Innocence

Capitalists have had a hard time of it since the time of Marx. They exploit workers, so goes the narrative.

What is a capitalist? He is not necessarily a rich man. He may be a working man with a savings account. If he has a savings account he is, by definition, someone who has decided to defer (or forgo) indulging himself with a steak dinner, an extra holiday, a bigger house or any other consumer good.

What crime has he committed so far? He has exercised restraint. Why? Perhaps in order to provide for his old age or his children's' education – pretty evil huh?

How does he choose to deploy his unspent cash? He may deposit it in a bank with a view to receiving interest upon it. How will this happen?

We will, for the moment, leave aside the fact that the banking system in pretty well all "advanced" countries is an unmitigated scam, a crime against the citizenry. Most people would not believe the fact that banks are allowed by governments to create money out of "fresh air". Actually, fresh air is more concrete than that from which money is created. Let's say out of f*** all. This is the simple (almost unbelievable) truth. Quantum Mechanics is as easy to get your head around.

After almost a year of reading Austrian Economics, I am (sort of) getting to grips with Fractional Reserve Banking. That is to say, I (sort of) know what it is. I am totally baffled by the fact that it is legal. Not one in a hundred, I'd guess, is as sophisticated as I am; but I'm sure that, without being a beneficiary, no one could fail to be appalled. The system is almost certain to implode, and soon – I don't know whether to be suicidal or relieved.

In an honest banking system the depositor would make an agreement with the bank that it can have his money for a fixed period of time to lend, as it sees fit (he has got to trust it to do it judiciously), to someone, an entrepreneur, who can make the case that he has got a plan wherein, by mixing the cash with a good idea and labour (his and perhaps other peoples') he can produce goods or services that the public will want.

Assuming that the bank does its job competently – ie lends to competent entrepreneurs, what, so far, has the depositor done that is so evil?

Best case: the entrepreneur makes money, employs people and provides the public with what it is happy to have – and, in all probability, at a lower price than would otherwise have been the case. The bank receives interest on the loan; the depositor gets a share of that interest and is less likely to be a burden on his family – or the state – when he is old and decrepit.

Worst case: the entrepreneur's business fails, his employees are fired and the bank takes a hit – learns a lesson. Our depositor and others like him don't get a share of the interest the entrepreneur would have paid. Good things may happen as a result, however. The unemployed workers are taken on by "better" entrepreneurs, as are his premises and his capital goods (machines etc). We are, of course, not indifferent to the fact that the entrepreneur may have lost his house in the process or to the fact that his sometime employees are anxiously scouring the job pages. We should be glad if and when their labour is taken up by a "better" entrepreneur. When all labour is in the service of "good" entrepreneurs, we are collectively better off.

A capitalist may actually be someone who uses his savings (or perhaps an inheritance) to start his own business – ie without help from a bank. With a lump sum from Auntie Lilly, he arranges a lease on a shop, and using his skills as a butcher (or whatever) starts selling meat. He may well take on staff. How wicked is that? Needless to say, his steak and kidney must be of a quality and price that the public like – and he must be civil to his customers. Jobs and decent meat – a consummation devoutly to be wished for. What a bastard!

Just one word about his employees: The school leaver he takes on to sweep up proves capable of handling cash and perhaps of book keeping. The bastard realises before long that he has to up her wages or she will be off to a competitor. This happens routinely. Poor old Marx had another theory. He didn't notice that, as he was writing, wages were rising.

Butchers, like all fallen human beings, are likely, if they can organise themselves, to do what they can to keep others out of their trade. Insofar as they do so, they are being bastards. As capitalists, they and depositors are wholly innocent.