Critique of Capitalism Pt. 1

Critique of Capitalism Pt. 1

It is critical to define terms prior to the discussion. For the purposes of this post, Capitalism refers to all general forms ranging from the so-called ‘Corporatism’ that we see today to the ‘Free Market Capitalism’ that many libertarians are hopeful for. The reason why I connect these seemingly different forms of Capitalism is because I believe that Corporatism is simply an inevitable output of the function that is ‘Free Market’ Capitalism.

If we were to erase all debts, eliminate all government programs and start from scratch by tomorrow inevitably in ‘x’ amount of years we would be back to the same inefficient and unsustainable monetary system that we see in today’s world. This is capitalism in its truest sense. Why? Well, capitalism preaches competition and subscribes to the brutal force of the invisible hand referencing individual’s freedom to make their own decisions and thus their successes and failures. Therefore, it is only logical (and inevitable) that monopolies and corruption will exist. Wow, hold on there, let’s do some thinking before jumping to such conclusions.

Entrepreneur Example:

Let’s say you are living in a small town and run a business of selling computers for a living. You own this company, hire employees, and advertise for it. In this town, there are four other similar companies that are your competition. It is said that the invisible hand will pick the best product at the best overall price to win out over the others. Some time passes and your business strategy proves to be successful and two of the four competitors are now out of business. This leaves three competing businesses in town.  Realizing this, you have bought new stores and have expanded your business, but so too has the other companies. Since the competition is so high, you’ve had to lower your prices to compete with the others, you are now making minimal profits on every item you sell. One of the other competitors comes up to you and makes a request. He arranges a business proposal to eliminate the third competitor. You accept and now you and him are the only two in town. Together, you guys control the entirety of computer business in this town and are now capable of raising prices astronomically once agreed upon. A monopoly is now formed.

Now, granted, this was purely a theoretical example on a small-scale of what today’s Capitalism looks like, but as you can see, it’s not hard to imagine a system that incentives motives like this to exists. Consider gas companies working together by price-fixing to reap the highest possible benefit on a commodity that is needed in today’s world. If we look at this on a larger scale and include politics, it would only take time for a so-called free market capitalism to degrade into what we see today. To assume people are going to stay within the lines is absurd when you have so much at risk. The point I am trying to make is the invisible hand causes a direct incentive for monopolies to form and lays the groundwork for political corruption to exists and exponentially grow.

So what. Maybe you consider your life not to be too bad right now. Yeah, you have so-called freedom to choose which of the monopolies you will work for, right? Who cares about the encompassing global issues like proper resource allocation, social inequality, and creeping global warming. Unfortunately (or fortunately…) the death of capitalism may be unavoidable.

Technological Unemployment

Technological unemployment is the ‘silver bullet’ to the Capitalist system. Technological unemployment is simply the displacement of workers due to advancements in technology. This has happened in the past when Automated teller machines took over jobs previously handled by bank tellers. In defense of technological unemployment, proponents of Capitalism like to claim that the advancements in technology make products cheaper and thus, the demand for the giving products grows. In the automated bank teller example, capitalists claim that this allowed banks to branch out into previously unavailable territories and reach a larger market. In the past, technology has not advanced as quickly as it will in the future. This is called the exponential growth of technology or can be referred to as ‘Moore’s Law.’ exponentialgrowthofcomputingthumbnail

Essentially, within the next 50 years we will reach a point that technology grows at such an astonishing rate, that jobs will not be able to keep up. Let’s consider the very real possibilities in just the next few decades: Google’s self driving car (imagine the amount of jobs that would be displaced by this – Taxis, public transit, delivery services), self-check out machines, robot based doctors/nurses, ultimately no field is left untouched.

This creates a displacement of the work force that has never been seen before. The only way to compete with the amount of unemployment would be to create jobs out of thin air. How does becoming a manager of a group of managers who manage a group of managers who manages the robotic force sound to you? Obviously, the real value of such nonsense is minimal and quite honestly, disgraceful. Unfortunately, that scenario is not far off from where we are today with jobs such as advertisement and economic analyzers that offer no real value to humanity.

For more information on technological employment I implore you to seek Federico Pistono’s recent book, Robots Will Steal Your Job, but that’s Okay.

It’s clear that this presents a very difficult situation for a capitalist system. On one hand, the very foundation of capitalism claims to seeks efficiency and cutting costs to run a successful business. On the other hand, by eliminating the employees through robots you slowly create a world where no one can afford your product because everyone is unemployed.

Planned Obsolescence and Scarcity

Planned Obsolescence is the idea behind your breaking iPod every couple of years or your car breaking down every so often. Planned obsolescence creates a waste of resources, forces people to pay higher rates then initially expected, and is ultimately detrimental to society and Planet earth. Unfortunately, Capitalism incentives this behavior as it increases profits. Sure, capitalists will defend this point by stating that it is the consumers fault for buying the product or they will state that the invisible hand is there to protect against tomfoolery such as this, but as we can clearly see, this is just wrong. There is no reason that we should see so many issues in such a short period of time in 2014 when technology is thriving. Simply put, it is NOT profitable for companies to put forward a complete product because it will not guarantee return consumers (if the consumer already has a complete product, why would they shop for an additional one?). A prime example of this is modern day video games. What incentives does a company have to EPSON scanner imagework hard on a polished product when they can just rush a product out and force consumers to buy an additional add-on content package later? This is the system we live in and it is harmful to our planet. The amount of outdated garbage that has been created through planned obsolescence is staggering and will only grow worse. If we want to see change in this area, we need a social system that assures a quality product be made that is reusable, upgradeable, or recycle in the end.

Keeping with the incentive issues of Capitalism, artificial scarcity is born out of profits. Scarcity causes prices to soar, and thus, is beneficial for any company.

Gold Mine Example:

Let’s say that you are in the Gold business. You are hiking through mountains and to your surprise find a previously unexplored gold mine. You just hit the jackpot. You are deciding how to proceed and are considering the best available route to profits in the monetary system. You can either a) use all the gold to create a surplus and thus drive gold prices down to levels never before seen due to demand being met and a lower initial cost of the product or b) hold the gold, create as much scarcity as possible, and continue to sell gold at a higher price. Clearly, the benefits would lie in some form of option B occurring. Consider this example on a wider range, from oil to food to any resource on earth. Consider this example in the hands of a monopoly. Ultimately, the benefits of humanity are left behind in the name of profits.

This concludes part 1 of my general critique of Capitalism.

About Ron Joniak

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