Capitalism, historically, has been viewed as a companion to democracy. The development of free markets, in which anyone could participate, enabled ordinary people to take control of their lives and confront centralized economic power, just as democracy initiated an assault on political power.

Markets, of course, have existed since the dawn of time. People have always strived to satisfy their basic needs, by producing as much as they could and then bartering the rest. A real turning point, though, occurred with the invention of coinage.

Money divorced people from the need to produce their own food, and through this it enabled specialization and the foundation of trades. Further, through the use of savings it enabled the first “investments,” in the ingredients needed for greater production capacity, and in the tools associated with new production technologies.

With time, markets increased in size. This in turn led to concentrations of economic power (capitalism in effect helps create the problem it is supposed to solve), and with them the first modern forms of economic competition. Such development also fueled a variety of economic institutions, centered around different production specialties. Similarly, the first financial institutions were created, starting with the proverbial moneychangers at the temple gates.

Capitalism is defined as any system of markets. More deeply, though, it is money: its sheer existence. “Capital” is simply saved money. Any society that uses money necessarily is at least partly capitalistic, and hence exposed to all of the system’s risks.

In recent decades the growth in economic activity has been phenomenal. One consequence of this is that the largest corporations now have more economic power than most nations. There is an undeclared war around the world between corporations and governments, and for the most part the companies are winning. Business regulation is failing, and a new form of global aristocracy is being established, within the structure of democratic nations.

This is not an equilibrium position. The tension that has developed between business and government must be resolved. If the companies prevail, we will have democracy in name only. If the governments can revitalize their protective function, and rein in the corporations, we may yet have a well-functioning worldwide democracy.

The corporate system now constitutes an alternative approach to the overall organization of human society. It impacts every aspect of our lives. It also has innumerable deleterious effects, including on government, employees, consumers, communities, and the environment.

In the first lesson in this series, we learned that democracy is based on a core set of principles, and further that it is in conflict with capitalism. The reason for this is that capitalism has its own distinct foundation.

Democracy is based on cooperation. Capitalism (and the corporations through which it is implemented) celebrates and is inseparable from competition. Democracy stands for human equality, personal freedom, and their associated ethics. Corporations operate on the principle that, “if we don’t do it, someone else will,” which is identical to the idea that, “we have the power to do it, so we will,” i.e., natural law.

For democracy, value lies in diversity. Under capitalism, money is the measure of all value. Moreover, selfish interests are more important than the common good. Inequality is acceptable, and inevitable. And life, everything in life, is a business. Everything, and everyone, is a product for sale.

The benefits of markets are great, but the threats posed by modern corporations are so severe that they must be properly checked. Such checks can be divided between those that apply to the companies, and other checks on their executives.

Executives are of course subject to civil and criminal penalties if it can be shown that they have broken the law. In virtually all democracies, though, the law is selectively applied. “White-collar crime” is neither investigated nor prosecuted.

This needs to be rectified. In addition, executive behavior can be controlled through ostracism and shame. Activists need to identify not only unethical companies, but also their leading managers, and then pillory these individuals in press releases and at demonstrations.

Checks on the companies themselves are the responsibility of government, the media, and also the people. For the first, government regulation needs to address every possible area of abuse.

For the people, the main checks are company protests, from letter writing to demonstrations, but more importantly boycotts. Boycotts can force virtually any company, certainly any consumer products company, to change. Since so many companies are unethical, it is essential that boycotts become much more widespread.

A related regulatory issue, to empower consumers, is that all products must be properly labeled. Labels should include not only the product’s ingredients, but also a description of the social and environmental costs that were incurred in its manufacture. In particular, anything that involves genetic engineering or cloning must be labeled as such.

The final checks are structural remedies. For the first, corporations should not be legal persons. Such status is actually another example of an anti-check: a barrier that exists to a well functioning society and democracy. In the United States, the Supreme Court ruling that granted it must be reversed.

In addition, there is the issue of profit. It all starts with the profit motive. The communists believed that the problem was the existence of private property, but they got it wrong. It is not that everyone should be poor, it’s that no one should be too wealthy. The real problem is profit. Profit, at least as it is created on a large scale by corporate institutions, needs to be eliminated. All for profit organizations should be restructured as non-profits.

Present-day capitalists will of course oppose this change. They argue that individuals act only out of self-interest, not for others, and that society therefore requires unfettered selfishness. Through such beliefs capitalists, ipso facto, reject the possibility of ethics.

Capitalism is creating an authoritarian structure that is akin to a new form of feudalism. The reason for this is that it is a system of exploitation. It follows the tenets of natural law. Under its principles and practices, the most ruthless always win. Humanity cannot base its society on this type of structure, on a system that is obsessed with selfishness and greed and where everything is evaluated in monetary terms. We must choose democracy, and implement the controls that are required to ensure that markets, and market participants, do not overwhelm our lives.

© Roland O. Watson 2008