Capitalism: A Love Story – Review

I ‘ve never been a huge Michael Moore fan. Still, his latest documentary Capitalism: A Love Story is powerful and entertaining. Variety’s review is on the nose, and I won’t repeat it here.

The film builds its case well, which is that modern American capitalism has taken over the government, and turned the economy into something akin to an organized-crime racket. And in some ways Moore is right. Financial deregulation began under the Reagan administration and continued with Bill Clinton’s repeal of Glass-Steagall, and the destruction of even more laws under George W. Bush. This weakening of government encouraged the flagrantly fraudulent sales of sub-prime mortgages and their derivatives. When the taxpayers bailed out Wall Street in 2008, instead of Main Street, it became the mother of all swindles. To this day, no one has a proper accounting of how the $700 billion was spent.

Having said that, my biggest problem with Moore is his tendency toward oversimplification and sentimentality. He substitutes outrage for analysis. And he lets American borrowers and consumers completely off the hook. Sad as it may be to see someone getting tossed out of their home, no one forced them to take out a bad mortgage. Moore’s lurid populism strip-mines the “poor me” attitude of people who were only too happy to spend other people’s money without reading the fine print. Sadly we all had to be reminded that we don’t get something for nothing.

But this is picking nits. There is a larger problem with populist anti-capitalism: it ignores the realities of power and competition. Moore and other economic liberals love to disparage “greed.” Why can’t people just be satisfied with “enough,” they ask. Unfortunately, it doesn’t work that way. Humans were shaped by evolution to be opportunists. And it’s not just about living “happily ever after.” Humanity has conflicting drives for cooperation and dominance.

And “dominance” can mean exactly that: slaughtering the neighboring tribe, stealing their women, sowing their fields with salt. Sure, we are “civilized” now, which means dominance is expressed through deception and arcane financial instruments. It means a person, family, or tribe can fall into a trap in which their dignity is completely stolen. Instead of being slaughtered, they’re still walking around wondering what the hell happened. It’s no less brutal–as Moore showed in a powerful scene when a family was paid $1,000 in a “cash-for-keys” scheme that required them to clean and prep their own foreclosed home for its next owner.

Moore took issue with another corporate practice known as “dead peasant” insurance: A company takes out life-insurance policies on all its employees and collects the benefits when they die. It’s sad, of course, to see the bereaved talking about how much they miss their husband or wife. But blaming the corporation for their pain is disingenuous. Moore isn’t even claiming that the corporation killed them, but he’s implying it.

I object to this because it creates fake outrage, and it’s manipulative. The reality of the financial crisis is bad enough without having to manufacture new issues. People are free to take out their own life insurance policies if they want, and many do. This corporate practice feels unsavory, to be sure. But that’s not the same thing as it being illegal or even necessarily unethical, although new rules have been passed in the last few years. It’s basically placing an impartial “side-bet” on employee life expectancy. If they did it for just one person, it would be creepy. But doing it across the board for thousands of employees is little different than a corporation trading options. And this is my issue with Moore. He confuses being “nice” with following the law. We all wish people would be “nicer.” But relying on it is a recipe for disappointment. And there are countless business practices that are not “nice” but make economic sense.

This is not the fault of capitalism. Regardless of economic or political system, people are always going to try to take advantage of others’ misfortune. It’s how power works. Its even necessary as evolution and counter-evolution make people and companies stronger and more efficient. The debate then is not between capitalism and some other economic system, it’s finding out how to design a world that works well in spite of or even because of the rapaciousness of human nature.

One answer to the dilemma Moore presents is improved voluntary cooperation. To the extent that people can come together and unite around common goals, they can subordinate and temporarily sublimate their competitive drives. I support this wholeheartedly. Moore showed two examples of companies which ran as co-operatives. To me, this was the best and most hopeful part of his film. Still, all the voluntary cooperation in the world won’t get rid of cheaters and slackers. Nor will it get rid of the vultures, who occupy an important evolutionary niche.

The failures of American capitalism can also be largely chalked up to continued governmental indifference to externalities (costs and benefits accruing to non-participants in an economic transaction). It’s easy to focus on inequality and growing disparities between super-rich and everyone else. But this does nothing to solve the underlying problem: Systemic unpaid externalities that benefit the top 1%.

We should be far more concerned with recapturing externalities, than with indiscriminately raising taxes on the rich. Yes, tax the rich, to be sure. But taxing the rich punishes all wealth, whether it was acquired ethically or not. Taxing externalities targets specific bad behavior. This one concept has the capacity to transform the debate about everything from health care to green energy. Put another way, we won’t solve these problems until corporate profits are calculated based on their full long-term impact on society. It’s a conversation no one really wants to have, because it requires we face structural abuses and get our act together. (Even consumers don’t want to talk about externalities, because doing so might raise prices in the short-term.)

Finally, Moore presents a false dichotomy as the climax and summation to his film. He contrasts capitalism with his preferred alternative, “democracy.” Obviously, democracy is a political, not economic system, and it can co-exist with a wide range of economic methods. But Moore continues to muddle the two by showing a stirring clip from President Franklin Delano Roosevelt about a second bill of economic rights.

I agree with many of FDR’s “rights” on a humanitarian basis. But you can never guarantee such positive outcomes. Churn and loss are an essential part of social and economic evolution. When better ways of doing things come along, some people will inevitably suffer temporary pain. I’m all for government safety nets, and I’m all for a more egalitarian society. Unfortunately, I don’t think Moore’s liberal populism will get us there any faster than Glenn Beck’s “know-nothing” conservative populism.

Human rights only survive when backed by superior force. The opportunism of corporations and bankers will only be brought under control when the common people become smarter and even more ruthless in the wielding of their own political strength. The rape of the planet which many blame on “capitalism” will only be stopped by capitalism when the people demand full financial accountability on corporate balance sheets of every form of environmental externality.

It’s all about proper accounting.

But clearly such policy details have little to do with the art of documentary filmmaking–which is finding an emotional connection with your audience. This Moore accomplishes. Audiences will find his sentimentality and japery far more satisfying than the cold, dry prospect of improved policymaking.

Moore theatrically declared that “you cannot regulate evil,” but this is exactly what we must do. The first step is to stop demonizing it. Such black and white rhetoric is no different than what we were hearing from John McCain when he said: “How do you deal with evil? Defeat it.”

Fail.

The truth is a lot subtler, and we are all a part of the problem. Human “greed” is simply the fulfillment of evolutionary conflicts and metabolic needs. Without smart regulation, any attempt at reducing consumption will simply lower commodity prices and make it cheaper for others to consume. So we need to stop the hand-wringing about our immutable nature. We need to legally compel everyone to pay the true costs of what they buy. And we need to incentivize good corporate citizenship. Then, and only then, can we achieve a society that is fully functional.