Real Existing Capitalism

By and on April 11, 2015 in Columns

What is capitalism? The root of all evil? No. Capitalism as a structure has led to great leaps in development over the last two centuries. However, it has, to some extent negatively affected the lives of billions in the process. The issue at hand is the black and white portrayal of the systems in place; too often, too little is openly debated about the fundamental structure of our world order. Too often, the discussion focuses on the details, on numbers, on words, on immediate situations at hand. Even assuming the market worked perfectly, there is a tendency to ignore the consequences of a perfectly competitive market, and in doing so, simply ignoring important points of view that question our economic paradigm.

The legacy of our ancestors has all built up to this moment; every aspect of the immense amount of interactions and information that seeps through us on a daily basis. Google, IBM, Monsanto, McDonalds, Ford and the largest ‘non-profit’ organisation in the world, IKEA; all apparently aiming towards improving of our lives, whilst 800 million still go to bed hungry. Does that then mean that the incentive for profit maximization is what leads to the exclusion of some social-groups? No. Ayn Rand would argue that it is the existence of states and of altruism that has hindered the progression of the absolutely perfect free market from providing everything to anyone who works hard enough for it. Besides, in a perfectly competitive market, firms should not be able to sustain abnormal profits in the long run. However, it is Ayn Rand’s kind of thinking that haunts the lives of all of those who were born underprivileged, stuck as drops of oil between the large cogs of history, and worst of all, unaware of their situation.

Would freer trade between states increase the prosperity of all? Yes. Things would become cheaper, more steadily available and democratic states would then have an enhanced ability, though limited, to project ideas of free speech and the right to assemble in less open societies. And what would be the cost? The creation of an even stronger elite of multinational monopolies and the undoubted destructive exploitation of our common environment in the search for short term gain. Economic development, is not the equivalent to an increase in real GNP. However, even then, freer trade is completely distinct in character from what supporters of people like Ayn Rand are proposing. Laissez-faire does not challenge the establishment; it is a visualisation of the world that we are already heading towards.

Has there occurred a synthesis of existence between statist-workers movements and the bourgeois free-market since the rise of the ‘new’ establishment? Yes, in the traditional ‘West’ this has been the case until now. With the outsourcing of blue-collar jobs from the more economically developed countries, fewer and fewer workers in all fields are unionising and organising. This, combined with the ever growing consumer-culture in these countries, can lead to little else than an obscure prospect for the future. Not only are the issues of climate change not dealt with rapidly enough, but the slow transition into plutonomic and oligarchic systems has already begun. Oligopolies and monopolies can cause a laissez-faire system, but the final result of laissez-faire is domination of many by few.

It is the market that is the issue, and it is this fact which makes anarcho-capitalism utopic at best. Being the product of human interactions, the view that this system behaves rationally is a ridiculous notion. First of all, with the ballooning of media and advertising in the last century, the rules of the game have been shifted. The notion of product quality is no longer paramount, instead the one with the most capital and the greatest advertisement capacity overcomes the competition. For example, Coca-Cola’s marketing strategy was so influential that it came to define Santa Claus; also multinational corporations like Coca-Cola have the financial ability to undercut their smaller competitors leading to their bankruptcy  (a Swedish example being Cuba Cola). Secondly, with the advent of more competition, stores are saturated with products of the same sort from various companies, an event that leads to the strengthening of advertising-culture and rise of oligopolies. How? As Barry Schwartz showed in his book, The Paradox of Choice – Why More Is Less, people like choice, but not too much; approximately two seems to be the range of options preferred. So in short, advertising, a product of the market, distorts the free market ideal by appealing to irrational and subconscious behaviour. Worryingly, the advertisement industry now accounts for a sixth of the western world’s GDP. Instead of working within a market where there is a range of product quality why not work towards improving overall product standards.

Also, should the regulatory entities or states disappear, it is absurd to leave all of the responsibility on the consumer. For example, in a stateless society, schools (semi-public good) would be under-supplied. One individual cannot be an expert in all things necessary to make that kind of judgment, especially in a system where some social classes would be economically obliged to purchase the lower-end goods, and especially in a system where the education disparity would leave groups in ignorance, unable to make a judgement about a choice they do not have.

Another major issue in modern economics is the idea of externalities. Externalities range from carbon emissions to the benefit of your neighbour protecting his house against fire. This issue exemplifies the flaws of the system, for it implies that a system that should describe all interactions and benefit us by doing so, is failing at just that by leaving out collective costs and benefits. Simply put, this is what some economists who ignore the fact that economics is a social-science, ‘forget’ to take into consideration.

Furthermore, there is another pressing issue in our current economic system. With the growth of the one world economy, it has become easier for mega-corporations to affect the democratic process through the means of lobbyism, this is  perhaps something that even libertarians would agree with. The difference between lobbying and bribing is actually very small. Bribing implies that an entity hands over benefits, in any form, and buys the decision makers vote. That is, the decision maker abides to vote in a way that would be beneficial for the lobbyist’s interest. Lobbying is the same, except that the decision maker does not commit to voting one way or the other; the voter supposedly remains ‘unbiased’. This is a ridiculous notion and is a wonderful way of getting around the term bribery. How would the voter at hand be ‘unbiased’ when they know that if they vote in the beneficiary’s interest they will continue to receive benefits? Understandably, interests groups should exist to inform the public and representatives of issues that require attention, but parties, gifts and luxurious events are not a necessity when informing people.

For this reason, and many others, it is ridiculous to call the United States a free market system. It is not. Government exists at many levels of the process, however corrupt and run down by corporations it is. Even a secret Citibank memorandum referred to the United States as a Plutonomy; a government run by and for the benefit of the richest. This is exemplified by the fact that the United States’ six largest banks have increased their assets in the US economy from 18% of GDP in 1993 to 63% in 2013..

Even though the US sees itself as such, the only free-market systems in the world exist in the third world. As Noam Chomsky puts it, it exists in countries where either chaos erupted or the imperialist powers shoved it down their throats in order to profit from deregulated resource exploitation and speculatory markets. Structural adjustment is nothing but the soft version of destroying collective institutions.

Another deeply disturbing point is the claim that the only  great technological leaps have come from private enterprise. A frequent example used by Americans is the transistor, choosing to ignore any other major military funded program such as the GPS or the ARPANET, claiming that the transistor was purely the product of corporate R&D by AT&T. Yes, Bell Telephone Laboratories invented the transistor, but what money was behind it? Absolutely massive amounts of taxpayer dollars subsided AT&T who had a federal protected monopoly over the entire telephone system in the US. Most great leaps in research have either come from state funded programs or independent geniuses in large lecture halls, sponsored in most cases by state governments. The space program would never have had any reason to start, and will never take the large steps without state initiative. Yes, private companies may come to take over the market, yes Space-X (still heavily reliant on NASA) will land humans on Mars, but as with the airplane industry or the discovery of the new world, without a collective body’s initiative, non profit based but based on progress, we will stagnate.

Finally, more philosophically, if you wholeheartedly accept a non-equitable system like capitalism, ask yourself a simple question: do people choose where they are born? Why accept that some are stuck in a great spiral of ignorance and misfortune? Of course you are free to think whatever you like, but this is not a question of emotion, rather, it is a question of rationality; the progress of the collective.

In conclusion, capitalism works in the short term, but just like slavery and feudalism, as we progress our paradigms change into ever more rational and liberating ones. There is no final step, and this is surely not the middle-point. So the next time you sit with an economist or an economics student, do not for an instant assume that they are a libertarian.


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