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the Political Philosophy
Capitalism is a term used to describe a category of economic systems in which 1) markets exist, 2) the means of production as well as other enterprises are privately-owned, and 3) the primary motive for important decisions is capital accumulation i.e. profit by individuals and firms.
As Capitalism is a class system, it naturally creates two distinct groups: The Capitalist class, the ruling class, or the bourgeoisie, and the proletariat, also known as the Third Estate (Revolutionary France), the plebians (Ancient Rome), the working class, or the commoners. The difference between the two is that the Bourgeoisie owns the means of production, and the Proletariat doesn't. The Proletarians have to sell themselves (or their labour power in Marxian terminology) to the bourgeoisie, while the bourgeoisie are in turn are supposed to (though not always) pay the proletarians on the basis of how long or how much they work so that they may live. This is in-effect an employer-employé relationship. The worker does not receive the full value of their labour though. Otherwise the Capitalist wouldn't be making a profit and as a result would go out of business. Instead, the worker only gets paid a small fraction of what they make while the Capitalist just sits and does whatever they want all day. This is known as surplus value. The equation for it is: surplus value = the price of the commodities or services being sold - (constant capital + variable capital), or S = P - (C + V).
There are occassionally other classes such as the clergy or nobility, or the petty bourgeoisie (also known as the middle class in some countries, they are peasants who own small businesses such as grocery stores or farms or clinics or whatever, generally favour local change instead of regional or national change, and have bourgeois interests at hand), though the former two are feudal relics that have lost much of their power and influence, and the latter is a dying class.
While at a base level Capitalism does have to offer a commodity or service that people want or think they want via price signals, or does have to compete with other businesses often by innovating, or does have to charge low prices so people will buy from them, or does have to pay high wages so people will work for them, etc., etc., this does not last for long. Sure, there may be a competition. But what happens in a competition? Someone wins. Do they let the other companies keep their shares and continue competing within the market? No, they do not. Often times there may not be any need for innovation; rather they simply buy the company or temporarily offer their goods and services for a lower price, causing other companies to go out of business. Monopolies inevitably form, and wages go down, prices go up, the quality decreases, and other bad things occur. Why would you increase the quality of your goods if you're the only person people can buy from? Monopolies are not like McDonald's and Burger King, competing for your money if you're a consumer or your expertise if you're an employee.
Unlike in Soviet-style planned economies, there is no economic democracy under Capitalism. While in the Soviet Union you could elect or un-elect your boss or manager, under Capitalism you cannot. There are some ways to combat this such as "voting with your dollar," or "choosing" to work somewhere else, or going on strike, but voting with your dollar may as well be voting for the same candidate as many of the companies are owned by the same person, and you can't just not work as that would mean starving to death, and the Capitalist has several countermeasures ranging from docking your pay to firing you from your job to paying the government to shoot at you.
Liberals and Marxists differentiate in their approach to Capitalism. Liberals and SocDems believe Capitalism can be reformed and that the model we see today is just Corporatism or Cronyism, whereas Marxists argue that Capitalism inevitably results in Cronyism, saying that the reason why places such as Scandinavia are mixed economies and not free market economies is because for 70 years Socialism was right around the corner, and the only solution is abolishing Capitalism in search of a better system.
Ideology rating 2/10.
Some of the elements of capitalism such as monetized economic exchanges can be detected in all societies governed by states, but capitalism became dominant in Northwestern Europe the century before the Industrial Revolution that began in the first half of the 18th Century. Gradually the bankers, merchants, and businessmen became more important than landowners in Great Britain. Many people on the traditional left have strongly anti-capitalist attitudes, though in the United States (and increasingly in the rest of the world as well), the left generally prefers to reform capitalism rather than abolish it altogether. Due mainly to the historical failure of most command economies, many leftists (though by no means all) have accepted the premise that some kind of competitive, market-based private sector is necessary for economic prosperity. There is, however, vast disagreement over how much of the economy should be organized on a capitalistic basis.
That is why in this author's opinion people who want socialism should aim for a Social democratic system as in Scandinavia. Socialists should accept a small private sector rather than risk the way economies go wrong under central planning.
Varieties of Capitalism
A central component of capitalism is the notion of "free enterprise," which argues that government intervention in the economy should be relatively minimal and that a free market, based on supply and demand, will ultimately maximize consumer welfare. A system based on extremely limited government intervention and almost pure free enterprise is called laisser-faire economics. Leftists, both reformist and anti-capitalist, are very cynical toward laissez-faire economics and generally believe that it will benefit mainly the wealthy, business-owning class while workers, consumers and poor people get exploited. Capitalist owners want the freedom to operate their business as they see fit,
even if especially if that means exploiting people. Because of this, government action is viewed as necessary to curb the system's abuses, which include income inequality, monopoly power, political campaign finance, market failures, environmental degradation, and the business cycle. When exploited people become poor or remain poor it's assumed they are at fault.
Social democratic countries run on the Scandinavian model also have a Mixed economy wirh a private capitalist sector, but it is combined with a large public sector and extensive government regulation to Markets and elsewhere. Many studies suggest that Scandinavian countries such as Denmark, run on the Social democrat model, are among the happiest societies in the world. They provide generous protection against poverty and unemployment and also are relatively egalitarian in their income distribution, yet they still enjoy material living standards roughly on par with more strongly capitalist countries like the United States and Canada.
In the United States Prior to the neo-conservative revolution in American politics the United States economy was generally described as a mixed economy. In general, the US allowed heavily regulated monopolies only in industries which had been shown to safely and efficiently deliver goods and services at low prices under monopoly control. The US Government owned a few industries that could be efficiently run in coordination with mandated functions. In industries where free markets were shown to be more efficient at delivering goods and services at low prices, the government acted to reduce barriers to entry and exit of markets and eliminate price-fixing and anti-competitive business practices. The overall emphasis of US business policy prior to the Neo-con revolution was efficiency, [Individual Economic Rights], and individual defense from coercive market manipulation.
In 1980, Neo-Conservatives took power in the United States and began a systematic destruction of a mixed economy.
- The US Tax Codes were revised to favor the efficient accumulation of wealth by Capitalists.
- Federal agencies charged with enforcement of anti-competitive laws, consumer protection, business regulation, environmental protection, labor rights, etc. were de-funded and put under control of industry administrators.
- Potentially profitable enterprises under direct government control were outsourced to private capitalists
- Jurists who favored laissez-faire capitalism and efficiency of capital accumulation over consumer protection, freedom of enterprise and anti-competitive enforcement, Shareholders rights, business regulation, and environmental protection were promoted to key positions.
- Tort reform laws were passed to limit legal remedies to business misbehavior, and external costs.
- Labor Union representing Federal Employees was broken, and the Federal government adopted an anti-union stance
- Usury laws were rewritten or eliminated
- Bankruptcy laws were rewritten
- The Republican Party began to be purged of Liberals. Ronald Reagan and other neo-con leaders began to speak of the "L-word" and RINO's; Liberals began to be demonized by the new main-stream Republicans and were pressured to either:
- repudiate mixed economy, advocate laissez-faire anarchic capitalism and join the libertarian wing
- leave the Republican Party, as they were RINO
The post-Neo-Con period has been marked by:
- Increased monopolization of markets. While Monopolies are very inefficient from a consumer standpoint, they are extremely efficient at maximizing profits while minimizing risks.
- Many modern monopolies are now so essential to our economy that they are deemed "too big to fail"
- Federal agencies charged with enforcement of anti-competitive laws, consumer protection, business regulation, environmental protection, labor rights, etc. continue to be pointed out as wasteful big-government and underfunded.
- Jurists who favored laissez-faire capitalism are now empowered in senior posts. No significant restraint-of-trade prosecution has been made in years. Class Action suits have been substantially eliminated from American Courts. Well funded litigants are now able to postpone litigation for years, and in many cases divest themselves of liable divisions before their case comes to trial.
- Barriers to market entry are at an all-time high.
- Mandated Government programs are more expensive due to outsourcing to private contractors
- Labor Unions, wages, and worker protections are marginalized
- The American Middle Class as we knew it is becoming a thing of the past
- Deregulation of Financial markets has resulted in extreme booms/bust cycles common to the early American economy
- The American economy has continued to grow, but the wealth generated from that growth is increasingly concentrated in the hands of a tiny minority of Americans.
- Wealthy Americans and Corporations wield unprecedented political power
Critiques of Capitalism
Critiques of capitalism vary from fundamental denunciations of exploitation conceived in terms of the labor theory of value like those made by Marxists to complaints of deviations from abstract or idealized capitalism made by liberals. Aaron James offers an example of the latter in his popular nonfiction book, Assholes: A Theory. On page 146 he describes "asshole capitalism" as characterized by three features:
- a) incentives - affirms expansiventitlementsts
- b) undermanagment - lacks a system for moderating the worst behaviors.
- c) destabilization - accumulation of people given to the worst behaviors undermines necessary cooperation
Systematic Capitalist Failures
- Artificial demand for domain names created by permission from ICANN to grant new internet suffixes as firms and individuals buy such "property" defensively. According to general counsel of the Association of National Advertisers Douglas Wood: "All that money is just wasted money because it's money thrown away to property rights that will never be used, never add to competition, never add to innovation, never do any of the things that ICANN is touting will be the great benefits of all these new top-level domains."
- Lobbying for anti-immigrant legislation at the state level by the Corrections Corporation of America.
- Meat Glue
- Low standards (falsified attendance records, grade inflation, job placement data inflation) at "For Profit" Institutions of Higher Education. Source: Kelly Field. "Faculty at For-Profits Allege Constant Pressure to Keep Students Enrolled." The Chronicle of Higher Education. May 13, 2011. A1, A10-A12.
- Systemic fraudulent mislabeling of seafood in the United States, with catfish substituted for Grouper and thresher shark substituted for swordfish and mahi mahi. Source: Elizabeth Rosenthal. "Some Foul Play At Fish Market" The New York Times. May 27, 2011. B1, B4. See Overfishing
- Killing creativity by restricting tinkering to protect property rights “The Tinkerers”: How Corporations Kill Creativity Alec Foege. Salon. December 30, 2012.
- wage theft
- Corporate practices leading to Nestle boycott.
- Has to use the state to protect capital interests from Socialists (neoliberalism), sometimes going as far as funding literal Nazis or Fascists
- There are an estimated 20 million preventable deaths every year due to lack of clean drinking water, starvation, vaccine-treatable diseases, and malaria. These many people die each year because fixing these problems isn't profitable
Spectacular Capitalist Failures
- In 2011, a political scandal erupted in Britain when it was discovered that the News Corps' News of the World tabloid had been hacking the telephones of crime victims, celebrities and political figures on a massive scale. This shameful violation of journalistic ethics was driven by capitalist competition between tabloids.
- In 2010, Eastern Livestock Co., LLC left 734 livestock producers in 30 states holding bad checks totaling $130 Million. The firm was only bonded for $875,000. Source: Kim Watson-Potts. "Eastern Livestock Fails." Farm Journal. 46 December 2010.
- 2004 FDA and EPA seafood advisory
- Savings and Loan Scandal
- Enron Scandal
- Worldcom Scandal
- Freddie Mac Scandal
- AIG Scandal
- Lehman Brothers Scandal
- Bernie Madoff Scandal
- The Importance of Public Goods George Irvin