Shareholder Primacy Culture and American Decline
Excerpt from my latest book America in Crisis (p 143-44). It was written in 2021:
The SP form of capitalism currently in use is untenable, otherwise there would be no capitalist crisis. That a financial crisis happened in 2008, after 75 years without one, shows that something is amiss with our financial economy. American real estate values rose to levels far higher than anything ever seen before just before the 2008 crisis (extreme real estate values backed mortgage bonds and the derivatives based on them that were involved in the crisis), and today we see even more extreme stock market and real estate valuations. We live in a Minskian world today. The Federal Reserve has acted to contain the threat to the current elite order posed by asset bubbles by flooding the system with money; first in response to the financial crisis and again in March 2020 in an apparently successful effort to a reverse a stock market crash. The net effect in both cases is to increase the money supply, which, sooner or later, should work itself into higher prices and wages. The normal policy response to this is rising interest rates, which could trigger a recession and stock market decline, potentially leading to another financial crisis (given today’s extreme asset valuations). If no policy response is forthcoming, inflation may break out, which creates another set of problems. The capitalist crisis is so named because it becomes increasingly difficult for the capitalism of the day to remain viable.
We are in uncharted territory for the US economy, and for the world trading system that emerged in Europe after 1500. Both are faced with existential challenges. The current world system is based on Western concepts that were sold as universal, but are actually constructs of WEIRD psychology, the result of a process of cultural evolution under the auspices of the Roman Catholic Church over 500-1500 CE. The industrialization of nations from other cultural traditions means alternate world systems based on non-Western psychologies exist today. The destruction of the present American-led world system by the capitalist crisis could lead to a world resembling the premodern world order, with separate world systems operating in parallel under different evolved psychologies and sets of cultural norms, each equipped with nuclear weapons.
The capitalist crisis plays into this return to premodernity theme. The Federal Reserve’s efforts to avoid financial crises has led them to employ an extreme policy of one-sided intervention. Money is created and funneled into the financial system in an effort to stave off deflation and depression, which serves to create immense inflation in financial assets. This creates a situation in which objects of speculation such as stocks, crypto currencies, art and real estate become central to economic culture, in an intensified version of SP culture. Business has already responded to this reality as shown by rising trends in stock buybacks. This cultural focus on the financial means that neither private initiative nor government can deal with things that are real (i.e. non-financial) anymore, leaving American elites incapable of dealing with any of the real problems America faces.
Not as well understood are the cultural assumptions behind this financial focus in the West. SP culture is based on a particular version of capitalist ideology that makes sense only to truly WEIRD minds. The Chinese world system on offer is based on a culture that has absorbed much from the West but has not embraced hyper-individualism. Powerful individuals out of line with the government in non-Western societies can be brought to heel more easily. This suggests that private fortunes that produce no benefit to the state will be less well tolerated than in the West. In a future contest, Chinese leaders may be able to marshal their national resources more effectively than their American counterparts.
SP culture can continue to thrive only in regions where extreme WEIRD psychology continues to be adaptive. Yet SP culture provides ever fewer benefits to non-elite citizens of the West, making it increasingly maladaptive to the bulk of the Western populace (which manifests as rising PSI and risk of state collapse) as well as unattractive to non-Western populations. It seems to me that continuing to maintain SP culture, as the US government has been doing, amounts to choosing cultural suicide for Western Civilization.
American civilization is in decline because it can no longer do big things.
I see human history as an evolutionary process and human societies as systems undergoing this process. Consider Old Kingdom Eqypt as such a system. Internally there are many millions of subprocesses, most of which involved food production. Another major component was processes that produce the materials needed to keep the system going. That is, the production of homes, clothes, tools, medicines, and, of course, more Egyptians. A small side stream went to the production of what we see as the elements of civilization, the state, art, religious rituals, etc. This activity served to maintain the civilization, just the inhabitants were maintained through food production. Part of this stream went to construction of monumental architecture, which, unlike the rest, accumulates over time to form a product that left a mark that can be seen 4,500 years later. We might say that the “product” of Eqyptian civilization, for which they are remembered millennia later, were the Pyramids and other examples of monumental architecture.
I would submit that the product of American civilization under SP business culture is monumental financial architecture, as represented by the market capitalization of the US stock market. This product is the outcome from the pursuit of shareholder value, which is the objective function of economic activity under SP culture. Over time it has accumulated into a financial monument equivalent to more than 60 years of global energy use at 2022 levels. Here “equivalent” means the monetary value of the capitalization is sufficient to buy this quantity of electrical energy at current prices. In actually, no such amount of electricity exists. The “wealth” represented by the monument cannot actually be used for anything. Like the pyramids, it is merely ornamental, serving as a signifier of status, or, as Ted Turner put it, “how we keep score.”
In contrast, the American civilization in 1945 produced about the same amount of “product” (relative to GDP) as today, except only 25% of it was in the form of market capitalization, the rest was manifest by the utter destruction of the Nazi and other fascist dictatorships in WW II. A quarter of a century later, America put men and machines on the Moon that will remain as lasting monuments to American civilizational greatness.
Under the SP culture, American civilization is not equipped to deliver real things. I do not believe America can prevail in a war with the rising dictatorships in Russia and China and retain its SP economic character. It seems that the leader of the Republican party agrees. Trump seems poised to surrender Europe to Russia should the latter invade, and he has expressed a willingness to let China have Taiwan as well. For all of his malevolence, mendacity and buffoonery, Donald Trump seems better able to see though the smokescreen thrown up by American politics than other political figures. As a member of the capitalist elite, Trump knows his interests and those of his class are best served by a continuation of the current (SP) economic status quo, which could not survive a major war. So, America must retreat before any peer or near-peer challenger but to do so in an aggressive fashion so as to maintain the appearance of strength.