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Capitalism

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The dismal science
Economics
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Economic Systems

  $ Capitalism
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Major Concepts
People
Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon.
Winston Churchill[1]

Capitalism is an economic system that is utilized in most countries of the world. Even in most countries where it is not accepted in theory, it is accepted in practice.

Most people agree that it has been more productive than any other economic system the world has tried, and requires comparatively small amounts of centralized oversight to keep it from running out of control. However, there is the fact that the benefits of this often fall disproportionately to the rich, with persistent (and in some cases dangerous) material and social divides in capitalist societies, and there are intellectuals that propose other economic systems are more just or can improve on capitalism. For example, some of the least unequal states are those that have adopted modified versions of capitalism that spread wealth without sacrificing overall prosperity, such as the Nordic countries and to a lesser extent, Canada.

In particular, capitalism is a far sight better than its predecessors, mercantilism and guilds, and has outlasted the idea of a command economy; it has also proven itself much more compatible with liberal ideals than either of these systems. There is a body of academic literature that suggests that capitalism may in fact be a prerequisite for the growth of progressive social values, or at the very least something that can help with their spread. On the other hand, there have been plenty of countries that loosened economic restrictions while maintaining violations of political and civil rights, such as mainland China.

There is also a belief patterned on the democratic peace theory of liberal international relations that no two globalized, capitalist countries can or will go to war with each other, though this statement only tends to be true if you define "democracy" and "capitalism" such that the statement is true.[2]

What exactly is capitalism?[edit]

The theory of free market capitalism calls for the following rights:

  • the right for each person to sell their labor (to another person)
  • the right to do whatever one wishes with one's own property

This entails, in theory, that one does not have to work except on terms acceptable to oneself. However, this also means that employers do not have to provide work except on terms acceptable to them, so people are not free to set the terms of their employment and both parties must arrange a compromise that each finds acceptable. This concept of mutual benefit is an important idea in capitalist theory — the idea that no exchange will take place unless both parties benefit, barring fraud. However, this assumes that both parties to a contract have alternatives, that is, access to a competitive market. If a monopoly is established, or merchants conspire to fix the supply, then the price of a product can be artificially inflated. In theory, a competitor could now enter the market as they could offer the product at a cost lower than the inflated one - although in this case lobbyists often coerce government officials to bar or hinder their entry. It is often claimed that free-market capitalism leads to wealth accruing in the hands of a fewer as trade persists, although it can be shown that this is caused by the speculative nature of tradeWikipedia's W.svg.

While the exact origins of the concept of private property are hard to trace, it's widely recognized that capitalism developed pretty organically (with few notable exceptions like vagabond laws,[3] land appropriation and enclosure,[4] private property rights) in the 18th century, possibly in popular response to Enlightenment philosophers such as John Locke. Feudalism and (later) mercantilism had protected ruling economic classes in Europe reaching back to the 9th century. Capitalism slowly undid these centers of power as entrepreneurs convinced landowners to invest in business enterprises, developed its own means of production, contributed to increasing standards of living, and sometimes exploited the peasants for their cheap labor.

Capitalism has trucked along; there may have been a few people who disagreed along the way, but their state-capitalistWikipedia's W.svg country imploded evolved naturally into a peace-loving Commonwealth of Independent StatesWikipedia's W.svg, so almost everybody - even those of an anarcho-capitalist persuasion - has written off the idea of a complete alternative. Capitalism is well known for inspiring such stoic and moral attitudes in the people who benefit from its fruits.[5][6][7][8]

Examples of capitalist countries[edit]

No societies of notable size have allowed for complete laissez-faire (or "leave it alone") capitalism. Mainstream economists today do not consider this to be feasible. It became clear in the age of monopolistic trusts that, in a totally unregulated free market, there is nothing to keep the more powerful and wealthy from manipulating the economy for their own benefit. The effect of these manipulations is to close markets to competition and coerce workers into below-equilibrium wages, thereby making a totally free market a far cry from "free." Moreover, such a system makes income inequality skyrocket. The question has instead become to what extent societies and markets should be regulated. Three examples are considered below.

  • Japan: Since the end of World War II, Japan has flourished as a capitalist nation striving for more economic expansion. Following rebuilding under the Marshall Plan, Japan was internationally viewed as a rising power and a model for other countries to emulate. However, Japan went into a recession in 1990. They have emerged from that long recession, yet growth remains rather slow.[9] If it still remains in a recession, it is a rather strange one, as unemployment remains low. As a matter of fact, the number of employed adults aged 25 to 54 shot up from 80.5% to 83% after the economic policies of Prime Minister Shinzo Abe kicked in. Abenomics, as they are known, involves printing money and deregulation in order to jump start the economy.[10]
  • Singapore: This tiny city-state is rated one of the economically freest countries in the world, and it has obtained considerable wealth despite its lack of natural resources. However, the state has draconian social laws that run contrary to the theory of free-market capitalism, restraining (for example) free trade in chewing gum. Singapore is also considered state-capitalist.
  • United States of America, the: The United States has long been viewed as one of the freest economies in the world. Despite some dramatic increases in government size since the more laissez-faire 19th century, the US still ranks highly in economic freedom. She remains the largest economy in the world, producing roughly 23% of global GDP.[11] Most economists believe it is the relative ease to start a business, secure property rights and stable political environment that allow for this growth. Also important is the tremendous natural resources available on US territory as the reason for this wealth. As of 2017-8, the World Economic Forum ranks the U.S. as one of the ten most economically competitive countries in the world, alongside Singapore and Japan.[12]

Capitalism and American politics[edit]

Conservatives and Republicans fancy themselves defenders of capitalism; although an innegligible amount of right-wing measures are indeed pro-free market (e.g., offshore drilling, reduced spending, reduction of income taxes, deregulation), the fact is that conservatives sometimes manage to be as hostile to capitalism as Democrats. Examples of this include George W. Bush's tariffs on steel,[13] conservative think tanks coming up with such evil ideas such as Obamacare,[14] and an ongoing War on Drugs that seems counter-intuitive if you claim to believe that free markets are great because people best know how to run their own lives.

In a similar vein, one could point out that Democrats have been as friendly to the free-market as the GOP, as seen in the Clinton administration's many neoliberal reforms, such as welfare reform and friendliness towards businesses. It wasn't all that great.

Capitalism and religion[edit]

Religious people involve themselves in politics all over the spectrum, usually claiming that God personally shares their political beliefs. For this reason, most of them are cranks and the "powers that be" appease them only as much as necessary to get their votes; hence, the Religious Right's failure to bring in a theocracy.

Although there is a strong tradition of religious involvement in centrist or left-wing politics (e.g., the early Christian church vs. the Roman Empire, Liberation theology, Christian democracy), in the United States most politicians who make religion an explicit part of their political identity are conservatives and adhere to a form of Christianity that fits these beliefs. This is ironic, because most of the particular policies that set the Religious Right apart from the secular right are contrary to the principles of free-market capitalism; however, knowing so would require reading and that's difficult.

Capitalism is rooted in the Lockean notion of self-ownership and self-determination, and there is little evidence that Locke was implying the government should be used to stop gay people from getting married or teenage girls from aborting their pregnancy. Christians seem to want capitalism in that they want BMWs and leather-bound Bibles, but if other people want to spend their money on cocaine and hookers then clearly freedom is going a little too far. Another layer of irony is added when you consider that Christ spoke out, in no uncertain terms, against what is considered today to be the extreme of capitalist doctrine. It took an act of staggering cognitive dissonance — helped along by the fact that, due to the influence of Marxism, anti-capitalist politics in the 20th century had become firmly associated with atheism — for Jesus to be portrayed as a long-haired version of Ronald Reagan. (Seriously, anybody who has not had the joy of asking a wealthy fundamentalist to explain Matthew 19:24 to them should get down to their nearest Baptist Church immediately and start asking around. It's the most awkward 15 seconds of half-remembered excuses.) Some, however, have actively attempted to reconcile theology and laissez-faire ideology as in the Reconstructionists' concept of "Christian economics."

A truly free market, which is based on self-ownership as opposed to the doctrine that all people are the chattel property of God, is a fundamentalist's worst dream; the only reason they sometimes pretend to defend it is because they can't spell "theocracy."

Max WeberWikipedia's W.svg, the pioneering sociologist, argued that Protestant religious sentiment (what he called the "Protestant work ethic") was a primary factor in the development of capitalism. Modern analyses insist only indirectly, through the increased literacy that it caused.[15]

In most Muslim countries capitalism is actively opposed due to its Western roots, as is socialism for the same reason. Islamic economicsWikipedia's W.svg serves as a substitute and draws direct influence from Quranic verses. Technically, these economics can be seen as third way economics, as they do advocate a limited free market economy while simultaneously taxing people to help the poor.

Criticisms of capitalism[edit]

An anti-capitalist illustration of how capitalism and the class system worked during the early 20th century. Fortunately for angry college students, capitalists are more than happy to profit off of communism.

Ideologies like socialism, communism, and fascism are all categorically opposed to free market capitalism for various reasons, such that it oppresses workers or spits in the face of tradition. Fascism, both historically and in theory, retains important aspects of capitalism such as it's system of property and hierarchies, as well as the state.

Unregulated capitalism is frequently mocked in cyberpunk and dystopian literature (the works of Neal Stephenson[note 1] and Max Barry,[note 2] among many others, are particularly known for this).

This stems from the observation that capitalism, at its heart, is about each person working to benefit themselves as much as possible, and without regulations to ensure that this benefit does not come at the expense of others, capitalism changes into something rather unhealthy for society. Thus economists who do not advocate for laissez-faire economics support government intervention to address these kinds of positive as well as negative externalities. Problems not resolved by the free market are known as market failures.

The myth of the free market[edit]

The biggest problem with capitalism is that the free market in reality doesn't exist for a very simple reason: money is power. Gain enough money fast enough and you can "encourage" those in charge to change the laws to make competing in your field more difficult if not impossible. This is formally called crony capitalismWikipedia's W.svg. Another tactic is stockpiling enough cash so that one can sell goods at a loss, eliminating any competitor that does appear. Once the competitor goes out of business, the prices can go back up (perhaps higher then before). This is called predatory pricingWikipedia's W.svg. Still another tactic is to control the chain of industry needed to produce a good or service, for example owning the iron mines whose ore is then used to build a railroad, which supplies the businesses you also own (see vertical integrationWikipedia's W.svg).

Conditions for workers...and consumers[edit]

Conditions for workers can be horrid under capitalism as companies feel they can easily replace workers. The consumer was in little better shape as caveat emptor was the rule of the day with goods either poorly made or fraudulent. The Gilded Age was particularly bad in this regard with Midnight is a Place and The Jungle popularizing the horrors that existed for both workers and consumers. Conditions were so bad for child workers that some areas used animal cruelty laws to protect them. The consumer was in nearly as bad a shape as some of the products (patent medicines) were downright dangerous (some medicines contained large amounts of powerful drugs like cocaine [16]) and other used food dyes and other means to hide the fact that food being sold was spoiled. One particularly gruesome fact was the way meat was ground up could result in a worker falling into the meat grinder and being shipped out with the meat for consumption.[17]

Worse yet sweatshops are not something of the past or limited to second or third world countries. Conditions for workers in the triple A computer game industry would certainly qualify as "sweatshop". This crunch time is notorious and getting worse. Money tends to go into the hands of the CEO and the upper management rather then back into the company (or the employees). If the stock takes a hit because the company didn't meet the totally unrealistic expectation they put out then expect a load of people to get laid off which for some insane reason tends to result in the stock going up.

The ultimate bottom of the barrel of Capitalism is the MLM snake oil. To paraphrase an old show 'they were promised dreams and that was what they got paid in..dreams'.

Quotes about capitalism[edit]

Supportive[edit]

I could say to you that I have done more good for my fellow men than you can ever hope to accomplish -- but I will not say it, because I do not seek the good of others as a sanction for my right to exist.- Ayn Rand, reactionary free-market devotee and Social Security user, Atlas Shrugged.

With all its flaws, capitalism remains the most productive economic engine we have yet invented. Like Churchill's line about democracy, it is the worst of all economic systems, except for all the others.- Fareed Zakaria, Newsweek, June 22, 2009.

The most important single central fact about a free market is that no exchange takes place unless both parties benefit.- Milton Friedman, Nobel Prize-winning economist, PBS, October 10, 2000.

Critical[edit]

Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate.- Bertrand Russell, philosopher, logician and mathematician.[18]

Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.- Adam Smith, The Wealth of Nations.[19]

Capital is dead labour which, vampire-like, lives only by sucking living labour, and lives the more, the more labour it sucks.- Karl Marx in Das Kapital[20]

Capitalism and Godwin[edit]

Welcome to the Internet, where everything is a race to compare something you don't like to Hitler. Because of that, here are some quotes attributed to Hitler that are either supportive or critical of capitalism:

I absolutely insist on protecting private property... we must encourage private initiative.- Adolf Hitler, model libertarian.[21]

I am bound to say that private property can be morally and ethically justified only if I admit that men's achievements are different. Only on that basis can I assert: since men's achievements are different, the results of those achievements are also different. But if the results of those achievements are different, then it is reasonable to leave to men the administration of those results to a corresponding degree. It would not be logical to entrust the administration of the result of an achievement which was bound up with a personality either to the next best but less capable person or to a community which, through the mere fact that it had not performed the achievement, has proved that it is not capable of administering the result of that achievement. Thus it must be admitted that in the economic sphere, from the start, in all branches men are not of equal value or of equal importance.- Adolf Hitler, srslythebestlibertarian.[22]

See also[edit]

External links[edit]

Notes[edit]

  1. Snow Crash and Diamond Age in particular.
  2. Notably Jennifer Government and Syrup.

References[edit]

  1. An A-Z of business quotations, The Economist
  2. Thomas Friedman referred to this as the "McDonald's Effect."
  3. http://www.londonlives.org/static/Vagrancy.jsp#toc2
  4. http://www.parliament.uk/about/living-heritage/transformingsociety/towncountry/landscape/overview/enclosingland/
  5. The Talented Mr. Madoff, The New York Times
  6. Behind the Enron Scandal, Time
  7. AMAZING FREAKOUT OVER XBOX 360
  8. How to steal gumballs out of the machine :P
  9. Japan comes out of recession but growth still disappoints. BBC. February 15, 2015.
  10. Is Japan Really In A Recession? World Economic Forum and The Washington Post. November 24, 2015.
  11. World Economic Outlook Database 2011, IMF
  12. Global Competitiveness Report. World Economic Forum. September 26, 2017.
  13. George Bush, protectionist, The Economist
  14. Obamacare's Heritage, Wall Street Journal
  15. Sascha O. Becker and Ludger Wößmann. Was Weber Wrong? A Human Capital Theory of Protestant Economic History. Munich Discussion Paper No. 2007-7
  16. For example, Coca-Cola begin life as a patent medicine with the "Coca" relating to the cocaine used in it at that time
  17. Brings a whole new meaning to the term "Swedish meatballs"...they could called that because a Swede fell into the grinder that week.
  18. Sceptical Essays (1928), Chapter 13
  19. The Wealth of Nations, Chapter IX, p. 117 (1776)
  20. The Political Economy of the Dead: Marx's Vampires, Wake Forest University
  21. A private statement made by Hitler on March 24, 1942. Cited in "Hitler's Secret Conversations." Translated by Norman Cameron and R.H. Stevens. Farrar, Straus and Young, Inc. 1953. p. 294.
  22. Hitler's address to the Industry Club on January 26, 1932.