Saturday, February 17, 2007

Capitalism and Asabiya

You can buy computer simulations of football. Often you are the football manager and choose the teams. You can observe the pitch, the players and the game in progress. Each player comes with attributes of skill and strength, they run around and sometimes score goals.

These computer games are correct insofar as they exactly abide by the rules for football. More often football is played by human beings on real pitches. Although the rules are the same in both cases, to understand real, human games you have to know about human psychological characteristics such as team behaviour, unselfishness, morale, courage, duty, concern for reputation, leadership and followership qualities and so on - as well as individual skill and strength.

What makes a team game interesting is the interplay between the formal level of the game and its rules, and the ‘implementation’ of the game by real human beings with social behaviours as typically studied by disciplines such as sociobiology and evolutionary psychology.

Capitalism as a social phenomenon is in the class of games. The rules which define the concepts of market, company, owner, manager, employee are formal, and even enshrined in law. No reason not to have a ‘capitalism’ game on the computer which explicitly represented individual workers, managers, firms, regulators, courts and so on. At that granularity, it would merely be complex and perhaps uninteresting to play.

How good are human beings at playing ‘capitalism’ away from the computer? To answer this question we have to itemise the salient features of the ‘capitalism game’.

Good things about the ‘game’ are resourced teamwork for important outcomes as embodied in the operations of the firm, and physical rewards necessary to live, most particularly pay.

Bad things include the destruction of teams when things go badly wrong (trust me, firing people is deeply unpleasant) and differential rewards. Crudely, bosses usually get a lot more than the cleaners do.

The positive, Darwinian character of capitalism at its best and purest - welfare-optimising competitive markets and the creative destruction of inefficient firms - can be combined with a redistributive mechanism to ameliorate the lot of those thrown out of work. But to move resources from the haves to the have-nots requires a sense of collective community encompassing both sets of people - what the fourteenth century Arab historian Ibn Khaldun, via Peter Turchin and Steve Sailer, called asabiya.

Counties which have it are aligned with human values and are good places to live (cf. the Scandinavian model); countries without it split into fractious (gated?) sub-communities with few and impoverished national redistributive programmes - the United States being a well-cited example. We talk about private affluence and public squalor.

Capitalism unrestrained by asabiya can be even more vicious when operating across community boundaries. The history of multinationals operating in Africa is a case in point. With little sense of social cohesion between the people who comprise the corporation (and their host country) and the indigenous population, the latter can be treated as dirt. And are.

NOTE 1: these reflections were partially motivated by the recent success of a Vulture Fund in extracting $40 million in debt repayment from Zambia, wiping out part of its internal poverty reduction budget (reference).

NOTE 2: the problem with marxist economics is that it correctly identified the sociobiological dimension (all institutions are social relationships) while failing to understand the autonomy of the rules determining how capitalism works at all, rules partially codified in microeconomics. This is why marxism was never able to get a handle on an adequate theory of pricing (an elementary issue in ‘bourgeois’ marginal economics).