The socialization of capitalism

New York Magazine takes us on a tour of what lays beyond, after the capitalism runs out. That may sound hippie and/or conspiratorial, but facts is facts and the entire game has changed:

Making matters even weirder, contemporary capitalism’s dominant shareholders have no direct interest in the success or failure of the firms they own. All returns on their holdings get passed down the investment chain to their clients — households, governments, and corporations. Asset managers make their money off of their clients’ fees, not their firms’ returns. This diagram may make the hydraulics of the system more legible:

[cool graphic]

Of course, an asset manager that delivered consistently poor returns would attract few clients. And asset managers’ fees are calculated as a percentage of the current value of their clients’ assets. Nevertheless, add a fee-based business model to asset managers’ universal portfolios, and their interest in the performance of any individual firm they own becomes extraordinarily attenuated — even when they are the single largest shareholder of that firm (which is very often the case)!

This is not how capitalism is supposed to work in theory. And it isn’t how corporate governance has ever before worked in practice. To the political economist Benjamin Braun, the contemporary structure of corporate ownership is so novel and consequential as to mark a new era in economic history, the age of “asset-manager capitalism.”

Braun’s papers on this subject are fascinating, and nerds will want to read them in full. Mere dorks, however, may be content to consider the following four ways the rise of asset managers challenges conventional wisdom about how capitalism functions — and how it might be changed.

Cool graphic and the rest at the link. Removing market competition from the equation renders many of the other legacy levers moot. Even the ESG stratagem takes on a different tenor – what does promoting efficiency even mean when the owners of the means of production no longer prevail – when/if we default (curious wording) to a dirigiste model. They, ESG pressure campaigns may become more effective. Because frankly, christian soldiers, that’s what they’re talking about.

Love for Trees

No, not an exchange but these two actually work together in Jean Giono‘s The Man Who Planted Trees (L’homme qui plantait de arbes) originally published in 1954. Giono (pronounced like “ja know“) was a French author who set many stories in the region of Provence, wherefrom he hailed. In the spirit of thumbing his nose ar IP rights, he freely gave way the rights to this story as it was translated far and wide. He’s someone I first learned about from Henry Miller, who wrote about him in Books in My Life.

Here’s some of The Man Who… translated from the French by Peter Doyle.

The shepherd, who did not smoke, took out a bag and poured a pile of acorns out onto the table. He began to examine them one after another with a great deal of attention, separating the good ones from the bad. I smoked my pipe. I offered to help him, but he told me it was his own business. Indeed, seeing the care that he devoted to this job, I did not insist. This was our whole conversation. When he had in the good pile a fair number of acorns, he counted them out into packets of ten. In doing this he eliminated some more of the acorns, discarding the smaller ones and those that that showed even the slightest crack, for he examined them very closely. When he had before him one hundred perfect acorns he stopped, and we went to bed.
The company of this man brought me a feeling of peace. I asked him the next morning if I might stay and rest the whole day with him. He found that perfectly natural. Or more exactly, he gave me the impression that nothing could disturb him. This rest was not absolutely necessary to me, but I was intrigued and I wanted to find out more about this man. He let out his flock and took them to the pasture. Before leaving, he soaked in a bucket of water the little sack containing the acorns that he had so carefully chosen and counted.

I noted that he carried as a sort of walking stick an iron rod as thick as his thumb and about one and a half meters long. I set off like someone out for a stroll, following a route parallel to his. His sheep pasture lay at the bottom of a small valley. He left his flock in the charge of his dog and climbed up towards the spot where I was standing. I was afraid that he was coming to reproach me for my indiscretion, but not at all : It was his own route and he invited me to come along with him if I had nothing better to do. He continued on another two hundred meters up the hill.
Having arrived at the place he had been heading for, he begin to pound his iron rod into the ground. This made a hole in which he placed an acorn, whereupon he covered over the hole again. He was planting oak trees. I asked him if the land belonged to him. He answered no. Did he know whose land it was? He did not know. He supposed that it was communal land, or perhaps it belonged to someone who did not care about it. He himself did not care to know who the owners were. In this way he planted his one hundred acorns with great care.

After the noon meal, he began once more to pick over his acorns. I must have put enough insistence into my questions, because he answered them. For three years now he had been planting trees in this solitary way. He had planted one hundred thousand. Of these one hundred thousand, twenty thousand had come up. He counted on losing another half of them to rodents and to everything else that is unpredictable in the designs of Providence. That left ten thousand oaks that would grow in this place where before there was nothing.