This blog is based on a paper entitled: Critiques of Capitalism. It is third of five parts in a series that takes a long, hard look at the economic system we have in modern America. [Part 1 is available HERE]. The purpose of the bold-face type is that it represents my main arguments.
Whether it goes by the descriptor free-market capitalism, laissez-faire capitalism, neoliberalism, classical liberalism, libertarian economic philosophy, or its illegitimate children – crony capitalism, supply-side economics, or trickle-down economics – the economic theory that America is based on has a long, significant, storied past. There are, however, many critiques of capitalism, based both on theory and on actual results. This blog is the third in a series of five entitled Critiques of Capitalism, and represents my second argument against a wholesale reliance on free-market capitalism as the ideal economic system.
The unregulated (or inadequately regulated) free-market system is an unstable, arbitrary, unsustainable, and unfair system (Marx; Piketty). “The failures of the entire neoliberal project are built right into its underlying economic model because it requires certain unachievable conditions. In order to sustain itself, a globalized economy on the neoliberal model requires (1) a never-ending, always-expanding, supply of inexpensive resources; (2) an ever-expanding supply of accessible new markets; and (3) a steady supply of cheap labor to exploit it also requires a multitude of compliant governments to collaborate on the project,” note John Cavanagh and Jerry Mander.
Clearly, the evidence shows that tax cuts for the wealthy in times of economic gains do not, as Arthur Laffer indefatigably claims, “trickle down” from the “frightened rich” to the “envious masses” (de Tocqueville). Harvard philosopher Michael J. Sandel believes that: “We live at a time when almost everything can be bought and sold. Over the past three decades, markets – and market values – have come to govern our lives as never before.”
Instability is created when booms and busts are fomented by a class of financial services wizards create derivatives and credit default swaps, when government passes a law that everyone should share in the joys of home ownership, and when many citizens are too pressured to say no (Reich). Class struggle is simply part of capitalism (Marx), and as Warren Buffett put it: “Class warfare is indeed real – and my class has won.” The bourgeoisie has been doing very well indeed since the late 1970s, when deregulation began to take off. Since then, nary a president has been a progressive populist – just various shades of reactionary, corrupt, neo-conservative, and hugely influenced by the money Wall Street and their lobbyists shower on politicians.
One of the bases of critiques of capitalism is that the market should not decide everything (Marx; Stiglitz). Money is not the ultimate value. It is as though Reagan and Thatcher, taking a cue from Hayek and Friedman and others, have worshipped at the altar of the free market. As economics professor Robert Reich shows in vivid detail in the powerful movie Inequality for All, we used to be better. For decades, the GI Bill sent many returning soldiers to school, public universities were free, and good jobs could support a family of four. America made goods and the financial services industry was just that – servers. Banks were kept in place with reasonable regulation, and taxes were very progressive. The rich were rich, of course, but everyone else had a shot at moving up a social class.
But the love of money has come to hold sway over us. The country has a hard time “keeping up with the Joneses,” but they do try. The fear of getting further and further behind (and to enjoy the fruits of a productive economy) led many in the 2000-2008 era to send moms to work, consume, and “put it on the credit card.” Houses acted like ATM machines. The rich got very rich.
However, the pursuit of rents by the upper class, globalization pressures on labor and business, anti-union sentiments by the GOP, and the gaming of the system by the wealthy have had social costs. Alienation from labor, class conflict, poverty, and inequality are bad for individuals and society (Marx). “The greatest weapon of mass destruction is corporate economic globalization,” said Kenny Ausubel. Society is in a state of disrepair. Gar Alperovitz looks at liberty and social progress in this way: “The entrepreneur once did play a central role in the system— but this was more than 100 years ago. Today, roughly 90 percent of working Americans are employees— a very different kind of individual.” When workers face pressures of automation and outsourcing, a very powerful corporate leadership, and flagging pay, it is neither good for those individuals, or for society at large. Many issues such as racism, xenophobia, domestic and public violence, and suicide have some connection to class and economics.
Despite the major drawbacks that represent the critiques of capitalism (at least, American-style crony capitalism), Statism/Communism are going too far & will have unwanted & unintended consequences (Piketty). Philosopher Kai Nielson describes the ideal society as radical egalitarianism: “Where everyone alike, to the fullest extent possible, has his or her needs and wants satisfied.” That is aspirational and wonderful, but it might simply be too far for Americans to go, either mentally or practically. Not to mention the dysfunction, unintended consequences, and even atrocities that Bolshevism wrought (and, let’s remember, Soviet-style Communism failed and collapsed of its own weight in the real world in 1989). The attitude of the workers was, to a large degree, “They pretend to pay us; we pretend to work” (The Commanding Heights).
But these two extremes are not the only economic choices for society. John Cavanaugh and Jerry Mander would agree that American government is not currently earning high marks. The tendency has been to diminish it rather than improve it. They write that “[m]any governments are corrupt and unaccountable, but this does not lead us to the conclusion that the private sector is a better guarantor of rights. Rather, it reinforces our resolve to press accountability on governments at every level.” Indeed, regulatory, socialistic, and egalitarian amendments can be made to America’s current system of free-market/crony-capitalism as they are in other industrialized countries (Stiglitz, Piketty, Nielson). In fact, many countries in Scandinavia, Europe, Australia, New Zealand, and Canada have decent economic systems and often-superior social conditions. In fact, according to measures of well-being, happiness, satisfaction with/trust toward government, and health, many countries outrank the United States by impressive numbers.
Therefore, a hybridized system is better in many ways than pure free market capitalism or statist Communism – including in its economic justice and the general well-being of citizens. Stiglitz notes that ups and downs and booms and busts occurred in many countries – and I would note that it was more of a domino effect starting with the United States than some kind of “whack-a-mole,” to mix metaphors. He assures the reader: “But it is not inevitable. It is not the inevitable workings of the market economy. There are societies that have managed to do things far better…. Those societies produce a standard of living higher than that of the United States for most of their citizens, measured not just in terms of income but in terms of health, education, security, and many other aspects that are key to determining the quality of life.” In some of the most inspiring language of his incredible book, Stiglitz writes this: “another world is possible. We can achieve a society more in accord with our fundamental values, with more opportunity, a higher total national income, a stronger democracy, and higher living standards for most individuals. It will be easy. There are some market forces pulling us the other way. Those market forces are shaped by politics….” Indeed, another world is possible. It looks a lot like Denmark and Germany, in fact.
Stiglitz provides more reassurance with the following study: “Research comparing individuals’ views about what a good distribution of income might look like with their perceptions of inequality in the United States confirms that most think there is too much inequality.” He indicates that: “…when asked to choose between two distributions (shown on a pie chart), participants overwhelmingly chose one that reflected the distribution in Sweden over that in the United States (92 percent to 8 percent).” Swedes pay more for their government, and they get a better one in return.
This is the third in a series of five entitled Critiques of Capitalism.
He also notes that: “We are paying a high price for the inequality that is increasingly scarring our economy— lower productivity, lower efficiency, lower growth, more instability— and that the benefits of reducing this inequality, at least from the current high levels, far outweigh any costs that might be imposed.” Further, he notes that “[t]he bottom line, though, that higher inequality is associated with lower growth – controlling for all other relevant factors – has been verified by looking at a range of countries and looking over longer periods of time.”
It is indeed noteworthy that veterans tend to be satisfied with their medical care (though lament long waits and other aspects of bureaucracy), Social Security has been a very successful program (especially measured in a way that partials out the effects of the aging of the “baby boomer” generation), and generally Americans want a competent, functional government that provides a fairly robust social safety net and aspects of welfare. They feel entitled to it. Indeed, we might very well be much more progressive if the “captains of industry” and the moneyed class was less influential on our political system. This is not something you see in other advanced democracies.
A country needn’t go “full Soviet” to provide its citizens with social goods such as healthcare, a living wage, environmental protections, and adequate education. The free market just doesn’t care for positive liberty – the freedom to not live in a rigged economic system where it’s “who you know” and “where your parents went to school” that determines so much about a person’s chances for well-being and social mobility. Stiglitz indicates that, “…for the market economy: the power of markets is enormous, but they have no inherent moral character. We have to decide how to manage them.” In recent decades, the “deciders,” as George W. Bush put it, have been drawn from his group of $100,000-per plate campaign contributors (his “Pioneers”) more than they have been the folks on Main Street. America may have been founded by elites who distrusted the people, but we have reached the absurd age of the ubermensch.
Regarding liberty – always a consideration no matter what kind of political-economic system a society adopts – Kai Nielson has this to say:
It has been repeatedly argued that equality undermines liberty.… My arguments have been just the reverse. I’ve argued that it is only in an egalitarian society at full and extensive liberty is possible. Perhaps the egalitarian and the anti-egalitarian are arguing at cross purposes?…in that the egalitarian is pointing to the fact that rights to fair terms of cooperation and their associated liberties require equality, while the anti-egalitarian is pointing to the fact that rights to noninterference and their associated liberties conflict with equality. They focus on different liberties.
What Chomsky writes in The Government of the Future is illustrative of this point as well. In it, he is noting that his favored view of the individual-government relationship is much-diminished compared to that of modern America, but that his views do not therefore indicate that laissez-faire economics is an ideal system; capitalism it is too arbitrary and austere:
The first concept of the state that I want to establish as a point of reference is classical liberalism. Its doctrine is that state functions should be drastically limited. But this familiar characterization is a very superficial one. More deeply, the classical liberal view develops from a certain concept of human nature, one that stresses the importance of diversity and free creation, and therefore this view is in fundamental opposition to industrial capitalism with its wage slavery, it’s alienated labor, and it’s hierarchical and authoritarian principles of social and economic organization.
I will end with an interesting take on this dialectic by noted philosopher of science and emigre from a Soviet country, Karl Popper. In this quote, he is longing for a balance – a hybridization of the powerful engine that is free-market capitalism with the rights and social justice that mark social democracies and their welfare statist economic systems:
…if there could be such a thing as socialism combined with individual liberty, I would be a socialist still. For nothing could be better than living a modest, simple, and free life in an egalitarian society. It took some time before I recognized this as no more than a beautiful dream; that freedom is more important than equality; that the attempt to realize equality endangers freedom; and that if freedom is lost there will not even be equality among the unfree.
Is the ingenious Popper right that capitalism is really the only way? Is it the only form of economic arrangement that preserves liberty? Will we all devolve into lazy pseudo-workers if there is not the chance to become superrich? Read on!
This was the third in a series of five entitled Critiques of Capitalism. The next segment is available HERE.
The prior blog, the second installment, can be found HERE.