How Predatory Capitalism Breaks Societies, Economies, and Minds
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Here’s a tiny fact. Burberry recently had $35 million of unsold clothes — and so it burned them. Just set them alight. If you think there’s something weird, infuriating, and perverse in that, you’re not wrong. It contains in it the whole story of how predatory capitalism operates — and why it’s failed a system to organize and shape human life.
Why did Burberry burn the very goods that people had worked so hard to imagine, create, fabricate, and try to sell? The cotton and silk and wool in them? It’s a way to create artificial scarcity. Burberry needs to keep its prices high — or at least it thinks it does — because people are playing a game of status competition by buying its stuff. “Oh, that dirty poor person is wearing my Burberry scarf!! Now it’s worthless to me!” The only way in which that can be true is if what you’re really buying isn’t the scarf, but exclusion, social status, primacy, and dominance.
Predatory capitalism operates, now, by enforcing this gruesome and weird idea of artificial scarcity. It’s a way of manipulating markets, which are only tools so that supply can freely meet demand, at some price in which everyone’s outcomes are maximized. But artificial scarcity rules that efficient functioning of markets out altogether — it’s a way to restrict supply, and therefore raise the price. Burberry burns coats, so it can go on charging some people $1k to buy the status, the enviability, that the hole in their soul needs to be filled up with. But that’s the tip of the iceberg.
Artificial scarcity is now the rule by which predatory capitalism — “late capitalism”, if you like — now operates nearly everywhere. When hedge funds buy up life-savings medicines, and then skyrocket the price by 5000%, that’s artificial scarcity too. When student debt costs more than a mortgage, that’s artificial scarcity too, only by another means. And when 75% of a “healthcare system” is a system to limit who gets treatment to the “insured,” the rich, or the otherwise profitable, that’s artificial scarcity too.
The hidden cost of artificial scarcity is this: societies governed by it never invest, instead, in making precisely those very things abundant. You can’t do both, after all —you can make medicines artificially scarce, or you can build factories to make more of it, doctors to prescribe more of it, and clinics to dispense more of it. And yet America’s problem is that it keeps choosing the first option, which is a ruinous one — and that means it can’t do the second. What happens to a society like that — and to people inside that society?
The effect of an economic system premised on artificial scarcity is that capital income skyrockets, and labour income stagnates and implodes. That’s exactly what’s happened in America — average incomes have stagnated for decades, but people now pay absurd prices for the basics of life, $5000 for ambulance rides, $30k for childbirth, which means even those stagnant incomes are really shrinking ones, in real terms. Life has become a desperate act of living every day right at the razor’s edge of ruin.
Here’s what I think. Artificial scarcity is the law at the end of predatory capitalism, the principle by which it operates. But the price is that it also drives people out of their adult minds — or at least out of their better selves, if you like. When people themselves begin to become the enforcers of artificial scarcity, as a way to reduce the grief they feel for the loss of human potential that it has produced, then they break apart. So no matter how nominally “rich” such a society gets, such people are going to find it difficult to stay a democracy, a republic, or even free in minimal ways — they’ll go on enforcing the rule of artificial scarcity.
What the law of artificial scarcity operating at the end predatory capitalism is really saying is: “you can only have what you need if you can pay the impossible price we demand, or else we burn it all down.” It’s exactly the logic of an abuser, if you think about it. And when people, enough of them anyways, begin to believe that is the only way to run a society, what is the result? Precisely the authoritarian meltdown America is now facing — because the logic of the abuser and the authoritarian is one and the same.