The fundamental aspect of capitalism is supposedly competition. Businesses compete against each other for customers, and it is that competition that keeps the game fair. If one company behaves poorly, customers will take their dollars elsewhere and that company will fail. This keeps companies honest in order to maintain a solid customer base. This competitive drive to succeed among all participants creates a so-called “Invisible Hand” of the market that keeps it fair as companies compete against other companies, and the aggregates of supply and demand will fall into harmony to provide a equitable cost for everyone involved.
However, competition is just a euphemism, or a deliberate deception depending on how cynical you want to be, for the real essence of capitalism: conflict. A “by-any-means-necessary” attitude is taken towards financial gain, and governments must impose very strict regulations on companies in order to prevent them from undercutting their “competition.” Corporate espionage, predatory pricing, monopolization, etc. are all fraudulent, non-competitive methods of achieving victory that are quite illegal (regardless of how frequently they might still happen). This is technically considered government regulation, which pure capitalism would frown upon. If businesses act closer to rival gangs than two opponents having a race, then this illustrates the non-competitive nature of capitalism, because in a race, you don’t win by cutting the Achilles tendon of your opponent. Well, maybe you do, but you’d have a hard time legitimately defining it as a fair competition. Capitalism, left to its own devices, would not achieve harmonious balance, it would devolve into the last scene of The Godfather. Or… whichever scene is the one where Michael has all the other heads of the families killed. It’s near the end, anyway.
Conflict also appears between businesses and employees. Adam Smith suggested in the Wealth of Nations that business owners will try to get as much out of their employees for as little pay as possible, and employees will try to do as little for as much pay as possible. When both sides are attempting to gain exponential financial growth, this conflict is surely to blossom. Problems of course arise when employers hold all the cards, and this one-sided battle will naturally escalate into as close to slavery as the company is socially allowed to get away with.
Smith writes that if there are fewer people around to do the work, then employers will have raise wages and working conditions in order to get employees to work for them; after all, a business will not function without workers. This will allow families to grow and people to immigrate, increasing the population, and allowing wages to be lowered. On the flip side, if there are too many people around, then wages and working conditions will decrease. The Invisible Hand will create balance this way by having people starve to death until the number of people decrease to accommodate a natural wage/workload equilibrium. The problem that Smith is forgetting, outside of this abhorrent solemn acceptance that people are just going to have to suffer and die for this system of economics to function properly, is the unwavering spirit to live that human beings possess. We do not just lay down to starve and die when things are oppressive and tough. A good many Jewish people survived the Holocaust if they weren’t killed outright. Therefore all the oppressive measures will forever remain in place if businesses are allowed to have their way, unchecked. Also, considering the globalization that has occurred since Smith’s time, businesses can now just move their production to parts of the world where the human capital is highest, and can exploit the world to their hearts content.
To even things up a bit, workers have come up with their own solution: unions. Unions were invented to create an opposition to the tyranny of management. Within a capitalistic system, unions are a definitive necessity to avoid the inevitable slavery that allowing management to have absolute power would produce, but this is replacing slavery with strife. Unions are not designed to work with management, but against it. Allowing either side to “win” this capitalistic conflict would either bankrupt the company financially or morally. Within capitalism, for it to be “fair”, workers and management need to be forced into an eternal struggle wherein neither side can emerge victorious.
If we are trying to avoid this union/management rivalry, the government can regulate businesses to provide humanistic working conditions and wages, which again is outside of pure capitalism.
To further show the all-encompassing nature of conflict within capitalism, we come to the remaining participants of the economic system: the patrons. The very essence of supply and demand is that customers will try to get the best product for the least amount of money, and businesses will try to get the most money for the cheapest product. This means that businesses will cut corners to provide substandard products, and use guile and propaganda to persuade the masses to purchase their products regardless. Businesses work under the mantra to buy from the lowest bidder and sell to the highest one. This creates inferior, often dangerous products, that only through government regulation can be reigned in. The “Buyer Beware” practice of the past proved fatal, as all businesses will invariably take the cheapest route, and when that route involves lead, for example, and consumers have no other alternatives, it is up to an overseeing, regulatory body to make sure companies do not put literal poison in their products.
As in all conflicts, there are losers. What capitalism fails to take into account, either through apathy or ignorance, is what to do with those losers. The only solution capitalism offers is to try again within the same framework. Pull yourself up by your bootstraps. But those who lose in a conflict will always be starting again with much less, and in a dog-eat-dog system that is just a set-up for further failure.
Alternatively, a government which provides for those who slip through the cracks, such as through a welfare system or other social programs, could potentially salvage the losers from the depths of the capitalistic war.
There are social costs to capitalism as well: We are alienated from our neighbours by having our typical everyday social interactions with strangers taking place within the realm of conflict. It’s why both people on either side of the Starbucks counter hate each other. The division of labour, though it cuts costs and increases production, means that the people we depend on are strangers a thousand miles away, rather than those who live within our community. Friends and families are often torn apart over issues of money because each transaction will always be tainted with self-interest and greed; the fundamental tenets of capitalism.
Capitalism also prioritizes short-term gains over long-term problems. We destroy the environment, our planet, for the sake of a few dollars. We create economic bubbles by creating and profiting off of a market of debt. We lay off employees to save a few bucks, and then go under completely because we now deliver a shoddier product (eg. the entire state of Michigan).
There is planned obsolescence, where new products are designed to either break or go out of style so that the consumer will have to purchase a new one. Repairing items now is more expensive than a new purchase, furthering this drive to consume more, and in the end, waste more.
There are so many more examples of the inherently flawed aspects of capitalism. I am probably missing some key elements already, and I’m not even bothering to cover distinct examples of companies doing atrocious things for the sake of profits, or how governments subsidize big businesses to the point where even calling it capitalism is a joke. Some argue the capitalism works because it plays to our human nature: self-interested and savage, and that any other system we try would inevitably follow the same patterns. I disagree, but getting into what I believe constitutes human nature is a tangent that will be discussed in a future blog.
Some might argue that without capitalism we would not have the advances in our society that we all enjoy, that it is because of the promise of wealth and fame that people are inventing things. But studies have shown us that money as motivation is actually counter-intuitive to the creative process, and only works for menial, brainless labour. What is necessary for inventive creation is freedom, and capitalism works as a barrier to that freedom because of the walls that those we are in conflict with place in front of us. How much better would computing technology be if Microsoft and Apple didn’t manhandle the market so that no new contributors could participate? How would the electric car be doing if the oil and gas industry didn’t have their say?
As we have seen, the only way for capitalism to “work” is with heavy government regulation and social programs to make sure that we don’t devolve in corporate feudalism and gang wars. And by that point you’re already basically at socialism. So why bother?
