Critical DisBelief

When certainty becomes uncertain…

What’s Wrong with Free-Market Capitalism? Part I

Exciting times we live in! When I was interested in theology it was really difficult, even in Church, to find anyone else to discuss it with. I had to hunt out atheists or other weirdos in obscure newsgroups and pique them with my ideas. But now that my gaze has shifted to things that actually matter and are real – power (money/politics), people (care/social justice) and planet (ecology/sustainability) – it’s heartening to find that that these topics really are things (some) people like to discuss.

It’s a pleasure to be able to listen to and read about these issues in most newspapers and news podcasts. It’s as if the whole Zeitgeist has changed from self-fulfillment and consumerism to the Bigger Issues. A different wind is blowing where many people are no longer looking up to the rich as “successful” but rather critiquing their greed and demanding they pay their share.

At the same time, in every discussion someone will offer the Gegenthese, the counter-argument which aims to show that either a) the rich deserve to be rich or b) capitalism (which makes some people rich) is the only working economic system and we depend on it for our survival. To paraphrase my former hero C.S. Lewis (recycled by Daniel Dennet whom I don’t like much at all) we need to dispell the myth, or break the spell.

I don’t go in for conspiracy theories but I have and do see how people can be manipulated by cleverly crafted messages. In a benign form it’s called Culture, in less benign forms Advertising and then Brainwashing. The power of language is so immense and under-estimated that you can package an obvious lie as obvious self-evident truth.

Take the idea that Free-Market Capitalism is the “only” or the “best practical” economic system. When you boil it down it means that the best system is the one in which the rich can (and should) have the lion’s share (or all) of the resources. Because a seller will/should always sell to the highest bidder and a buyer can only procure what he/she can afford, those who don’t afford cannot get. Ultimately they will die.

The echos of Social (or Econcomic) Darwinism are clear: survival of the richest. But let’s give Capitalism some credit: it does work fairly and morally under certain conditions which are…

Imagine life as a level playing field. Each person starts out with equal health, equal skill and intelligence/education. Each has 10 coins (talents?) in their pocket, each has equal access to a job (a market to sell their labour) to increase their coins. One guy sits under a tree and orders tequilas all week, another spends all his money on a plough and some seed, another buys a horse, a third buys/builds a cart. Here we see the beginnings of a free-market utopia where each person will conceivably reap the rewards: the gringo get’s drunk but blows his fortune and is hungry and thirsty after a week whilst the 3 entrepreneurs are well on their way to a bustling, cooperative economy. Free-trade has resulted in what we would call a fair distribution of wealth.

But real life is nothing like this scene. It’s the proverbial edenic myth needed to sustain the religious belief that free trade is good for humanity. You’ve got the villain: the lazy gringo who expects a state handout and the protagonists: the hard working capitalists who invested. But reality is different in many ways.

In reality none of us are born equally. We each are born with different cards for/against us. Studies have shown that your birth postcode is a better predictor of your mid-life social and economic status than almost any other factor – hard work included.

The CEO who earns 100 or 1000 times the rice farmer in south-east Asia does not work 100 or 1000 times harder than the farmer. Though it’s hard to quantify, if judged by sweat, hours toiled, worry lines, the toll on the body, life-expectancy the farmer is working harder but getting paid orders of magnitude less. Not only is he/she getting paid less, they are eating less, eating worse, have less access to medicine, education and leisure.

As a society, especially a democratic society we have to decide which direction we want to go and not be led by the nose by an aristocracy or plutocracy. Neither the well-born nor the rich minority have the right to dictate a societies development/degeneration. We need to decide how we want to allocate resources, what kind of behaviour is to be rewarded, what kind of activities are to be opposed (not punished!),

It seems to be an agreed liberal/progressive value that people should not be condemned for things they cannot change. This is a profoundly humane and moral idea: you cannot be discriminated against because of how you were born or because of how you are given that you cannot change some things. This outlaws sexism, racism, derogatory behaviour towards the handicapped, homosexuals and even religious persecution (given you can be born Jewish, or christened Catholic).

By the same logic, we cannot reward people for being born into rich families and surroundings. But that is what our laws do: by allowing children to inherit fortunes with little or no tax we perpetuate a undeserved rich class. Another example would be our penchant for ursury: by allowing limitless (free-market) interest rates we ensure that the rich get richer for it is only the rich who can lend. This phenomena gets compounded as less and less people become more and more rich because the less people are rich the more the money markets become effective monopolies.

In engineering terms this is known as a positive feedback loop: the richer you are the richer you get. There is no stabilising factor and (in electronics as in economics) the system will go out of control until something breaks. When the rich are so rich and so small a group that something has to give a revolution occurs and there is a big mess which later generations have to clean up.

Ironically, some thinkers have shown that the best thing for the rich classes, is a thriving middle class because it is the middle class which buys the produce of the factories owned by the rich classes. In moderation the free-market can work. But people are greedy, the system is unstable, and Free-Market Capitalism offers no bounds on Greed leading to Instability.

An engineer will tell you that an unstable system needs regulation. It needs a negative feedback loop which compares the output to a desired value and adjusts the input accordingly. In today’s society the regulatory function is fulfilled by the state/government. Theoretically it could be fulfilled by anyone, the important thing is that the desired value is what the people want if the system is to be democratic.

To be continued…


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