Why the Way in Which Capitalism Creates Winners and Losers is Wrong

[Sunstone]

I think what you're saying is that capitalism has no inherent provision for the cultivation of compassion or morality. My question is what economic system does?

Of course, that's a distinct question, but I think if you want some provision for compassion, etc, then you must look to regulations, etc.

 

[Vouthon]

One thing all sides to a debate on the merits of capitalism can on occasion agree to is that "capitalism creates (or at least sorts out) winners and losers".

"...And what of a regime in which capitalism is dominant? Does it offer a prospect of real welfare? We have no need here to describe the economic and social consequences of this system. You know its characteristic signs and you yourselves labor under the burden it imposes: the excessive crowding of the population into the cities; the ever-growing and all-invading power of big business; the difficult and precarious condition of other industries, especially the crafts and even more especially agriculture; the disquieting spread of unemployment..."

- Venerable Pope Pius XII (QUESTA GRANDE VOSTRA ADUNATA), 1945
​

Excellent post, I think you've articulated a strong case against unmitigated capitalism from both a moral (i.e. failing to restrain avarice, sociopathic traits) and a civic angle (i.e. in terms of social capital).

Neoliberal capitalism, or 'shareholder' capitalism, is demonstrably not a scientifically sound economic theory. And yet self-serving interests continue to make it the unimpeachable dogma of most professional economists, like an article of faith, no matter how awry things get.

The guiding norm of the post-Cold War, triumphalist kind of capitalist doctrine (for it is a kind of faith, "a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system" to quote Pope Francis (Evangeli Gaudium, 2013)), has been the notion that “the business of business is nought but business”, that is short-term maximization of shareholder value.

You are thus very 'on point', if I may say so, later in the thread when referring explicitly to 'shareholder value' and the unfortunate dominance that this socially harmful idea has enjoyed in economics since the 1980s. I really do feel that commerce has become something of a 'values-free' zone for a not inconsiderable number of financiers, bankers and businessmen. We forget the ethical roots and ramifications of the free market at our peril. It has become untethered from moral truths and the common good.

We should all remember that Adam Smith, the so-called father of capitalism, who wrote the Wealth of Nations, also wrote a book entitled The Theory of Moral Sentiments. In his day, economics was viewed as a moral science. The crux of Smith’s theory of social justice developed in Moral Sentiments lies at the heart of his economics in Wealth of Nations: “To hurt in any degree the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects” (WN IV.viii.30). This could definitely be applied to shareholder value, whenever it is trumpeted as the raison d'etre of enterprise. Mark Carney, Governor of the Bank of England, said in the summer of 2014, “just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself.”

Pope Emeritus Benedict XVI (apologies for always bringing the Catholic tradition to bear on these kinds of topics, I must be getting as predictable as an old gramophone record player!), raised a critique broadly in tune with your own back in his 2009 encyclical Caritas in Veritate, at the height of the financial crisis:


Caritas in veritate (June 29, 2009) | BENEDICT XVI

“Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value.” (40)

“Profit is useful if it serves as a means towards an end ... Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.” (21) "It is clear that economic activity cannot solve all social problems through the simple application of commercial logic. This needs to be directed towards the pursuit of the common good”

​

Of Benedict and business

The idea that businesses exist to make money is flawed, in the eyes of the pontiff; a concentration on profit, rather than serving society (with profit as the happy benefit), leads to distorted risk-taking. Moreover, the very form of the corporation leads to an abdication of responsibility. Answering only to investors, managers fail to appreciate the larger moral implications of their answers. Benedict apparently falls squarely behind those who speak of a corporation having to answer to “stakeholders,” rather than just shareholders.
​

In some ways, the Catholic and Calvinist traditions are to blame (or to be credited, depending on your outlook) for the emergence of the market economy in the first place in early modern Europe (though not capitalism itself, which is a profit-oriented ideology that deifies the law of free competition and private property, without any concurrent social obligations), such that the extensive criticism that the Catholic Church has leveled for generations towards the excesses - and even the very essence - of capitalist economics, could be viewed as coming from a uniquely informed and appropriate standpoint.

Weber's 'Protestant work ethic' is a long-established theory in the public consciousness, less popularly known outside the halls of specialist academia, however, is the role played by the Spanish scholastic School of Salamanca, which Joseph Schumpeter, Friedrich Hayek and Murray N. Rothbard hailed as the real foundation stone of modern economics and capitalism. As Rothbard has noted:

"it was the sixteenth-century Spanish Scholastics of the Catholic Church who developed the purely subjective and pro free-market theory of value." (Rothbard, 1976: 37)
​

But the market itself must be distinguished from the capitalist ideology IMHO.

"...Catholic social doctrine is not a surrogate for capitalism. In fact...the church, since Leo XIII's Rerum Novarum, has always distanced itself from capitalistic ideology, holding it responsible for grave social injustices (cf. Rerum Novarum, 2). In Quadragesimo Anno Pius XI, for his part, used clear and strong words to stigmatize the international imperialism of money (Quadragesimo Anno, 109).

This line is also confirmed in the more recent magisterium, and I myself, after the historical failure of communism, did not hesitate to raise serious doubts on the validity of capitalism, if by this expression one means not simply the market economy but a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality (Centesimus Annus, 42)..."

- Pope St. John Paul II (What Social Teaching Is and Is Not, in Origins, Vol. 23, No. 15), September 1993​

https://www.theosthinktank.co.uk/cmsfiles/archive/files/Just money combined final.pdf

Catholic Social Teaching has always been critical of market fundamentalism, in the name of those who are denied any share in its benefits. Catholic Social Teaching can be traced back to Judaeo-Christian scriptural sources. It proposes correcting the way market forces work so that they serve the public interest and the common good. It is not anti-business, but pro-human. It offers a coherent set of principles that can protect social capital – shared values and standards such as honesty and trust – from being devoured.

These principles are

i. prioritising the common good over profits; ii. respect for human dignity and opposition to discrimination; iii. sustainability, solidarity, subsidiarity and civil society; iv. defence of workers’ rights; v. recovering a sense of vocation and virtue in pursuit of “excellence” in trade or professional skills; vi. priority for the poor and disadvantaged and resistance to unfair inequality; vii. importance of reciprocity and unconditional gift (gratuitousness); viii. private property held under stewardship; ix. dangers of marketisation and commodification; x. the state’s duty to protect and promote the common good.

These are calls for both structural and personal change in the way the economy functions. The evidence suggests it would work much better. Neoliberalism is a false ideology that has to be confronted, in the name of sound economics and of humanity itself
​

 

[Sunstone]

@Vouthon, since -- as you know - so called "anti-capitalism" is not actually a struggle against capitalism per se, but rather a struggle against unbridled and unregulated capitalism, I cannot see how any defense of unbridled and unregulated capitalism can be made that takes into account the interests of most people, rather than is narrowly based upon the interests of the uber-rich and those who would aspire to become uber-rich. But even in that latter case, the long term interests of such people lay in regulating and restraining capitalism, for it is certainly not in their interests for the discontent of the masses to boil over into revolt and rebellion.

 

[Stevicus]

It would seem difficult to argue that capitalism is a pure success that requires no major overhaul when at the same time arguing that some people under a capitalist system do not deserve a living wage. The latter is an admission that the system fails at least some people. At which point, one is reduced to arguing that those people deserve to be failed. A very problematic argument.

It seems that most of the arguments supporting capitalism rely on the Just-World fallacy.

 

[dfnj]

"...And what of a regime in which capitalism is dominant? Does it offer a prospect of real welfare? We have no need here to describe the economic and social consequences of this system. You know its characteristic signs and you yourselves labor under the burden it imposes: the excessive crowding of the population into the cities; the ever-growing and all-invading power of big business; the difficult and precarious condition of other industries, especially the crafts and even more especially agriculture; the disquieting spread of unemployment..."

- Venerable Pope Pius XII (QUESTA GRANDE VOSTRA ADUNATA), 1945
​

Excellent post, I think you've articulated a strong case against unmitigated capitalism from both a moral (i.e. failing to restrain avarice, sociopathic traits) and a civic angle (i.e. in terms of social capital).

Neoliberal capitalism, or 'shareholder' capitalism, is demonstrably not a scientifically sound economic theory. And yet self-serving interests continue to make it the unimpeachable dogma of most professional economists, like an article of faith, no matter how awry things get.

The guiding norm of the post-Cold War, triumphalist kind of capitalist doctrine (for it is a kind of faith, "a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system" to quote Pope Francis (Evangeli Gaudium, 2013)), has been the notion that “the business of business is nought but business”, that is short-term maximization of shareholder value.

You are thus very 'on point', if I may say so, later in the thread when referring explicitly to 'shareholder value' and the unfortunate dominance that this socially harmful idea has enjoyed in economics since the 1980s. I really do feel that commerce has become something of a 'values-free' zone for a not inconsiderable number of financiers, bankers and businessmen. We forget the ethical roots and ramifications of the free market at our peril. It has become untethered from moral truths and the common good.

We should all remember that Adam Smith, the so-called father of capitalism, who wrote the Wealth of Nations, also wrote a book entitled The Theory of Moral Sentiments. In his day, economics was viewed as a moral science. The crux of Smith’s theory of social justice developed in Moral Sentiments lies at the heart of his economics in Wealth of Nations: “To hurt in any degree the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects” (WN IV.viii.30). This could definitely be applied to shareholder value, whenever it is trumpeted as the raison d'etre of enterprise. Mark Carney, Governor of the Bank of England, said in the summer of 2014, “just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself.”

Pope Emeritus Benedict XVI (apologies for always bringing the Catholic tradition to bear on these kinds of topics, I must be getting as predictable as an old gramophone record player!), raised a critique broadly in tune with your own back in his 2009 encyclical Caritas in Veritate, at the height of the financial crisis:


Caritas in veritate (June 29, 2009) | BENEDICT XVI

“Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value.” (40)

“Profit is useful if it serves as a means towards an end ... Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.” (21) "It is clear that economic activity cannot solve all social problems through the simple application of commercial logic. This needs to be directed towards the pursuit of the common good”

​

Of Benedict and business

The idea that businesses exist to make money is flawed, in the eyes of the pontiff; a concentration on profit, rather than serving society (with profit as the happy benefit), leads to distorted risk-taking. Moreover, the very form of the corporation leads to an abdication of responsibility. Answering only to investors, managers fail to appreciate the larger moral implications of their answers. Benedict apparently falls squarely behind those who speak of a corporation having to answer to “stakeholders,” rather than just shareholders.
​

In some ways, the Catholic and Calvinist traditions are to blame (or to be credited, depending on your outlook) for the emergence of the market economy in the first place in early modern Europe (though not capitalism itself, which is a profit-oriented ideology that deifies the law of free competition and private property, without any concurrent social obligations), such that the extensive criticism that the Catholic Church has leveled for generations towards the excesses - and even the very essence - of capitalist economics, could be viewed as coming from a uniquely informed and appropriate standpoint.

Weber's 'Protestant work ethic' is a long-established theory in the public consciousness, less popularly known outside the halls of specialist academia, however, is the role played by the Spanish scholastic School of Salamanca, which Joseph Schumpeter, Friedrich Hayek and Murray N. Rothbard hailed as the real foundation stone of modern economics and capitalism. As Rothbard has noted:

"it was the sixteenth-century Spanish Scholastics of the Catholic Church who developed the purely subjective and pro free-market theory of value." (Rothbard, 1976: 37)
​

But the market itself must be distinguished from the capitalist ideology IMHO.

"...Catholic social doctrine is not a surrogate for capitalism. In fact...the church, since Leo XIII's Rerum Novarum, has always distanced itself from capitalistic ideology, holding it responsible for grave social injustices (cf. Rerum Novarum, 2). In Quadragesimo Anno Pius XI, for his part, used clear and strong words to stigmatize the international imperialism of money (Quadragesimo Anno, 109).

This line is also confirmed in the more recent magisterium, and I myself, after the historical failure of communism, did not hesitate to raise serious doubts on the validity of capitalism, if by this expression one means not simply the market economy but a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality (Centesimus Annus, 42)..."

- Pope St. John Paul II (What Social Teaching Is and Is Not, in Origins, Vol. 23, No. 15), September 1993​

Catholic Social Teaching has always been critical of market fundamentalism, in the name of those who are denied any share in its benefits. Catholic Social Teaching can be traced back to Judaeo-Christian scriptural sources. It proposes correcting the way market forces work so that they serve the public interest and the common good. It is not anti-business, but pro-human. It offers a coherent set of principles that can protect social capital – shared values and standards such as honesty and trust – from being devoured.

These principles are

i. prioritising the common good over profits; ii. respect for human dignity and opposition to discrimination; iii. sustainability, solidarity, subsidiarity and civil society; iv. defence of workers’ rights; v. recovering a sense of vocation and virtue in pursuit of “excellence” in trade or professional skills; vi. priority for the poor and disadvantaged and resistance to unfair inequality; vii. importance of reciprocity and unconditional gift (gratuitousness); viii. private property held under stewardship; ix. dangers of marketisation and commodification; x. the state’s duty to protect and promote the common good.

These are calls for both structural and personal change in the way the economy functions. The evidence suggests it would work much better. Neoliberalism is a false ideology that has to be confronted, in the name of sound economics and of humanity itself
​

You might find this commentary on the purpose orientation of corporations interesting:

Belief Systems, Purpose, and Balance

 

[dfnj]

It seems that most of the arguments supporting capitalism rely on the Just-World fallacy.

See my earlier post in this thread and the Marx video I referenced. Marx has really succinct criticism of capitalism. I'm surprise by how little people watch videos I reference. I watch so many videos. I find people who spend time really trying to understand a subject generally have interesting things to say. The Marx video I thought was really good. I've watch maybe 30 videos on Marx. But the one I referenced is the best one I viewed.

 

[dfnj]

@Vouthon, since -- as you know - so called "anti-capitalism" is not actually a struggle against capitalism per se, but rather a struggle against unbridled and unregulated capitalism, I cannot see how any defense of unbridled and unregulated capitalism can be made that takes into account the interests of most people, rather than is narrowly based upon the interests of the uber-rich and those who would aspire to become uber-rich. But even in that latter case, the long term interests of such people lay in regulating and restraining capitalism, for it is certainly not in their interests for the discontent of the masses to boil over into revolt and rebellion.

According to Richard Wolff the problem with our capitalism is wage growth is stagnant or even negative with inflation:

The 14th minute through the 16th minute talking about the "exodus" is really scary.

 

[Curious George]

One thing all sides to a debate on the merits of capitalism can on occasion agree to is that "capitalism creates (or at least sorts out) winners and losers".

Proponents and opponents typically cast that principle in different lights, but often agree on that much, if nothing else.

Under capitalism, proponents often argue, the hardest working members of society receive their just reward by achieving prosperity, etc, while those who fail to work as hard in turn get what they deserve -- relative poverty. Thus, it is concluded, capitalism is a fair and just system since it is a system under which people chose what they get.

Now, as anyone who really studies these things knows, that argument is often attacked on the grounds that it is naively based on idealism and ideology, rather than on empirical science, because empirical science tells us that in a capitalist system, the predominant factor in determining where you end up is often enough how wealthy your parents were. And that is especially true in America these days. Any more, hard work doesn't even come close to determining where you end up as does how rich your parents were. That's a common enough criticism of capitalism, but it is NOT the criticism I wish to examine here today.

What I wish to point out is that, even if the proponents of capitalism were correct in assuming that it is a "system under which people chose what they get", pure unregulated and unrestricted capitalism would not be the optimal system for human well-being because it selects "winners and losers" on much too narrow of a basis.

Put as briefly as possible, capitalism does not select for many human traits that most us who are not psychopaths might find it valuable for a social/economic system to promote. Traits such as compassion, kindness, cooperation, generosity, community-mindedness, consideration for the well-being of others, etc.

At best, I think, it is arguable that capitalism does not actually prevent anyone from being those things, or from cultivating those things in themselves. But even there, I think one is on thin ice. For example, the corporation that lays off three thousand workers by offshoring their jobs to a nation with much lower wages and fewer environmental and work regulations is certainly displaying none of those traits -- and yet it is to be praised, by the logic of capitalism, for increasing its economic efficiency by reducing costs and thus increasing its value to shareholders in the form of profits -- to say nothing of the praise it might also deserve for increasing its competitiveness.

In sum, I think the commonsense question to ask whenever some proponent of capitalism claims it is an especially moral system because it picks winners and losers who should or ought to be winners or losers -- the commonsense question to ask is "Moral for whom?"

Pics of kittens? Brief, but poignant accounts of loves lost? Tearful and/or mouth frothing denials that there's even a little truth to the OP? Legitimate questions and/or comments?




______________
Sadly Necessary Footnote: None of the above should be taken as proof that I am anti-capitalist. I am not. I am just anti-unregulated, unrestricted capitalism, such as we seem to have increasingly turned to over the past 40 or more years in America.

Hmmm.

I think that you have done a fair job stripping down capitalism. I think you should go further. Capitalism is a system for property. The winner is the person who pays the most for some property. This in theory generates the most happiness as the seller gets the highest price and the buyer is the person who wants the product the most (with degree of want being measured by price paid). It is a way to distribute property. While as you allude there is a problem with unequal distribution of resources, the other problems in creating winners and losers that you mention are not necessarily relevant. Another poster already pointed out how these moral traits you listed can indeed be involved in capitalism, but if your criticism is they are not necessarily involved, then I would caution you to ponder whether that is a relevant criticism.

You suggest it is not optimal based on this lack of moral consideration. But optimal for what? What is the purpose that capitalism is trying to achieve by which we can evaluate whether or not it is optimal?

I am more concerned with the idea of Need vs. Want. As in this system of resource distribution we see no focus on this aspect. And while capitalism may be one of the easier systems to effect, it may not be the optimal based on this aspect.

 

[Sunstone]

Another poster already pointed out how these moral traits you listed can indeed be involved in capitalism, but if your criticism is they are not necessarily involved, then I would caution you to ponder whether that is a relevant criticism.

Actually, I got a bit distracted when addressing that poster's notions that certain moral traits are involved in capitalism. In hindsight, I should have stuck two to criticisms of his views.

First (and least important) that his examples of how those traits were involved in capitalism were unconvincing for more than one reason, but mostly because they stretched one's credulity. For instance, his notion that authentic "compassion and kindness" were shown when -- as an example -- restaurant staff wished customers a "Happy day" seemed a bit of a stretch to me.

Second (and far and away more important) the internal logic of shareholder capitalism, which is currently the dominant capitalist ideology, demands that all other values be sacrificed, if need be, to maximizing shareholder value; and furthermore, even in the absence of that ideology, the necessity of competing with other enterprises once again means that all other values be sacrificed, if need be, to at least remaining competitive. I don't see how those arguments can be easily defeated, especially the second one, since it is hard to imagine a non-competitive business long surviving in a genuinely competitive environment. The "laws of competition" will simply weed out any businesses that assert "inessential" values to the degree they degrade competitiveness.

You suggest it is not optimal based on this lack of moral consideration. But optimal for what? What is the purpose that capitalism is trying to achieve by which we can evaluate whether or not it is optimal?

Perhaps that is very much the wrong question. A more significant question might be, "What are we as a society or as humans trying to achieve so that we may judge whether capitalism is the optimal means for achieving it?

I am more concerned with the idea of Need vs. Want. As in this system of resource distribution we see no focus on this aspect. And while capitalism may be one of the easier systems to effect, it may not be the optimal based on this aspect.

By chance are you hinting at the tendency of capitalism to become unsustainable due to the ever increasing demand it places on exploiting the world's limited resources?

 

[Curious George]

Actually, I got a bit distracted when addressing that poster's notions that certain moral traits are involved in capitalism. In hindsight, I should have stuck two to criticisms of his views.

First (and least important) that his examples of how those traits were involved in capitalism were unconvincing for more than one reason, but mostly because they stretched one's credulity. For instance, his notion that authentic "compassion and kindness" were shown when -- as an example -- restaurant staff wished customers a "Happy day" seemed a bit of a stretch to me.

Second (and far and away more important) the internal logic of shareholder capitalism, which is currently the dominant capitalist ideology, demands that all other values be sacrificed, if need be, to maximizing shareholder value; and furthermore, even in the absence of that ideology, the necessity of competing with other enterprises once again means that all other values be sacrificed, if need be, to at least remaining competitive. I don't see how those arguments can be easily defeated, especially the second one, since it is hard to imagine a non-competitive business long surviving in a genuinely competitive environment. The "laws of competition" will simply weed out any businesses that assert "inessential" values to the degree they degrade competitiveness.

But neither are those very effective arguments. While it is not my fault the other poster used bad examples, buyers can value genuine compassion over forced compassion and choose to buy from the business that is compassionate. All values which the people value can be factors in capitalism. Pointing out that they are not in capitalism is simply pointing out that they are insufficient in people.

If effecting x, y, or z morals produces higher shareholder value then you will find businesses effecting x, y, or z morals. That is to say that your second argument comes up against the same problems. Just because these values you point to are not necessary components does not entail that they insufficient.

Perhaps that is very much the wrong question. A more significant question might be, "What are we as a society or as humans trying to achieve so that we may judge whether capitalism is the optimal means for achieving it?

one of those moments when your wisdom shines. Yet, I somehow feel yours is more rhetorical. Either question will do, but please answer one or the other.

By chance are you hinting at the tendency of capitalism to become unsustainable due to the ever increasing demand it places on exploiting the world's limited resources?

Yes and no. If we see capitalism as a means for resource distribution, we have recognized that people need things and we have to have a system by which to get those things to the people. Some people will thrive some will fail to thrive. This is true with any distribution system. However, in our current system, our failure to address needs mean that some will fail to thrive that otherwise might have. Arguably, idealistic communism and socialism might reach some of these individuals but suffer from other criticisms.

The problem with selecting winners and losers by any method is that some of the losers might have bettered the system. I am not sure there are answers. Certainly not easy ones.

 

[PureX]

So here's a thought-experiment / tweak. What if shareholders only got benefits after holding a stock for 10 years, or 20? Or some such formula that rewards steady, long-term ROI?

If capitalism is agnostic on the question of timeframe, why not tweak the system to reward long-term, reliable ROI?

Again, all of these systems are inventions - why shouldn't we revise and refine them? Why do we have to be hidebound to pure, academic definitions?

I don't think capitalism is agnostic on time frames. I think it's goal is to maximize the profits returned on minimal investment, and to do so as quickly as possible. It is, in fact, systematized greed.

If we were to force the investor to wait on his return, I think we would be instilling a 'false function' into the system. And only a temporary fix. Such that a business enterprise that is proving to be distinctly anti-social or even to be unprofitable would be prolonged simply because the profit values have been deliberately time-lagged.

I would think a more reasonable solution would be to simply impose business structures that ensure a more equitable sharing of the decision-making, and of the profit-taking. That is we take some of the control away from the investor and spread it out among those who are actually engaged in the enterprise. Mostly, the producers, and through them, the consumers. Because THEY will be interested in the long term viability of the business enterprise. THEY will be interested in producing a quality product at a reasonable price. And THEY will be interested in minimizing the negative effects of the business enterprise on the society, government, and environment. Whereas the capital investor is only interested in gaining a maximum return on a minimum investment, as quickly as possible, and often at the expense of these other factors.

This, by the way, is also why we should not be allowing what happens on Wall Street to define what is or is not a healthy economy, as we are currently doing.

 

[icehorse]

I don't think capitalism is agnostic on time frames. I think it's goal is to maximize the profits returned on minimal investment, and to do so as quickly as possible. It is, in fact, systematized greed.

Agreed as to the idea that currently capitalism is extremely short-sighted.

If we were to force the investor to wait on his return, I think we would be instilling a 'false function' into the system.

Now we're getting into interesting territory! It strikes me that tweaks are necessary, and what we're starting to discuss now is the nature of those tweaks. I'm not attached to "tweaks" as a label, but I think "false function" is worse. Whatever label we choose ought to be more neutral.

That is we take some of the control away from the investor and spread it out among those who are actually engaged in the enterprise.

To me, this "tweak" is as much a "false function" as mine. I think both have strengths and weaknesses, and this is where the discussion gets interesting!

This, by the way, is also why we should not be allowing what happens on Wall Street to define what is or is not a healthy economy, as we are currently doing.

yup!

Mostly, the producers, and through them, the consumers. Because THEY will be interested in the long term viability of the business enterprise. THEY will be interested in producing a quality product at a reasonable price. And THEY will be interested in minimizing the negative effects of the business enterprise on the society, government, and environment.

It's hard to be so altruistic and long-sighted when you're struggling to make ends meet.

Instead, how about the idea of "use" taxes. E.g., companies would pay for their use of the infrastructure, their use of natural resources, their fouling of the environment, and so on. We know from experience that people naturally put a lot of energy into reducing their tax burden - this seems like more of a naturally-motivated, virtuous circle approach.

 

[PureX]

Agreed as to the idea that currently capitalism is extremely short-sighted.

Now we're getting into interesting territory! It strikes me that tweaks are necessary, and what we're starting to discuss now is the nature of those tweaks. I'm not attached to "tweaks" as a label, but I think "false function" is worse. Whatever label we choose ought to be more neutral.

To me, this "tweak" is as much a "false function" as mine. I think both have strengths and weaknesses, and this is where the discussion gets interesting!

It's hard to be so altruistic and long-sighted when you're struggling to make ends meet.

Instead, how about the idea of "use" taxes. E.g., companies would pay for their use of the infrastructure, their use of natural resources, their fouling of the environment, and so on. We know from experience that people naturally put a lot of energy into reducing their tax burden - this seems like more of a naturally-motivated, virtuous circle approach.

My thought is that the "tweeks" are going to have to address the excessive control and profit-taking on the part of the investor. That means the profits and the decision-making are going to have to be better distributed, with less going to the investor and more going to ... I believe the other people engaged in the business enterprise; that is the producers and the consumers of the commercial product. Taxation for infrastructure, I think, is a different issue. Once we minimize the profit-taking, and control, we will have minimized the investor's ability to corrupt government, and the tax system can then be restored to a more equitable and functional equilibrium. Also, I believe that the people who produce and consume the commercial products being offered will automatically want to see the businesses they are engaged in survive long term, and the communities those businesses inhabit, respected. Whereas the investors very often live elsewhere, and don't know, see, or care about the producers, consumers, and communities being effected by the business enterprises they are now completely controlling.

The solution to this, then, would seem to be to put the control back in the hands of the people most effected by the business enterprise, and in so doing limit the profits being taken by the investors so they can't pile up great fortunes to be used to corrupt the media, the government, and the environment, for the purpose of limitless exploitation.

 

[icehorse]

My thought is that the "tweeks" are going to have to address the excessive control and profit-taking on the part of the investor. That means the profits and the decision-making are going to have to be better distributed, with less going to the investor and more going to ... I believe the other people engaged in the business enterprise; that is the producers and the consumers of the commercial product.

I agree that investors need to be reined in. I also agree that employees should more often have more power in how companies are run. But that can start heading towards Marxist sort of solutions and those seem fatally flawed to me. I think there should be some shared power between investors / innovators-inventors / and employees/

It could be that employee unions have to be revitalized and re-empowered?

 

[PureX]

I agree that investors need to be reined in. I also agree that employees should more often have more power in how companies are run. But that can start heading towards Marxist sort of solutions and those seem fatally flawed to me. I think there should be some shared power between investors / innovators-inventors / and employees/

It could be that employee unions have to be revitalized and re-empowered?

Unions are inherently antagonistic to management. It creates an unnecessarily divided house. That's why I think shared control is the better way. (Marx is irrelevant, let's focus on function, not ideology.) Also, in most cases it's the producers that ARE the innovators. That's why I think they should be considered and treated like business partners rather then employees. And it's why they should be given a share in the responsibility/profits. They're already investing a significant portion of their time and skill, and yet under capitalism, they're treated like an unwanted expenditure. Like overhead.

 

[Sunstone]

But neither are those very effective arguments. While it is not my fault the other poster used bad examples, buyers can value genuine compassion over forced compassion and choose to buy from the business that is compassionate. All values which the people value can be factors in capitalism. Pointing out that they are not in capitalism is simply pointing out that they are insufficient in people.

If effecting x, y, or z morals produces higher shareholder value then you will find businesses effecting x, y, or z morals. That is to say that your second argument comes up against the same problems. Just because these values you point to are not necessary components does not entail that they insufficient.

That strikes me as a good argument, for I must agree that -- at least in theory -- it's a solid argument. A capitalist economy is not necessarily a market driven economy, but the two are so frequently interwoven that in practice it is easy to see -- or at least imagine -- consumer pressure prevailing upon capitalist enterprises to practice nearly any generally agreed upon values the consumers demand.

Yet, taking a close look at it, I think it is most likely a case of "putting theory before practice". In practice, people overwhelmingly select products and services for what business theorists call their "value" -- which more or less means "The biggest bang for their bucks" (not to be confused with mere lowest price). Other considerations, such as whether the business pays a living wage, maintains safe work places, is genuinely environmentally friendly, are notoriously secondary considerations at best.

And such near impossible to assess or measure considerations such as whether the business is fair, kind, or compassionate towards anyone, whether it in any way shows more than ostensible community spirit, generosity, basic moral respect for people, or most other highly desirable values, can be considered virtual non-starters as reasons any significant number of people buy its products or services. No business I know of ever went under because a significant number of people quit buying from it on, say, the grounds it was unfair to its employees.

For one reason, it is so easy -- in this age in which "public relations" is all but a technology -- to create a false image of being all sorts of desirable things that a company really is not. The slogan, "Our people are our most valuable asset", has justly become a joke for that reason. Even a conscientious consumer would, I think, have a chore accurately cutting through all the smoke and mirrors, then repeating the process for every product or service he or she bought.

A Director of Marketing -- who I rightly or wrong regarded as especially astute based on what I knew of his track record -- once told me (as best I can recollect now) something along these lines: "People buy our service on perceived value. That will never change. We advertise ourselves as "The friendly little underdog" not so much to get them to buy from us, as to fix in their minds an image of us that in a positive way distinguishes us from the competition." That's not an exact quote -- it's been far too many years for that -- but I think I've been faithful to the essence of his words.

Again, people almost routinely organize boycotts and threats of boycotts intended to pressure some capitalist enterprise or industry into some moral behavior. If one wanted to find consumers successfully asserting a whole spectrum of humane values, this would be the place to look first. Yet, although a relative small number of those boycotts are successful (usually limited to the most high-profile ones), it's obvious the vast number of them fail.

Has a "buy local" campaign even once driven a Walmart store out of town? If so, I've yet to hear of it. Has a "boycott Japanese goods to save the whales" campaign saved even a single whale? Again, I've yet to hear of it. Has a "boycott grapes to raise the wages and working conditions of migrant laborers" campaign ever been credited with raising wages and improving working conditions? Not that I know of. Has a "buy American" campaign ever pressured a business into selling even mostly American made goods? The last I saw, Walmart had responded to that campaign by guaranteeing that "5%" of its items were "proudly made in America".

Yet, I suspect you will object: "All very well and good, but still in theory consumers could, if they were only determined enough, pressure capitalist enterprises to practice nearly any set of values that can be imagined, and therefore, capitalism is compatible with nearly any set of values." But I would question even that, and first for this nearly theoretical reason: The pronounced tendency of consumers to buy primarily or -- or perhaps more often -- exclusively on value shows no great sign of ever changing and thus can be considered an all but intrinsic feature of capitalism in the sense it is apparently so much a part of human nature that the only way to divorce it from capitalism is to divorce capitalism from humanity.

Granted you are correct that, in pure theory, consumers could start at any moment to, say, demand that capitalist enterprises pay all their workers at least a living wage. But I see that as such a remote possibility we might as well be talking of building cities at the bottom of the Mariana Trench. To me, the argument that consumers can directly impose upon capitalist enterprises non-competitive values, more often than rarely, is a mere curiosity along the lines of "anything is possible".

But perhaps even more to the issue, while it must ever remain a theoretical possibility that consumers could band together and sustain their demand that capitalistic enterprises permanently adopt some non-competitive value, in practice they would need to overcome some rather formidable hurdles to succeed. For instance, they would need to sustain their demand on a permanent basis, for the moment they relaxed it some firm or another would most likely seize the opportunity to get a jump on its competition by backsliding on its "commitment" to whatever non-competitive values had been imposed upon it.

Second, they would need to unite against every enterprise in an industry or else their demand could not be met by any of the enterprises in a given industry without it costing them their competitiveness and, eventually, their business.

Last, I doubt the enterprises themselves would be passive spectators in all of this, but would instead marshal whatever resources they had -- and multi-billion dollar corporations have massive resources, as you know -- to actively combat any campaign tthat threatened either their competitiveness or their profits. Case in point: The oil, gas, and coal industries have in America ground action on global climate change to a halt using only a mere fraction of the total resources available to them. They have so confused such a large segment of the public that even the existential nature of the threat has failed to mobilize concerted public action.

As an aside, it seems to me far more realistic, expedient, and effective for citizens to lobby their governments to adopt moral regulations, laws, and policies governing capitalist enterprises than for them to generally attempt to pressure such enterprises into moral behaviors via market demand.

Last. I suspect what Peter S. Drucker once called, "The Iron Law of Cartels", might in some fashion apply to the issue of whether consumers can even in theory band together in a sustained enough effort to more than temporarily effect changes in capitalist enterprises. Drucker examined the history of various cartels and found reasons to conclude that cartels are intrinsically unstable and usually of short duration. But since I can only imperfectly recall now the exact reasons he came to that conclusion, I'm only offering his theory here as food for thought, rather than as an actual argument.

Either question will do, but please answer one or the other.

As I see it, a wide range of values are generally desirable for human well-being and flourishing. Those include, but are not limited to, the values of love, compassion, kindness, generosity, community, fairness, self-fulfillment or realization, happiness, purpose or meaning, and so forth. Capitalism, at best, can be said to affirm or facilitate most of those values only in limited ways, or only obliquely.

For instance, it can be said to affirm fairness in a limited way, for there are obvious ways it encourages fairness -- such as in contracts between buyers and sellers. But at the same time, it just as obviously does not universally affirm fairness because, among other things, it routinely pressures management to reduce worker's wages, while at the same time maximizing profits for owners. That is hardly a fair and just distribution of wealth unless you happen to think most workers should merely "get by" while some owners should bask in more wealth than they can spend in a lifetime.

All of that is because -- in practice if not in theory -- capitalism is ruthlessly focused on competitiveness and making profits for shareholders. Even the limited ways in which capitalism promotes fairness are consequences of those ways being the best ways to compete and make a buck. Moreover, that is a systemic problem, not a mere voluntary choice on the part of management. Most senior corporate executives and business owners that I know -- and I probably know a few more than my rightful share -- are personally decent people by nearly any standard, but when it comes to so many decisions, their hands are tied by the ruthless practices necessary to further competitiveness and maximize profits.

A friend of mine -- a guy I grew up with -- went on to become the youngest senior executive in the history of one of America's largest corporations. One night at about two in morning, he called his mother. He was in tears -- no exaggeration, real honest to god tears -- because his careful financial analysis of the business logically demanded that he lay off 3,000 workers in order to make the business profitable. His mother, with decades of experience running her own business, and after painstakingly going over his numbers with him, ended up telling him he only had two choices: "Do his duty to the company" or resign. That incident will always stand in my mind as a nearly perfect illustration of the fact capitalism is -- at least in practice -- systematically destructive of all values except those that can be driven through to the bottom line.

Yet, I do not think the problems are without solution. As I see it, wise government regulations, laws, and policies can at the very least ameliorate the ill effects of unbridled and unrestrained capitalism. People can assert a wide range of humanist values over capitalist enterprises through their governments.

Yes and no. If we see capitalism as a means for resource distribution, we have recognized that people need things and we have to have a system by which to get those things to the people. Some people will thrive some will fail to thrive. This is true with any distribution system. However, in our current system, our failure to address needs mean that some will fail to thrive that otherwise might have. Arguably, idealistic communism and socialism might reach some of these individuals but suffer from other criticisms.

We're pretty much in broad agreement there.

 

[Sunstone]

It could be that employee unions have to be revitalized and re-empowered?

Speculative notions that unions are hopelessly flawed aside, I think history provides us with no greater a mechanism than unions to insure workers are not only treated fairly to a share in the profits, but also have such nice and pleasant amenities as somewhat less than lethal workplaces.

 

[PureX]

Yet, I do not think the problems are without solution. As I see it, wise government regulations, laws, and policies can at the very least ameliorate the ill effects of unbridled and unrestrained capitalism. People can assert a wide range of humanist values over capitalist enterprises through their governments.

For this to occur, the people have to be represented in government, and not just the investor class. But in our current system, it's only the wealthy capital investor class that has any influence on policy-making. And they continue to use it to rig the system in their own favor, thus gaining even more influence.

Until we establish a way for producers and consumers to influence policy-making, the policies that are being set will continue to enable their exploitation and abuse. And that kind of self-perpetuating imbalance in power and abuse can only lead to a disastrous collapse, as it is unsustainable.

 

[sun rise]

The guiding norm of the post-Cold War, triumphalist kind of capitalist doctrine (for it is a kind of faith, "a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system" to quote Pope Francis (Evangeli Gaudium, 2013)), has been the notion that “the business of business is nought but business”, that is short-term maximization of shareholder value.

The idea that businesses exist to make money is flawed, in the eyes of the pontiff; a concentration on profit, rather than serving society (with profit as the happy benefit), leads to distorted risk-taking. Moreover, the very form of the corporation leads to an abdication of responsibility. Answering only to investors, managers fail to appreciate the larger moral implications of their answers. Benedict apparently falls squarely behind those who speak of a corporation having to answer to “stakeholders,” rather than just shareholders.

I have issues with Catholicism, but I also have large areas of agreement with Catholic ideas as well. And here I see both the current Pope and the preceding one as having a position I can wholeheartedly endorse.

Enshrining "greed is good" as is done either openly or hidden a bit is antithetical to the concept that we are one human family and should treat each other as brothers and sisters as religious doctrine promotes.

 

[Curious George]

That strikes me as a good argument, for I must agree that -- at least in theory -- it's a solid argument. A capitalist economy is not necessarily a market driven economy, but the two are so frequently interwoven that in practice it is easy to see -- or at least imagine -- consumer pressure prevailing upon capitalist enterprises to practice nearly any generally agreed upon values the consumers demand.

Yet, taking a close look at it, I think it is most likely a case of "putting theory before practice". In practice, people overwhelmingly select products and services for what business theorists call their "value" -- which more or less means "The biggest bang for their bucks" (not to be confused with mere lowest price). Other considerations, such as whether the business pays a living wage, maintains safe work places, is genuinely environmentally friendly, are notoriously secondary considerations at best.

And such near impossible to assess or measure considerations such as whether the business is fair, kind, or compassionate towards anyone, whether it in any way shows more than ostensible community spirit, generosity, basic moral respect for people, or most other highly desirable values, can be considered virtual non-starters as reasons any significant number of people buy its products or services. No business I know of ever went under because a significant number of people quit buying from it on, say, the grounds it was unfair to its employees.

For one reason, it is so easy -- in this age in which "public relations" is all but a technology -- to create a false image of being all sorts of desirable things that a company really is not. The slogan, "Our people are our most valuable asset", has justly become a joke for that reason. Even a conscientious consumer would, I think, have a chore accurately cutting through all the smoke and mirrors, then repeating the process for every product or service he or she bought.

A Director of Marketing -- who I rightly or wrong regarded as especially astute based on what I knew of his track record -- once told me (as best I can recollect now) something along these lines: "People buy our service on perceived value. That will never change. We advertise ourselves as "The friendly little underdog" not so much to get them to buy from us, as to fix in their minds an image of us that in a positive way distinguishes us from the competition." That's not an exact quote -- it's been far too many years for that -- but I think I've been faithful to the essence of his words.

Again, people almost routinely organize boycotts and threats of boycotts intended to pressure some capitalist enterprise or industry into some moral behavior. If one wanted to find consumers successfully asserting a whole spectrum of humane values, this would be the place to look first. Yet, although a relative small number of those boycotts are successful (usually limited to the most high-profile ones), it's obvious the vast number of them fail.

Has a "buy local" campaign even once driven a Walmart store out of town? If so, I've yet to hear of it. Has a "boycott Japanese goods to save the whales" campaign saved even a single whale? Again, I've yet to hear of it. Has a "boycott grapes to raise the wages and working conditions of migrant laborers" campaign ever been credited with raising wages and improving working conditions? Not that I know of. Has a "buy American" campaign ever pressured a business into selling even mostly American made goods? The last I saw, Walmart had responded to that campaign by guaranteeing that "5%" of its items were "proudly made in America".

Yet, I suspect you will object: "All very well and good, but still in theory consumers could, if they were only determined enough, pressure capitalist enterprises to practice nearly any set of values that can be imagined, and therefore, capitalism is compatible with nearly any set of values." But I would question even that, and first for this nearly theoretical reason: The pronounced tendency of consumers to buy primarily or -- or perhaps more often -- exclusively on value shows no great sign of ever changing and thus can be considered an all but intrinsic feature of capitalism in the sense it is apparently so much a part of human nature that the only way to divorce it from capitalism is to divorce capitalism from humanity.

Granted you are correct that, in pure theory, consumers could start at any moment to, say, demand that capitalist enterprises pay all their workers at least a living wage. But I see that as such a remote possibility we might as well be talking of building cities at the bottom of the Mariana Trench. To me, the argument that consumers can directly impose upon capitalist enterprises non-competitive values, more often than rarely, is a mere curiosity along the lines of "anything is possible".

But perhaps even more to the issue, while it must ever remain a theoretical possibility that consumers could band together and sustain their demand that capitalistic enterprises permanently adopt some non-competitive value, in practice they would need to overcome some rather formidable hurdles to succeed. For instance, they would need to sustain their demand on a permanent basis, for the moment they relaxed it some firm or another would most likely seize the opportunity to get a jump on its competition by backsliding on its "commitment" to whatever non-competitive values had been imposed upon it.

Second, they would need to unite against every enterprise in an industry or else their demand could not be met by any of the enterprises in a given industry without it costing them their competitiveness and, eventually, their business.

Last, I doubt the enterprises themselves would be passive spectators in all of this, but would instead marshal whatever resources they had -- and multi-billion dollar corporations have massive resources, as you know -- to actively combat any campaign tthat threatened either their competitiveness or their profits. Case in point: The oil, gas, and coal industries have in America ground action on global climate change to a halt using only a mere fraction of the total resources available to them. They have so confused such a large segment of the public that even the existential nature of the threat has failed to mobilize concerted public action.

As an aside, it seems to me far more realistic, expedient, and effective for citizens to lobby their governments to adopt moral regulations, laws, and policies governing capitalist enterprises than for them to generally attempt to pressure such enterprises into moral behaviors via market demand.

Last. I suspect what Peter S. Drucker once called, "The Iron Law of Cartels", might in some fashion apply to the issue of whether consumers can even in theory band together in a sustained enough effort to more than temporarily effect changes in capitalist enterprises. Drucker examined the history of various cartels and found reasons to conclude that cartels are intrinsically unstable and usually of short duration. But since I can only imperfectly recall now the exact reasons he came to that conclusion, I'm only offering his theory here as food for thought, rather than as an actual argument.



As I see it, a wide range of values are generally desirable for human well-being and flourishing. Those include, but are not limited to, the values of love, compassion, kindness, generosity, community, fairness, self-fulfillment or realization, happiness, purpose or meaning, and so forth. Capitalism, at best, can be said to affirm or facilitate most of those values only in limited ways, or only obliquely.

For instance, it can be said to affirm fairness in a limited way, for there are obvious ways it encourages fairness -- such as in contracts between buyers and sellers. But at the same time, it just as obviously does not universally affirm fairness because, among other things, it routinely pressures management to reduce worker's wages, while at the same time maximizing profits for owners. That is hardly a fair and just distribution of wealth unless you happen to think most workers should merely "get by" while some owners should bask in more wealth than they can spend in a lifetime.

All of that is because -- in practice if not in theory -- capitalism is ruthlessly focused on competitiveness and making profits for shareholders. Even the limited ways in which capitalism promotes fairness are consequences of those ways being the best ways to compete and make a buck. Moreover, that is a systemic problem, not a mere voluntary choice on the part of management. Most senior corporate executives and business owners that I know -- and I probably know a few more than my rightful share -- are personally decent people by nearly any standard, but when it comes to so many decisions, their hands are tied by the ruthless practices necessary to further competitiveness and maximize profits.

A friend of mine -- a guy I grew up with -- went on to become the youngest senior executive in the history of one of America's largest corporations. One night at about two in morning, he called his mother. He was in tears -- no exaggeration, real honest to god tears -- because his careful financial analysis of the business logically demanded that he lay off 3,000 workers in order to make the business profitable. His mother, with decades of experience running her own business, and after painstakingly going over his numbers with him, ended up telling him he only had two choices: "Do his duty to the company" or resign. That incident will always stand in my mind as a nearly perfect illustration of the fact capitalism is -- at least in practice -- systematically destructive of all values except those that can be driven through to the bottom line.

Yet, I do not think the problems are without solution. As I see it, wise government regulations, laws, and policies can at the very least ameliorate the ill effects of unbridled and unrestrained capitalism. People can assert a wide range of humanist values over capitalist enterprises through their governments.

The difference is that you blame the system and I blame the people who employ the system. People want Walmart, people want the products more than they want to save a whale. The cold hard truth is that capitalism gives the people what they want. Your objection is to what the people want, not the system that is employed to get it.