A critique to capitalism

Since Adam Smith discovered the invisible hand, market economies have been sold as the panacea for ever-increasing growth. The rationale behind the culture of laissez-faire neoliberalism is that free, deregulated, international markets will lead to fierce competition which, coupled with the profit motive, will result in the optimum allocation of limited resources. Statistics demonstrate a wave of worldwide growth that has swept entire populations out of poverty, with the Asian tigers and BRIC countries at the forefront. However, inherent to capitalism and the free competition principle is the need for companies to grow larger or die out and the subsequent, self-reinforcing increase in power. This is directly translated into a society in which the supremacy of non-satiation and consumerism is directly seen in people’s attitudes, creating massive inequalities to which it is perturbingly easy to turn a blind eye to. In a supposedly meritocratic society the poor are lazy, the hard workers rich.

Capitalism as a socio-economic system places big emphasis on private ownership and minimum legislation. Government intervention should therefore be constrained to ensuring the basic rules of the free market, that is enforcement of copyright and private property laws and perfect competition by means of eliminating trade barriers, monopolies and deregulation. Milton Friedman exemplifies the need for capitalism. He says that if workers obtain higher wages due to union power it is at the expense of other workers’ opportunities or if governments pay higher wages it is at the expense of the taxpayer. However, if workers get higher wages through competition those are at nobody’s expense. “The whole pie is bigger – there’s more for the worker, but there’s also more for the employer, the investor, the consumer and the tax collector. That’s how the free market system distributes the fruits of economic progress among all people.”

Furthermore, the capitalist dogma may be defined as an individualistic one. Selfishness is not necessarily a pejorative word. In fact, the selfish leitmotif is the precursor of innovation. It was the quest for profit that led Henry Ford to revolutionize the automobile industry, and the thirst for knowledge that gave us Einstein’s theory of relativity. It does not take a genius to realize how flawed this argument is.

However, if there is one attribute which capitalists are proud of it is the freedom to do anything and everything. As long as an idea can be matured into a profitable business opportunity, the farmer or the peasant can become a millionaire. The freedom to live life as desired is a reality and the abundance of choice may even become overwhelming. In a capitalist society all dreams may come true, but dreams come with a price tag. It is up the consumer to decided if the price is worth it. This leads us to Smith’s final argument, “if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it”.

It is often thought that the negative consequences of capitalism seen around the world are due to extreme capitalism, however, these are in fact the inevitable outcome of what is at the core of such a system. State power grew out of a necessity to protect private property, which greatly benefits big corporations and retroactively gives states more power (since the main political parties are affiliated with such corporations to obtain financing, for example). Furthermore, these same corporations will provide politicians with a job in the private sphere once their political careers come to an end. As a consequence, it is a system that gives into the needs of capital instead of following the ideals it voices, such as perfect competition or free markets. A system of self-reinforcing corruption. To exemplify this a simple look into the 100 largest economies in the world suffices: 51 are corporations and 49 countries. Furthermore, in 2002, the top 200 transnational corporations had sales equivalent to 28% of world GDP yet only employed 0.82% of the global workforce demonstrating the ineffectiveness of trickle-down economics.

A fundamental problem with capitalism, and which has been conveniently ignored, is that the pursuit for profit leads to measures that are far from the expected or desired innovation. The extraordinary profit margins which corporations obtain are based on underpricing resources, whether it be raw materials or labor supply. Multinationals will lobby for all sorts of benefits ranging from tax exemptions to export processing zones i.e. zones levied off custom duties. Some will even use child labor, prevent workers from unionizing or keep such horrible conditions that suicides are not uncommon, as seen in Foxconn’s Chinese factories. However, the quintessential innovation has been planned obsolescence.

Planned obsolescence is a process by which a product is designed with a limited useful life, that is, so it will become obsolete thereby forcing the consumer to obtain a newer, up-to-date version. In the old days manufacturers were proud of lifetime lasting products. Now they are merely driven by profit expectations, the ink is sometimes more expensive than the printer. Whereas my parents inherited cutlery and crockery I will simply go to Ikea, often rebuying the same item repeated times due to its short lifetime. Planned obsolescence has given way to the ‘use & toss’ era, the era where it is cheaper to rebuy than repair, refill or reuse and led to what I call ‘use & toss’ solutions to remarkable problems. For instance, China has been the exemplar student in its transition to capitalism. It has based its growth policy mainly on cheap exports thanks to ridiculous labor costs. However, once these have started to increase and due to a lack of the economy’s diversification and the need to remain competitive, Chinese policy has been based on decreasing tax for exports, increasing access to credit, millionaire investments incentivizing exports and a devaluated currency peg. All these are short-term solutions which do not address the roots of the problem and which will have to be constantly renewed in order to keep growth growing. They can be described as bandages applied to a stitch-requiring wound. Even if the constant reapplication of band-aids might deter some bleeding, the subject will eventually bleed to death.

Capitalism requires constant growth for it to be successful (considering success is economically determined and it is the success of a few, not of the entire society). If growth stagnates, governments panic, businesses default and people may even lose their homes. The main driver of constant growth is rampant consumerism. Therefore, people learn to define themselves in terms of what they own not who they are as a person. This is beautifully described in Saint-Exupery’s The Little Prince: “If you were to say to the grown-ups: “I saw a beautiful house made of rosy brick, with geraniums in the windows and doves on the roof,” they would not be able to get any idea of that house at all. You would have to say to them, “I saw a house that cost 100,000 francs.” Then they would exclaim, “Oh, what a pretty house that is!

Therefore, society has been divided into 3 very distinct groups. The poor, who make up 68.4% of the world population and hold 4.2% of global wealth which struggle to survive. The rich & stratospherically rich, 8% of global population and 79.3% of the wealth, which can buy anything they want. The middle class, compromising 23.5% of the population and holding 16.5% of the global wealth (Credit Suisse Research Institute, Global Wealth Report, October 2010.). The middle class is indispensable to support the wealthier citizens. They do so by entering a spiral in which they spend money they do not have, on things they do not need, to impress people who do not care because they are too busy buying themselves. All in an attempt to reach an economic status that is unattainable by design.

Competition embedded in capitalism conveys a vying society. Life is a solitary competition of all against all and survival of the fittest is no longer valid, it is possible to pay someone to be the fittest in your place. Fear of being ostracized from the system by those more able has meant that workers everywhere are accepting lower wages and precarious job conditions. It is no secret that in many western societies an entire generation has been lost to unemployment because of the recent financial crisis. The right to a job is no longer so. In fact, those employed should demonstrate their gratitude by accepting ever-worsening living conditions.

Furthermore, the notion that all is buyable, all is achievable and all is improvable voiced by the media, which happens to be owned by the same corporations which sell us the products, has persuaded us that once when get our dream job we will be happy, replacing this by our dream car, dream house, dream holiday… The speed at which we move on has resulted in a complete lack of reflection. To stop and think could mean losing the comparative advantage crucial for survival. This deeply implanted want for more has brought about a permanent discontent. Social networks, specifically the dating sites, which have been thriving in the last decade, are the prime example. There is always the possibility that someone smarter, funnier, prettier, sexier will come along making compromise hard to come-by.

In addition, politicization & corporatization of the mass media have led to a culture described by Noam Chomsky and Edward Herman of manufactured consent, a technique used to maintain the capitalist system. One in which propaganda is used to create a compliant, manageable population. We are sold the idea that given the already existing levels of stress in our everyday lives there is no need to become involved in politics which, coupled with fear of being wrong, means we willingly sidestep of public life, leaving it to so-called “experts”. The stories of success against the system, whether it be stopping a foreclosure in Spain or passing an immigrant’s rights law are often not shown on television. We believe we are powerless and forget that revolutions have worked in the past. Or we claim to be revolutionary through Facebook whilst we drink Coca-Cola and take a Kit-Kat break.

We can believe that humanity is conditioned to live like described by Baudelaire in his poem to the reader:

Our sins are obstinate, our repentance is faint;
We exact a high price for our confessions,
And we gaily return to the miry path,
Believing that base tears wash away all our stains.

However, we have reached a turning point that no longer permits this reasoning. Capitalism has reached its ecological and social limits so we must reinvent the system since, as it is, it can “only persist with whatever suffering and injustice it entails as long as it’s possible to pretend that the destructive forces that humans create are limited, that the world is an infinite resource pool and that the world is an infinite garbage can”. (Chomsky, Manufacturing Consent) The system is like a cancer, if the cells knew that their incessant reproduction would lead to the death of the body that maintains them with life, they would stop reproducing.

It must be noted that this does not imply, like Naomi Klein says, that it is not possible to have a market economy coupled with a supervising government that provides services which, due to logic reasoning, should not be submitted to the profit motive such as the firefighters. “Markets need not be fundamentalist”. Furthermore, a change of priorities must be put in place to avoid a worldwide debacle. A type of capitalism where businesses have a social function, that is, that their reason of existence is not solely the profit motive but are providing value to society while being allowed to make a profit. However, one that does not rely on the destruction of the planet or modern slavery.

As society reacts to its stripping of rights by the political elites worldwide it realizes that hidden somewhere within lie feelings of empathy and solidarity. The Arab spring or the Occupy Wall Street movements showed the creation of communities with non-purely selfish motives. However, these have only surfaced as a reaction to the recent financial crisis, which has also brought to light the murkiest aspects of the system. Some say it is prove that capitalism is dead and that we are assisting to its final stages. The worldwide-imposed austerity is the mere reflection of an agonizing entity. One that jeopardizes its own support structure in order to obtain short-term benefits out of necessity since it has nowhere to turn to. Astronomic deficits must be eradicated but austerity will only reduce consumption, further exacerbating the problem. Even if capitalism has increased our liberties and choices it has done so at the expense of the vast majority. Such a system is not a sustainable one.

Sacha Pañeda.