Elsewhere on ThoughtLeader, Bert Olivier, an academic of the philosophical persuasion, rails against those who defend “the unforgiveable practices of capitalism”. He leans heavily on a polemic known as The Corporation, a documentary (and book) by Joel Bakan on which I’ve written before.
There’s so much to dispute in his post and the comments, I hardly know where to start. As one of the people who frequently offers a defence for the practices of capitalism (most recently here), I’ll make a few general points in rebuttal, though. I’ll refrain from cheap shots about the left-wing utopia from which most of us graduate (or drop out), thus to grow up and discover the real world. There is neat irony, however, in how our academic friend’s comrade in anti-capitalism, above, portrays himself. But enough ad humorem attacks.
Let’s begin by drawing some clear distinctions. Communism and capitalism aren’t just two systems among many. They are logical opposites, and are the only ways we know of organising production and consumption. One can either presume production and consumption are determined individually, or collectively. Collectivism presumes society (as expressed by the state) owns and organises both the production and consumption of its members. Capitalism supposes instead that individuals have the right to use and dispose of the fruits of their own labour as they see fit, without being constrained by any law other than those against infringing the same rights of others.
There are bastardisations of the concept, which is why “free-market capitalism” often needs to be spelt out. State-capitalism, for example, is merely a form of collective organisation. Socialism and communism are both collectivist in nature. The difference between them is a matter of degree, not nature. Any degree of socialism detracts from the general prosperity and must be enforced against the will of citizens. Any control of some parts of the economy, in order to be effective, eventually requires the control of more parts. In extremis, this means the logical conclusion of socialism is communist totalitarianism. Stalin wasn’t a perversion of communism. He was its logical culmination.
Limited socialist principles can appear to work, for a while, in rich countries, just like a rich individual can use his savings for a while without appearing to work for his lifestyle. It is no surprise that the well-intentioned New Deal culminated in the confiscatory taxes and economic malaise of the 1970s, and that a return to free market principles cured this malaise. Western Europe, too, became wealthy thanks to free enterprise and free trade. Poverty declined dramatically, and a large middle class was established. Once wealthy, it appeared to be able to afford a measure of socialism, but a few decades later, it is discovering that its savings are depleted, that not enough new wealth is being created. There is a price to pay for this well-intentioned idealism, and even rich countries find they cannot afford it forever. Unlike European economies, truly free markets need not fear immigration. Socialist markets, however, cannot afford to support even their own people, let alone people whose past production has not been decocted into the common pot. In poor countries, socialism has not offered a remedy for poverty either. It merely keeps the people mired in poverty — and that’s before accounting for the deleterious effects of tyranny or corruption.
The corporation doesn’t rule anyone. They can only profit if they offer things people are prepared to buy, and go to extreme lengths to do so. Do you really believe they determine what we eat, what we watch, what we wear, where we work, and what we do? Would you have more or less choice if you were limited to your own production and barter trade with your neighbours? Thanks to the corporation, we now have a vast array of food, mundane and exotic, on offer, at real prices (relative to our income) that our parents and grandparents would think fantastical. The picture alongside is one of hundreds of stores from which I can choose within five minutes of my home. Thanks to the corporation, we have a huge array of clothing available to us to suit every taste, from ordinary and practical to uber-cool and fashionable. If your needs or interests are more specialised, you probably know a store like the one below. There’s a lot you can say about golfers and golf equipment stores, but you can’t accuse them of not offering choice. And yet, not being controlled by corporations, I have never felt obliged to buy as much as a golf ball.
Corporations determine what we watch and where we work? Whether you sit in front of the TV all day is your problem, but don’t blame the people who create the thousands of different shows for different tastes broadcast on hundreds of different channels. If none of that extraordinary choice satisfies you, you can still read a book, you know.
Unlike our parents and grandparents, who were employed for life on the same boring corporate ladder, or our great-grandparents who were stuck on the same farm or village all their lives and did the work their fathers did, the modern professional workforce job-hops every few years. Many work for themselves, from home, doing things that companies don’t think worth doing. You’re saying people do this because they have less choice where to work and what to do than they used to have?
Even if companies are monopolies, people have choices, to buy or not to buy, to spend or save, to buy here or buy there. Only by serving the needs of customers can corporations profit. Therefore, corporations profit only to the degree in which they serve the public good.
When talking about monopolies, however, it is important to distinguish between those that are established or protected by law, and those that arise naturally. The latter simply reap the fruits of being better than competitors at providing a particular product or service, and are always vulnerable, should they abuse their position, to the emergence of new competitors with new ideas and better ways of doing things. Their power is restricted by the choice consumers have of buying their products or doing without them, as well as by the possibility for competition to arise — i.e. their power is restricted by the market, just as it would be if they were less powerful competitors.
A monopoly’s power becomes unrestricted when it is protected by law. For example, in South Africa, new cellular operators cannot emerge, rendering the three current “competitors” a cartel. To use an example that isn’t likely to be clouded by “essential service” emotion, the same goes for casinos. They are governed not only by licence conditions, but by a limit on the actual number of licences in issue. Hence the lack of choice, the lack of variety, and the uncompetitive house rules.
It is true that rich countries maintain some subsidies or trade barriers. This is not free-market capitalism. This is just as evil as the subsidies or trade barriers maintained by developing countries. The latter are, in fact, much higher, so focusing on farm protectionism in Japan or Europe, for example, is largely a red herring. In any case, no matter whether the rich countries do the right thing — from which their own consumers would benefit — the developing world could gain a great deal of the potential benefits by dropping trade barriers unilaterally. In fact, if they do so, but the rich world doesn’t, the developing world will become more prosperous more rapidly, and there is every chance that they will eventually overtake rich countries — especially those like Europe, where the socialist streak runs deep and trade barriers are relatively high.
On corporate abuses: how many people bought GM’s pickups after the media reported on the fact that they exploded? Its failure to care about the welfare of its customers had a massive impact on the company and its profitability, and on the industry in general. The same goes for other corporate abuses. First, they are covered by laws against theft and fraud — laws which apply to all of us. Second, they open a company to potentially crippling civil liabilities. Third, they can harm the reputation of a company gravely; many have gone bankrupt after the public’s trust was destroyed by a major disaster or consumer safety scandal. Yes, corporate social responsibility is cynical, in some way. It is designed to convince customers that the company is serving them well and deserves their patronage more than a competitor does. I can’t see how this dynamic is a bad thing. Or did you want to start legislating the moral motives for people’s actions?
On subjecting corporations to the state, doesn’t the state serve its citizens, and exist at the pleasure of the people? And isn’t a corporation merely a voluntary association of citizens designed to pool resources and better divide labour, so the whole becomes more productive than the parts? Why, then, if the state is to be subject to the will of the people, advocate that certain groups of people should be subject to the control and regulation of the state (beyond ordinary laws against murder, theft and fraud)? This is philosophically inconsistent with a belief in the freedom of individuals, and a democratically elected state with constitutionally limited power, established by citizens to uphold laws that protect common rights and liberties.
Undoubtedly, some people do not act legally, or charitably, or morally. But this doesn’t change when you place them in a state bureaucracy with power over citizens. As long as such actions fall outside the boundaries of limited and justly applied law under which everyone’s rights are protected from infringement by another, individual self-interest pursued through free association and voluntary choice remains the best way to organise production in society. If you demand to see why, to quote Christopher Wren’s epitaph, look around you.
Beyond the ties that bind us all — to respect the person and property rights of others — what justification is there for wishing to tie down the capitalist Gulliver? What will be the consequences, unintended or otherwise? Fewer choices? Lost wealth creation? Fewer jobs? Less innovation? Forfeit poverty alleviation? I contend that there is no justification, except that Gulliver is big and free and independent. This makes the Lilliputians afraid of him. That such an instinctive, emotional response is natural makes it no less irrational.
(First published on my own blog.)