Capitalism, Communism, and the Fractal Economy

A lot of people, if not most people, have a reflex (and negative) reaction to fundamental, or systemic, criticisms of Capitalism. The reflexive thought entails the notion that the only true challenge and alternative to Capitalism is Communism. Having seen or been told how bad Communism is, they prefer to side with the lesser devil that they know in the belief that there is no 'third way'.

The term 'third way' has been trashed and rendered meaningless by a number of governments and political parties, most notably by the New Labour administration of Tony Blair, who served as prime minister of the United Kingdom from 1997 to 2007. Blair's rhetoric turned out to be hypocritical and vacuous, and he proved to be just another self-serving member of the elite establishment. Whatever mish-mash of ideas have been tried in the cause, or name, of a third way; none of it can work without challenging and dismantling the great concentrated economic power residing in very few hands.

Is there a true third way? Let's start with the assumption that there is. In Why Capitalism doesn't work, we explain in broad outlines why Capitalism doesn't work, namely: because of the unearned income that private parties derive from ownership of certain assets. We showed that these assets were associated with what economists call the three factors of production: Capital (banks), Labour (corporations), and Land (land and natural resources). On this page and various others, we show why Capitalism creates the insurmountable difficulties as a consequence of the private ownership of the three factors of production.

In contrast to the three factors of production, it is also recognised that there are three 'functions' in an economy, which are: production, distribution, and consumption. Broadly speaking, within Capitalism these functions are left, quite rightly, in private hands. No-one tells producers what methods they should employ in their production (unless it impinges deleteriously on the environment or society), or how much they should charge. No-one tells people what they should spend their money on (consumption); and so on. In true communism (or the Bolshevik variety of communism practised by Soviet Russia), these functions are/were taken over by the state. The result is, or was, disastrous - everyone waits on hand-outs from the state but nothing much is produced.

In short, if we want to succinctly but accurately summarise the essence of Capitalism and Communism, then it would be like this:

Capitalism entails the private ownership of the three factors of production.

Communism entails the state (community) trying to manage the three functions of production, distribution and consumption.

Capitalism's ideology is very much centered on the notion of competition and a 'free market'. This notion is quite correct if applied only to the realm of goods and services (and the production, distribution and consumption of them). However there should be no market, 'free' or otherwise, in banking, corporations, land and natural resources. If we do not discriminate between goods and services and the three factors of production, we get a bit bamboozled by the free market ideology because it kind of seems right at some level (which of course it is).

From the above summary of Capitalism and Communism, it should not be particularly difficult to conceive the true third way. It can be summarised thus:

The true third way (the Fractal Economy way) entails: common ownership of the three factors of production and the private ('free') management of the three functions of production, distribution, and consumption.

The polarity between Capitalism and Communism can be studied from other angles. This is a brief but not exhaustive account:

Capitalism is a misplaced notion of individuality (freedom); Communism is a misplaced notion of community ('love'). In everyday life, as well as in our economic systems, we will always be looking to find the right balance between love and freedom; and between individuality and community. For example, a person who gives advice in the belief that it is done out of love for the other may be imposing on the other's freedom if the advice is not sought or wanted. Another example: a state which imposes an overly stringent code of safe work practices is overstepping the concern for communal safety and interfering with people's individual freedom.

Communism stifles supply because workers do not have any incentive to produce. Workers' income remain the same no matter how hard or innovatively they work. Capitalism stifles demand because unearned income eventually leads to a greater and greater proportion of income made by the wealthy, who do not use it to buy goods and services.

The factors of production are things that exist in the world. Factors/'facts' are nouns. The three functions are activities related to verbs. What exists arising out of nature, or society as a whole, rightly belongs to the commons. Activities belong to individual initiative.

What is common to both systems is that they are top-down hierarchical systems, even though it takes Capitalism many more years to reveal its true colours as a hierarchical system. In Communism, everyone knows it is a scam run by members of the Communist Party. In Capitalism, many people imbibe its values and ideologies in a kind of self-indoctrination process. They believe in it because it works for them. Capitalism also takes a lot longer before things break down irreparably.  The current erosion of our civil liberties (metadata collection, for example) and meaningful democracy under a manufactured 'war on terror' is a just an escalated phase in an ongoing battle between democracy and Capitalism. Communism gives voting rights to Communist Party members (at best); Capitalism gives voting rights to shareholders; democracy (at least in theory) gives equal voting rights to individual.

One final note: philosophers and political scientists might consider how our third way between Capitalism and Communism is an example of a Hegelian - not Marxist - dialectic. For those not familiar with this field, Karl Marx derived his 'dialectical materialism' out of Georg Wilhelm Friedrich Hegel's spiritual philosophy.

(Putting it rather simplistically, Hegel's dialectic involved the resolution of contradictory arguments - thesis and antithesis, as some have put it - by finding a third argument - synthesis - which combined the polar positions and creating thus a superior position. In some respects, a dialectic is a sophisticated version of the Gautama Buddha's 'middle path'.)

For those familiar with the structure of the Nazi economy, consider, in this vein, how Nazism is a false third way (synthesis) between Capitalism and Communism by the use of the following combination: The communalistion of production, distribution and consumption (for war purposes); and the private ownership of banks, corporations, land and natural resources (to fund the Nazi regime/party (much the same as the way our major political parties get funded). The 'dialectic' that involves Capitalism as a thesis; and Bolshevism as an antithesis; had a false synthesis in the Nazi economy. The true third way is there for us to realise today.

(Nazism was a hardcore version of Fascism; Bolshevism was a hardcore version of Communism. Is a hardcare version* of Capitalism waiting in the wings if we do not take pro-active measures in which we stand for something?)

*Such a social system would probably be a blend of a police state with Capitalism as we know it more or less. The police state would have all the information gathering and information processing of modern technology at its disposal. The economy in this version of Capitalism would most likely incorporate a global currency with no cash (notes and coins). Such a state of affairs could follow a gigantic global financial crisis (to dwarf the 2008 one) engineered by - wait for it - the current banking system.