The Importance of "Place" in Social Well-Being
You are receiving this post/email because you are a patron/subscriber to Of Two Minds / Charles Hugh Smith. This is Musings Report 2024-25.
In my recent essay The Glue Binding Democracy and a Free Economy Has Melted, I drew a distinction between capital and leadership grounded in a specific place--what I referred to as "Old Money"--and the mobile capital of rootless cosmopolitan Private Equity, which gets in and gets out of places as quickly as possible to maximize "shareholder value," i.e. profits and capital gains.
I suggested that our current economic system is optimized for mobile capital and mobile labor, to the detriment of social well-being and capital, which by its very nature is embedded in a specific place with a socio-economic order and culture unique to that place.
It's self-evident that vulture capital that swoops in, buys an asset, dismembers it to sell in pieces and then vanishes, is not going to invest any of its gains in the locale's social capital. In a similar fashion, a temp worker who moves in for a few months of work and then leaves is not going to put any care or effort into the local community.
I proposed that the default economic view is that 1) the individual maximization of self-interest magically optimizes not just wealth but social well-being, and 2) therefore nobody has to pay any attention to social capital because pursuing our own narrow self-interest magically optimizes social capital to the betterment of everyone.
This narrative doesn't map reality. Somebody has to pay attention to social capital or none accumulates, and whatever has accumulated dissipates, and so social well-being dissipates, too.
I noted that unlike dictatorships, democracies with free economies rely on voluntary participation to build / maintain social capital. Nobody forces individuals to contribute to their community or locale.
What's changed? Why is social capital eroding in so many places and on so many levels? There are many causal factors at work, but one that doesn't attract much attention is the economy has changed to optimize mobile capital and labor, as mobility enables higher efficiencies and profits. If labor costs and tax credits make one place attractive, move the factory there. When conditions change, move it elsewhere. If a worker can make more money in Shanghai for a few months, then move there. When it's more profitable to work in Los Angeles, leave Shanghai and move there.
Social capital isn't mobile. The hospital, homeless shelter, music hall, county fair and leadership don't move around the world seeking the highest return in the least amount of time. When Walmart closes a store because it didn't hit its profit targets, the local community may be devastated, much like a factory closing, as Walmart was the primary source of stable employment and social entertainment.
I mentioned the role of "Old Money" in maintaining social capital, and this caused confusion because I didn't refine what I meant by that term. One reader asked if I was referring to Aristocracy. Another commented that "Old Money" was simply rapacious capital before globalization gave it mobility.
By "Old Money," I mean capital and leadership that is embedded in a specific place, bound to a place by a number of factors beyond maximizing profits: history, ownership, stewardship.
Understood in this way, "Old Money" includes a wide range of capital and leadership.
Keep reading with a 7-day free trial
Subscribe to Charles Hugh Smith's Substack to keep reading this post and get 7 days of free access to the full post archives.