CAPITALISM, AND PROGRESS
By Roland Watson
The last economic system is capitalism, and although it enables the greatest separation of commerce from government, many strong, and troubling, links remain. The basis of capitalism is free markets, which we have seen enable the creation of savings which, when considered as "investment capital," can be used to increase production capacity and technology, both for industry and agriculture. But, although capitalism does enable great increases in efficiency, in "productivity," it has many negative effects as well.
William Pfaff has summarized the two premises of capitalism, and their modern consequence, as follows:
1. "Totally unfettered trade among societies at all levels of economic, social and political development is an unqualified good and will eventually produce a better life for all who take part in this trading system."
2. "The sole appropriate criterion for corporate decisions is return on invested capital, and ... any other consideration, including concern for the well-being of the work force and of the community in which the corporation functions, distorts economic rationality. The concept of a 'social return' on investment, or of a corporate social responsibility, is peremptorily and arbitrarily ruled out by this theory."
For the outcome of the system: "Capitalism ... is behaving as Leninism and Stalinism did in the first half of the century. It is destroying the prosperity or livelihoods of millions for the sake of the promised well-being of generations to come ... to the benefit, chiefly, of a narrow class of corporate managers and a somewhat larger class of corporate investors."
- International Herald Tribune, December 15, 1995
The only goal under capitalism, the only measurement of success, is profit maximization. But since this inevitably leads to a minority of winners and a majority of losers, as practiced, it will never bring about a fair and just social equilibrium. Indeed, capitalism appears to be incompatible with democracy and equality, since it creates a moneyed class that is able to buy control of the government. And this, "according to American political scientist William Robinson, [has given us] polyarchy, or a system in which a small group actually rules and mass participation in decision-making is confined to leadership choice in elections carefully managed by competing elites." Furthermore, for the elites "the advantage of a system of formal democracy was that it married political legitimacy to a system of gross economic inequality." (U.S. and demise of the Third Wave, Walden Bello, Bangkok Post, April 19, 2000)
The question is, is the underlying problem of capitalism the structure of its markets, or the nature of the market participants?
George Soros, the wealthy currency speculator, has commented that free markets lead to the elevation of self-interest over the common good, and the establishment of money as the true measure of all value. (He should know!) Now that he has made his fortune, though, he believes that markets must be guided, or regulated, by a moral code.
In the next series of articles, on corporations, I will take an alternative view. Capitalism, as we now have it, is dominated by the actions of corporations. And corporations, as they see it, are engaged in Free Enterprise, which we now know is anything but free. The best solution is not the regulation of markets, which are extremely adaptable and therefore highly resistant to reform through regulation, but rather increased restraint, or a redirection, of the actions of corporations. We need to accomplish a redefinition of the concept of corporate identity to that of production/employment organizations: organizations that serve a valuable social purpose, and only this purpose, by providing us with the goods that we need and with gainful employment.
We are still left with the problem of private property, though. Everybody wants some, so we have to allow for its accumulation. But some people want more than others - a lot more - and will do anything to get it. This in turn leads to a far greater concentration of wealth, and far larger differences between people, than is consistent with social harmony. (Capitalism in this effect also functions as a confidence game. We are told that the system will enable us to get more, again, a lot more, but in fact only a select few do.)
So, what is the solution to the issue of private property?
"Supporters of deep ecology believe that no one can own the Earth, whether from a state, individual or collective point of view. Asserted ownership is ultimately a convenient social fiction deriving from a human society bent on enforcing a claim of control over other creatures and the Earth itself."
- Marine Protected Areas - A Human-centric Concept, David Orten, Earth First! Journal, December-January 2000, page 25)
We do not own the land. We do not own nature. The earth belongs, if that is even the right word to use, to all whom inhabit it. Our only right is that which derives from our right to life: we can use land and resources for a place to live and from which to harvest the materials for our shelter and sustenance. However, since this usage requires the death or displacement of other living things, it is only acceptable to the extent that it is minimized.
The question remains, though, how is such minimization, and also the sharing of natural resources between people, to be achieved? Can the government assist in this process without its gaining too much power? The answer is: no, unless it is a participative government, a direct democracy.
The other issue of private property pertains to that which you create, i.e., if you made it, it's yours. The fruits of your labor should be yours and yours alone (unless, or until, you choose to share them). The more difficult aspect of this is the ownership of the fruits of other people's labor, specifically, of people whom you have hired. To communists, such ownership is theft: the theft of the labor of workers by the owners of capital. But this is an extreme position, or rather, it applies only in some situations. If you willingly agree to lease your labor, in return for a reasonable wage and working conditions, this is not theft. On the other hand, if the form of your situation is such that you have no choice, or that either the wage or the working conditions are unreasonable, then it is.
To return to capitalism, one might also ask if one final premise of this economic system is exploitation, but not the exploitation of labor by capital; instead, if it is a system so designed that the most ruthless will always win. Consider a simple transaction. Who profits the most: a merchant who is fair, or one who seeks to obtain the greatest gain by whatever means necessary? In most cases the victor will be the latter, and over time, and many transactions, this small advantage will be compounded. It is likely, if not inevitable, that this merchant will eventually, with its greater financial power, achieve domination over the other, through acquisition or via some means of evisceration. Capitalism follows the tenets of natural law, and it guarantees the supremacy of a few, rather than equality.
In addition, the differences that result from capitalism have disastrous effects on personal identity. The wealthy tend to think of themselves as better, and the poor of themselves as inferior. Marx observed, accurately, that individuals in the lower classes, who hold the most demeaning positions, would also tend to think poorly of themselves. (No one notices you when you have a menial job!) In his view, the principle of human equality demanded an equality in terms of personal wealth, and in communism the allowable amount of wealth was meant to be minimal. (The idea that we could all be prosperous apparently was not considered.)
Of course, not all capitalist systems are the same. Capitalist societies in the West, because of their longer process of development, or perhaps because of their stronger political foundation in democracy, have led to reasonable levels of prosperity and at least the possibility of class mobility. Capitalism in other areas, particularly in the East, with its authoritarian bias, has had much less favorable effects. In such nations it is usually used to satisfy only the interests of the elite, with tremendous negative effects for society as a whole. Resources are exploited as quickly as possible, and hence the potential for sustainable economic growth, which would benefit all groups and classes, is destroyed.
(The other big difference between the East and the West is that in the former, economic development is following, not preceding, overpopulation. This makes the goal of broad and uniform social development much more difficult to achieve.)
Finally, there is the problem that because of its reliance on markets, any and all capitalist systems may well be doomed to failure. (They will not achieve a sustainable equilibrium.) For instance, when a new market opportunity is created, as might occur via the normal process of economic development in a nation, or through the introduction of a new technology, such a market is considered to be "inefficient." This means there are only a few providers of a good or service that many people want. Hence these providers can charge high prices and make large profits. But this profitability attracts interest, and competition. More companies make the good or service available, the supply increases, and the price, and therefore the profits, come down. Economists say that the market has become more efficient. (This is another use of the term.) In economic cycles, when markets mature, what often happens is that they become too efficient. Too many competitors are attracted, and the prices, and profits, fall greatly, often to the point where they are not sustainable. The companies cannot make enough money to survive.
As we have seen, and new technology notwithstanding, humans have a basic set of needs, many of which under capitalism are satisfied in markets. At some point, following widespread economic development, all of these markets will become mature, i.e., completely efficient, at which point no one will be able to make any money selling anything. What happens then, to the economy and society, is anyone's guess. But in the markets themselves, it will be as in a pool of piranhas with no food; they will be forced to feed on each other.
But, in any case, for the global economy as a whole it is a long-term risk, simply the theoretical conclusion to the cycle of capitalism.
It is also worth noting that an unintended consequence of capitalism is the creation of a whole new set of needs, and hence industries, such as for the reversal of environmental destruction (and also for mental health care). We need a healthy planetary ecology, and there are now all manner of opportunities, including new business opportunities, to reverse prior destruction. Also, considering career opportunities, this is a major growth market for the foreseeable future, and one where your efforts unequivocally will serve a positive end. (Before we destroyed the ecology, we took this need for granted. Also, this reflects the fact that for many things you do not know that you need them, until they are gone.)
Now, while I have had much to criticize with capitalism, the conventional or conformist view is that it is inexorably leading to "development" and "progress." However, development is thought of solely in terms of economic, or commercial, growth. And progress, much in favor as a term in the 1950s and 60s, and which then referred to social development, is now rarely used. The downsides of capitalism, and also of its bed partner, technology, have become clear. The idea that we are actually achieving progress under the current system is very debatable.
The issue with development, or progress, is development or progress towards what? Are we working to create a stable society where human needs are fully satisfied, and is our system sustainable and not causing environmental harm? Under the current system, development, as in the idea of a nation's development, is seen in purely commercial terms, really, in how much money corporations, i.e., "developers," are making. There is little consideration given to - or calculation of - the cultural and environmental damage that is being caused. Indeed, land development means, it is the same thing as, irreversible land destruction: to pave it over and put up some type of building.
Real development, the type of development that should be our goal, is social or cultural development: the achievement of our social goals. And what are our social goals? The following is a prospective list:
- Voluntary control of our breeding, to reduce the pressures from overpopulation.
- The protection of all natural habitats, with minimal human impact thereon, and as natural resources are needed for industry and agriculture, the minimal, least impact, and sustainable extraction therefrom.
- Human happiness, through the satisfaction of our needs as individuals.
- An ethical society, where people care for others as well as for themselves.
- The construction of a social infrastructure that guarantees all people access to quality education, health care, housing, transportation and basic utilities.
- The preservation of cultural history and traditions, including such things as languages, arts and crafts, and environmental knowledge.
- Opportunity equality.
- Within reasonable tolerances, wealth equality.
- A meritocracy.
- No intolerance or discrimination; rather, a celebration of diversity.
- A level society, where the disadvantaged are given support and assistance.
- A level society, which does not sink to the lowest common denominator, but rather in which individuals strive to achieve personal creativity, excellence and sophistication.
- A highly productive society, with a great store of wealth, thereby minimizing work requirements and maximizing the time available for leisure and personal development.
- A stable society; one at peace, in equilibrium, and undergoing a natural process of evolution with minimal disruption and unrest.
Are these the goals to which capitalism is leading us? If so, it is by a very roundabout route. And are these the goals by which we measure the success of our development and progress? I don't think so.
Also, as a final measure, it is essential that we recognize that for real development to occur, we have to be able to minimize the effects of chance. We have to eliminate the forms that lead one individual to be a beggar on the streets of India, and another a multimillionaire in Silicon Valley (or Bangalore). Even in the greatest cases of merit, chance still plays a significant if not dominant role. In a fair and just society, this would not be the case.
© Roland Watson 2016