June 4, 2007

Why Capitalism Will Fail

Capitalism will fail for the same reason America rejected Britain; Capitalism consolidates wealth and power, and people want freedom from consolidated power and they want justice through meaningful democracy.

As Martin Luther King, Jr. is quoted,
the arc of the moral universe is long, but it bends toward justice.

Elaboration:

Capitalism is not democratic, and in its pure free-market, profit-seeking form, it is technically amoral (if a moral CEO passes up a legal, but immoral profit, a slightly less moral CEO will remove that inefficiency from the market).

But you don't need economic theory to prove capitalism is undemocratic. Our own work place experiences are rife with examples. Decisions are generally made by the higher-ups, and frustration among middle managment and the the workers reflects this undemocratic structure. Everyone has their own stories to tell about this.

On a global scale, transnational corporations fly into a developing world town, cut a deal with a the elite, who typically control the government, extract the natural resources, and pocket the wealth while the mass population gains no benefit at best, or is injured or killed at worst. Same undemocratic phenomenon at a large scale.

After the American Revolution, the Federalist Paper #10 was very open about the fact that a small number of wealthy people held great power. Even if pluralistic democracy was desired, the wealthy elite wasn't going to give up their power immediately. The U.S. Constitution was written with this in mind, to protect the power of the "minority," but to also allow a slow evolution and transition in power to the populace. So the theory goes.

However, corporations came into prominence after the US Civil War. They consolidated power, influenced the centers of government, and have corrupted the evolutionary process described above. But, that's only temporary; King's quote still rules, assuming humans don't go extinct first.

There are more classic reasons given for the eventual demise of capitalism, such as two reason predicted by Marx and Engles [1]:

The first reason is that capitalism basically leads to overproduction. The aim of capitalism is to make everything cheaper and faster. This will eventually lead to overproduction, once the means of production how become efficient enough. The markets will fail, the prices fall.

We see this playing out with the great China production phenomenon. We see capital seeking labor markets, raw materials and sales markets around the world, and creating blowback in the process. This reason leads into the second reason:

The management class will not be able to maintain living standards for the working class. The working class won't stand for it, and the system will change.

Efficient production itself leads to layoffs. US corporations moving jobs to China mean these layoffs are permanent. True, we could produce other "things" in addition to the things that are produced so much more efficiently, like environment-saving services and technologies, but these remain outside of the market, and there is good reason to keep environmental protection outside the market: consolidated wealth can afford to pollute or destroy the environment; only a collective, democratic decision can make environmental protection sacred.

Another argues that DEBT is why capitalism will fail. Others argue that lack of morals is why capitalism will fail, but it could be argued that the lack of morals will simply let capitalism reach its natural conclusion, that is, the reasons given by Marx.

With its eventual demise in mind, one has to wonder about the alternatives to capitalism.... a topic for another time.

Sources:

1. Sourced on Marx.

why will capitalism fail?

10 comments:

Simmons said...

No political system is perfect, capitalism is just the best. There's no better alternative (that actually works in practice).

GDAEman said...

Hey Simmons. Thanks for the visit.

Actually, capitalism isn't a political system; it's an economic system. There are a number of alternative econimic models, which allow competition to help foster innovation.

An example, on a smaller scale, would be a government-provided health care system. The access to health care would be provided for everyone, with costs spread across everyone to lower the overall cost. Competition would still take place among anyone who wanted to make drugs, medical devices, or any other product that could be used within the health care system.

You might consider reading America Beyond Capitalism by Gar Alperovitz. It's one among many books that offer workable alternative economic systems.

Our political system allows us to explore and adopt alternatives to exploitative versions of capitalism under which we now live.

Anonymous said...

The notion that Government must provide (with taxpayer’s money) for those who can’t afford the provisions, is a failed Marxist-Socialistic philosophy that eventually leads to economic failure. This theory has failed wherever it has been tried throughout the world. (It is always rescued by free market Capitalism – the natural law of economics!) Even in the U.S., all the Great Society welfare programs and neighborhood organizers have accomplished very little.



America needs to train those on the “wrong side of the tracks” to get off their duffs and go to work. We must stop pushing liberal arts education (the luxury of the wealthy) on people who, instead, should be trained as hands-on engineers, machinists, carpenters, plumbers, electricians, practical-nurses, etc. The “good life” could be theirs if they would acquire the American work ethic and apply it consistently during their lifetime. ("Get up early . . . get to work an hour early and leave an hour late . . . do the best you can, everyday . . . treat people as you'd like to be treated . . . ask, believe, and receive with undoubting Faith . . . and good things will happen.")

Furthermore, our political system is broken and is spinning hopelessly out of control. A two year presidential campaign is ridiculous . . . to produce two candidates so objectively lacking in executive qualifications. (No corporation of consequence would hire these two characters as their CEO!)
Bill- NJ

Anonymous said...

capitalism and democracy can't exists together because their main goals are the complete opposite our political system is democracy and capitalism as it seems goes hand in hand but there has to be a different way...how about getting rid of money? focus on creating technologies and getting rid or institutions that are corrupt...i.e.government and religion...that will surely be a start...but that would be the day, but it will come and the people who are living then will shake their heads and pity us who let corporate thugs rule are world

Anonymous said...

To many people have been totally brainwashed and alienated. Their perception of reality and of themselves, even their thoughts and feelings aren't real, it's all fake. Plastic people.
From time to time reality catches up with us, until the next denial or rationalization.
Capitalism has been around to long, people have internalized it to the fullest, they are not able to change anymore. The outlook is bleek, very bleek indeed. I'm not an optimist (can you tell?), rather a realist. Nah, we as humanity had our chance, now it is to late. We are doomed, all of us.

Gary said...

Capitalism is bloated and dysfunctional and is suffering from a terminal condition known as greed. It is about two thirds through its life cycle, but I am sure a new model will not even be considered till the smell of the rotting corpse of capitalism is more then we can bear.

Gary S

Anonymous said...

Capitalism, much like Communism, Socialism and a lot of other systems, has the potential to bring out the best in some and the worst in others. In truth, the main reason Capitalism will fail is due to the Fiat currency the US created when Nixon removed itself from the gold standard.
Had Nixon left the system alone (assuming all subsequent Presidents also left it alone) we would have had more stable economic growth and the US wouldn't be in debt up to its eyeballs.

Anonymous said...

@Simmons
I don't know why you think capitalism works in practice. Maybe because capitalism is oppressive in theory and in practice that is easily accomplished. Half the world's population are struggling to survive in shacks made of corrugated iron and you saying it works practice. If there is no better alternative we have to get to work and come up with a better alternative or civilization as we know it we come to an end. No I know why they say 2012 is the end of the worl

Anonymous said...

Communism has never been actually tried. It is time for anarcho-communist global societies.

Anonymous said...

Libertarian socialism would be a good thing to try. Catalonia, Ukraine free territory, Aragon, Paris Commune... It's seen limited testing in the real world, but it's the only form of socialism that's been successful.