Article: Paralysis: An Early Stage of Paradigm Shift

Although Arianna Huffington ended her report from Davos, Switzerland, last week with a bon mot about dinosaur free-marketeers, her more important comment was about the paralysis seemingly affecting the principals at the world's annual convention of the rich and powerful.

The widespread contrition permeating Davos is matched by an unnerving feeling of paralysis. The people here -- and we are talking about some of the most influential people on the planet -- seem confused, at a loss about how to attack the financial crisis. No one seems to think that the steps being taken are sufficient. It's as if we are watching things unravel -- how many times, for example, are we gong to hear that layoffs have exceeded expectations? -- but are powerless to stop the unraveling.

An unnerving feeling of paralysis, indeed! It is a good sign, in fact, for followers of Thomas Kuhn and paradigm theory. It means that we are probably rid of the free-marketers for a while, or at least until one of the inevitable late-adopters of the new paradigm comes up with one more reason to believe in a flat earth! New ideas, however, we have very few of these days. Everyone is reading Jonathan Alter and others on the FDR answer to financial calamity. FDR does not represent new ideas at all, nor were his ideas coherent and part of an ideology or theory of finance, markets, or government. The alphabet soup of CCC, NRA, PWA, WPA, TVA, and so forth were ad hoc stabs in the dark intended to put some money into circulation where it would do some good ... saving people from starvation and hopeless homelessness. Barack Obama, the economists like Paul Krugman, and indeed the Democrats in Congress are pretty sure they have distilled the FDR experience down to a paradigm, though. Spend. Spend like inflation of the currency would solve deflation in the general economy caused by a freeze in finance. They may be right, and who's to say when no one, well practically no one important, is saying something that makes more sense. Paradigms are tricky. You get to hatch a new paradigm only when you are least expecting to. So, if Krugman is correct in "Bailouts for Bunglers," the new paradigm could easily be founded on the principles of kleptocracy, and we will play hell getting beyond the thrall we have been in of the financial wunderkind s. While the Davos rich and powerful were sitting there in paralysis, down in Belem, Brazil, the world's Left was meeting, too. Their fairly unanimous opinion is that capitalism is dying, if not already dead. Let's be clear about this: capital-ISM is different from capital, which is just a category of resource in any economy. The Left at Belem ... (funny we don't hear about these meetings on Olbermann or Maddow) ... could not help but notice what the Davos people have known since 1581 (when the Dutch declared their independence ... and modern Christian capitalism began to form). People left to themselves try to find a financial advantage, be it in meals for socialists or drinking water for Lefties in Belem. One hopes that the version of capitalism that emerged in WWII (under FDR, Truman, and Ike, btw)-the military industrial complex-does fail, but we would have to stop fighting wars for that to happen. We are not close. Accordingly, the nature of capitalism will not change appreciably, except that the "complex" part of the military-industrial system, i.e., Congress, will try to expunge the latter-day variant called Reaganism, and might succeed. It does not matter whether we have stringent regulations or none as long as capitalists own our government! Not to despair, though, the Davos and the Belem people are not crazy. They both recognize ... as you have for several months ... that we are at a tipping point and it is up to us to notice that the world is spherical and that ownership of capital is not grounds for declaring superiority or special recognition. Capital is, as Marx laboriously proved, the accumulation of "surplus value" drawn out of markets and applied to next enterprises. Capital is not savings. Savings is savings. Capital is applied savings of surplus value. Surplus value is the value difference between the costs of production and price. In other words, surplus value is the result of holding down production costs knowing (or hoping) that the market will bear a higher price. Capital is not theft, nor is it evil or bad in any way. CapitalISM, on the other hand, adds judgments about the holders and appliers of capital that are wholly unwarranted by evidence and history. Capitalists are notoriously inept at decision making and waste more of their savings than they convert to capital. Recently Wall St. proved this by granting $18.2 billion in bonuses to people who managed capital ... to spend on wasteful toilets, yachts, and other inessential things, all of which do nothing to promote the general welfare. We will reach a new paradigm about political economy eventually. (I use the old term to emphasize that we dare not say "political economy" these days because it points up the relationship between politics and economy.) I don't know what the new paradigm will be, but if it is a new paradigm it will "solve" problems that seem intractable right now. It will account for the evidence we now see better after the fall. It will ignore some evidence and in so doing will lay the foundation for another paradigm shift years from now. JB