Social Matter

Ideologues enjoy using the nebulous concept of ‘capitalism’ either as a punching bag or as something to laud, but most prefer to stay away from the method of calculation that underlies it, giving it its own logic as to why it functions. That system is the international accounting system — which is not something that is evenly distributed throughout the economy.

Accounting is a way of rationalizing production using tokens of value combined with scrupulous record-keeping. It has less to do with enormous factories and more to do with the mathematically rationalized operations of those factories. Much of the political agitation surrounding the developments of capitalism owe to an evaluation that the rational method indicated by what the numbers say ought to be is unacceptable. When the accounts say that a given laborer can’t be paid more than what he produces, agitators will try to convince that laborer that he might be able to earn more than the books say that he should if he joins a protest or lobs a bomb at the works.

In the more modern times of too-big-to-fail nationalized and quasi-nationalized corporations, we see an aesthetic and political preference for the preservation of defunct entities — better to be big, impressive, shiny, and defunct than functional and rationally ordered. This is the essence of the Keynsian approach — puff up accounting entities with lots of credit, and then presume that rational productivity will ensue.

What actually happens is that entrepreneurs of all types — state and business — orient towards chasing new credit, because that’s what a rationalized response to the changed accounting environment is. The smartest decision to make is to chase after credit and credit-generated investment dollars, rather than following the restrictive moral and financial strictures of cash accounting along with scrupulous avoidance of excessive debts.

Much of the economic history (like its social history) of the 20th century concerns a pervasive rebellion against traditional strictures and disciplines. If the accounts say that a pursuit is wasteful, then the good (post-)modern man says “damn what the books say: flood it with more money!” In doing so, they can appear heroically irrational, even bold, and any boondoggle (no matter how poorly thought out) can be rationalized as an important speculative exploration, even when it’s actually just depleting the capital of the society and uncovering almost nothing.

The main difference between speculation under a more disciplined monetary system and speculation combined with too-big-to-fail accounting is that in the former, when speculators err, they run out of cash to speculate with, and poor speculators get culled from the market. With too-big-to-fail, bad speculators get rewarded commensurately with their failures, and their errors then cause further coordination failures. This goes beyond just big banks, but also extends to cities like Detroit, Camden, Newark, and Baltimore — essentially defunct municipalities where rational large-scale production can no longer occur.

Anti-capitalists rarely frame their criticisms of the system as a denial of the validity of using accounting to rationalize productive human activity, but that is in effect what most proposed interventions and modifications to the system wind up being: a demand either for irrational production or favored exemptions from the strictures that said rationalized production would otherwise indicate.