Ch. 11 Capitalism

 "Capitalism is the astounding belief
that the most wickedest of men

will do the most wickedest things 

for the greater good of everyone."

- John Maynard Keynes

Kajsa Ekaman pointed out in her Ted Talk “Everybody talks about capitalism, but what is it?” that between 1945 and 1973 we enjoyed a period without any major economic crises. Wages went up right along with productivity, and the working class became major consumers for the first time. A robust middle class, needed for a healthy economy, grew during this period as well.

So, what has happened since the early 1970's? What is meant by the current story of the economy, and this Status Quo system we find ourselves trapped in?

In order to answer these questions, first we must deconstruct the system of capitalism itself. The Oxford English Dictionary defines capitalism as follows: 

An economic and political system in which a country's trade and industry are controlled by private owners for profit. (Oxford English Dictionary, 2023.)

In other words, the capitalists own the means of production, and operate them in order to make money by extracting surplus value from the labor of their employees.

In modern capitalism, also called Neoliberalism, capitalism is referred to as a free market. Ostensibly, the free market is supposed to level the playing field for everyone. In the marketplace, only the best products at the most reasonable prices will thrive. Supply and demand are the sole directors of the market.

However, the truth is that when the wealthy talk about a “free” market what they really mean is “free from regulation.” And often when businesses are deregulated, it leads to disaster. The recession of 2008 was predicated on deregulation of the housing market (Kosakowski, 2023.) With the right to declare bankruptcy removed from private citizens by Congress, lenders believed that borrowers would have no choice but to repay them. Unfortunately, that means loans went out to people who could not really afford to pay them back, which eventually resulted in a recession. 

Deregulation also leads to ecological disasters, as in 2010 when the Deepwater Horizon well malfunctioned and spewed monstrous amounts of oil into the Atlantic Ocean. Bush-era deregulation of the fossil fuels industry led to a removal of oversights on safety, which in turn led to the disaster.

So if capitalism isn’t really about free markets, what exactly does make it tick? One possible answer comes in the form of a theory posited by Sofia Gradin. She defines capitalism using three key characteristics.

1. A drive for profit.
2. A distinction between the owners and the workers. 
3. Competition. (How to Abandon Capitalism, Ted Talk, 2019.)

Let’s start with the first item listed, profit. You hear this word all of the time, so much that most of us have stopped really thinking about what it means.

The Oxford Dictionary defines profit as a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something. 

A simpler definition would be money left over after paying for business expenses, or net surplus. 

We won't spend much time talking about profit in this chapter. We'll delve into that more in the next chapters. 

Workers VS. Owners

We’ve already established that the capitalists see a distinct line between themselves and the workers they employ. There is a rigid stratification between owner’s rights and worker’s rights. They are treated as separate entities, with the majority of laws being on the employer’s side. This inherent separation creates conflict. 

Have you ever filled out a job application and read the line we reserve the right to terminate your employment for any reason, or no reason, at any time? That’s not just wordplay, that’s actually how the system operates. Unless you can prove you were discriminated against because of race, color, or creed, you probably can’t do anything about being fired out of the blue. Of course, the Supreme Court seems to be chiseling away at the Civil Rights Act, so even those meager protections might be out the window soon.

Going back to the conflict between workers and the owner class, we can see the simple source of their adversarial relationship: Money. Both the capitalists and the workers want more of it, period, end of story.

The workers want more money for a lot of reasons, all of which involve improving the quality of their living situation. Maybe they need an expensive operation for their children, or their house is crumbling and falling apart, and they need to move.

The capitalists, on the other hand, want more money because that’s the way the system is designed in order to create more profits for the shareholders. This is why when stock drops in value, so many companies are eager to cut jobs. When they cut jobs, it’s a guaranteed spike in the valuation of their stock prices, every time. They get rewarded for putting a lot of people out of work and potentially subjecting them to poverty, hunger and homelessness.

Under our current system, there is no real way to resolve this conflict. Workers who are mostly poor and can’t afford advanced education any longer don’t get the opportunity to land good-paying jobs, which are reserved for the educated elite. It’s a self-perpetuating cycle since the children of those workers are unlikely to be able to afford education or training, either.

Let’s take a look at this self-perpetuating poverty cycle:

Cycle = Poor wages > underfunded schools > unaffordable education

System theory tells us that if you can reverse any elements of the cycle, it will reverse the entire cycle.

 

In most industrialized nations in the world, education costs little or nothing at all. Many countries will even pay for your college education. Germany, France, even Slovenia and Estonia will pay for their citizens to attend secondary education courses.

I can’t even find Slovenia on a map, and yet they provide secondary education for free to their populace. Unlike the allegedly most powerful industrialized nation in the world, the US. Here, education costs money. Yes, we have public education, but it’s perpetually underfunded and constantly attacked by conservative forces who want to funnel all that tax revenue to private schools instead. As for college, you can either go deeply into debt, or you can just not go to a university, (unless of course you are from a wealthy background).

Let’s look at our cycle. Low wages, underfunded schools, unaffordable education. 

If we broke just one of those three, we could reverse the cycle. Simply providing a living wage would break the cycle.

Unfortunately, the system is designed to discourage capitalists from paying a living wage. In fact, they’ll try to automate their processes and eliminate jobs whenever possible, and pay the bare minimum they can get away with to the workers they do keep. It’s an inherent flaw in the system, and it leads to the grotesque inequality we have here in America.

Competition

This tenet of capitalism is perhaps its most ballyhooed. In the marketplace, only the best and brightest ideas will be successful, or so the claim goes. Competition is also said to be needed for innovation.

But that is a myth that we will dispel throughout the rest of the book.

Another tenet of capitalism is infinite growth, which leads to a whole slew of problems all on its own. For one thing, nothing seems to be infinite other than in theory. Even our universe seems to have a limit, even if we can’t reach it yet.

Infinite growth on a planet with finite resources is simply an unsustainable model. 

Earlier in this chapter we talked very briefly about profit, or net surplus.

But the real question we need to ask is, what is being done with this surplus? How is it being utilized? We'll dig into that more in the following chapters...