Capitalism: A Magic Trick


Capitalism is a magic trick. Through sleight of hand obfuscated by the charismatic voice and flourishes of the illusionist, the doubts as to the superiority of this economic system over any other possibility disappear. The illusionist reaches into his hat and pulls out the profit motive. The profit motive is the great and mysterious force that binds capitalism. An ethos of greed supposedly needed to incentivize people to work. The wage laborers work and work, but somehow the profits evade them. The illusionist opens the trap door and there are the workers’ profits.  But in modern globalized capitalism, the traditional exploitation of labor is just one of the many magic tricks that the illusionist can perform:

The nonfinancial corporate sector has deleveraged even less than households. Instead, companies have taken advantage of low interest rates and plentiful liquidity to take on more debt to buy back equity to support share prices, pay larger dividends, and hoard cash. In the United States, corporations have expanded their debt relative to GDP by 14 percent…As a result, corporate leverage (the ratio of net debt to GDP) is higher than at this point of business cycle than in recoveries from previous recessions. That does not bode well for a quick escape from the depression if interest rates on debt start to rise. Michael Roberts’s The Long Depression (pg. 109-110)

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