Capitalism is so broken it can’t be fixed

Yves Smith points to Capitalism is so broken it can’t be fixed.

The amazing thing is this an article in the Wall Street Journal! Are Capitalists doubting Capitalism?

The question raised is:

This obsessive short-term thinking is capitalism’s biggest problem, and a huge one for America. But nobody wants to ask the hardest question of all: If capitalism is America’s core problem, why save capitalism?

But what is this Capitalism the article rails against? It would be that the idea of Capitalism is self-evident to the readers.

The author does not delve into what Capitalism is. Not like what Karl Marx did. In order to understand what Capitalism is, one must define it in its essentials. Marx said that the essence of Capitalism is the cycle of converting Money (M) into Commodities (C) which are converted to Money (M'). Hopefully, the quantity of Money (M) starting out is less than the quantity (M') ended up with. That is, a profit was realised as a result of the investment in the production of the commodity (C).

Once one has a definition of Capitalism, one can see that what people sees as problems in Capitalism is the result of what Capitalism. These problems are not caused by the improper implementation or having the wrong people involved.

The problems with Capitalism arise from the realisation of profit. A capitalist who makes a profit has more money and is therefore able to make greater profits in the next investment cycle. So, the wealth accrues to smaller and smaller fractions of the population. Inequality results from the natural functioning of Capitalism.

This rising inequality results in underconsumption by the rest of the population. They lack the means to purchase the commodities produced, so profits cannot be realised as readily. Thus, a bust follows. Hence the business cycle.