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Articles, Commentaries, History, Penang Monthly [formerly Penang Economic Monthly], Philosophy

Capitalism is the Exercise of the Power of Excess

MAdison quote

By Ooi Kee Beng

Editorial in Penang Monthly, June 2016.

This morning (May 20, 2016), my 12-year-old daughter asked me “what is Capitalism?”.

Since the Cold War is over, this is actually a harder question to answer than one may think.

So if you, dear reader, do not mind, I shall use this space to educate her on a subject that is vague and abstract even for educated adults. Of course, all I can do is give one point of view, and I don’t doubt or deny that there are many others easily more illuminating for a pre-teen than my own.

Anyway, here goes… so listen up, Aoife (that’s her name).

Economic activity since Day One, when humans hunted deer and bear and gathered nuts and berries, has involved consciousness about having excess and storing it for later consumption.

This means possessing more than can be immediately ingested. This raw excess has a best-before date of course, meaning it depreciates in value over time, and often very quickly through the rotting process. And so, preservation techniques came to be developed. For hunters, air-drying meat and salting fish; for farming communities, burning corn and fermenting beans: all innovations through which excess of production could be kept for later use.

The excess of the fruits of their labour, when preserved, became more exchangeable for the fruits of the labour of others. It was even exchangeable for the labour of others.

In essence, this preserved excess is wealth freed from the ravages of time. But accumulated wealth is something others desire, and it therefore has to be protected. One could use part of it to pay others to guard this wealth against theft. In fact, one could use these guards, if they were strong enough, to simply force others to work for one (enslaving them, if you like), and thus creating ever greater stocks of excess which then could be used to employ more guards (call them soldiers or police if you like) to force more to work for one to create more excess. This goes on and on, developing in a spiral.

States would then evolve to strengthen the collective ability to produce and to protect excess; and more importantly, to perpetuate the power of those who have most access to the excess (call them the Elite if you like). Armies were formed, and robberies in the form of wars were fought. Of course, disagreements over which system of wealth creation and distribution, of excess management and protection and resource distribution is best, generated ideologies. Dogmas of right and wrong were formulated, and methods of pacifying transcendent powers were articulated, and more and more imaginative methods for contest were developed.

The techniques through which wealth can be stored, exchanged and multiplied advanced over time. Various forms of money came into being, the value of which was guaranteed in different and clever ways. From shells to coins to paper currency, and finally digital money; from reserves to treasuries to banks, the management of excess evolved to favour some before others, and to increase the speed of wealth creation.

When social conditions are such that this excess – this Capital – can be widely used to form enterprises for creating and accumulating wealth for the capital-owner, we have the system we call Capitalism.

As Capitalism advanced, a financial sector emerged to the extent that money could be traded, moved at superspeed across the world, and even hidden away in secret banks. The excess accumulated to such an extent that now 1% of the world’s population owns 90% of the world’s wealth. And so, how to manage the process of wealth accumulation rationally for the good of the world has become the greatest challenge of the 21st century.

I sense as I close this hasty lesson on Capitalism that the ending of the Cold War may have made new analyses of Capitalism easier – and necessary. This is because one can now consider Marxian concepts freed from Communism, Leninism, Stalinism or Maoism. We are in fact freed of 20th century experimentation on a 19th century philosophy. So what the 21st century can say about Capitalism is important.

Is there any young scholar out there in 1MDB-land who is willing to take up the challenge?

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About Ooi Kee Beng

Dr OOI KEE BENG is the Executive Director of Penang Institute (George Town, Penang, Malaysia). He was born and raised in Penang, and was the Deputy Director of ISEAS - Yusof Ishak Institute (formerly the Institute of Southeast Asian Studies, ISEAS). He is the founder-editor of the Penang Monthly (published by Penang Institute), ISEAS Perspective (published by ISEAS) and ISSUES (published by Penang Institute). He is also editor of Trends in Southeast Asia, and a columnist for The Edge, Malaysia.

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