A free market exchange of views…

July 17th, 2016
by Chris

Elgin Hushbeck has written an impassioned piece in favour of capitalism. I quote him at length:-

“One of the common criticisms of those on the left, particular the religious left, is that capitalism is an evil system because it treats individuals as commodities of momentary worth, rather than as people made in the image of God.  This is really just a self-serving definition that tells us more about the person making the claim than about capitalism itself.

One reason for this is that at its core capitalism is based on a mutual giving among individuals that is, at least ideally, freely chosen.  There is nothing in this that demands greed or exploitation.  Granted we live in a fallen world where people are not always driven by the highest motives, but this is a problem with all systems, from sports to science, movies to teaching, the private sector, government, and yes, even socialism. It is hardly limited to capitalism.  People are people, regardless of where they are.

and

There is nothing inherent in capitalism that makes men greedy or teaches them to exploit others, in fact if anything it is the opposite for capitalism simply seeks an exchange that is best for both sides, where what is best is determined by each individual.  Since it is based on mutual consent, it encourages people to be concerned with the needs of others, which I believe is one of the reasons those supporting capitalism are on average more charitable than those supporting socialism.”

Now, as Elgin is my opposite number from the Global Christian Perspectives webcasts (currently in hiatus pending new technology and a new format), and by “opposite” I mean in politics, theological stance and country (the UK and the USA being opposites at least from the point of view of the Atlantic), and he is therefore well aware of my take on capitalism; I still recall the expression on his face when I called free market capitalism “the System of Satan” (which I later elaborated on in a post of the same name). I have written other posts in a similar vein – “Depression, the System of Satan and the Devil’s Evangelism”, “Freedom with or without Property” and “What price Free Trade”.

Do I feel just a teeny bit targeted by that This is really just a self-serving definition that tells us more about the person making the claim than about capitalism itself.” ? Well, even if Elgin hasn’t read all those four posts of mine (and I’m not going to recapitulate them here – you can click through and read or reread them to see that I do have some very good reasons for thinking the way I do), I think it isn’t unreasonable to think I am, if not THE target, then part of the target. Mind you, it does seem possible that this is just turnaround, and he felt himself targeted as one of the “Devil’s Evangelists”. That would be fair enough, I suppose.

What, then, does it “tell you about me”? It seems to me that in writing it, Elgin meant to imply that my view of capitalists is an overly negative one (after all, he goes on to paint a picture of capitalists as benefactors of all…). What it should tell you is, I think, expanded upon in the four blog posts I link to, but Elgin hasn’t dealt with the contents of those, so I suspect he hasn’t read them. They would also tell him that I’ve reached my position largely due to reading and rereading the synoptic gospels.

But yes, it does tell you that I don’t regard capitalists as generally beneficial to humanity as a whole. For that I have good reason.

It tells you, perhaps,  that I read a bit of economics occasionally, in which people are either units of consumption, units of production or “wealth creators” (i.e. profit takers). Elgin himself is fond of saying that taxation is bad, because it holds back “wealth creation”.

It tells you that I’ve encountered (and advised) large companies governed by cost accountants, balance sheets and share prices, I’ve encountered (and advised) individuals ground down to unsustainable wages and then continually pressured to make more and work harder and faster for no extra benefit to them than that they keep their jobs while the capitalists they work for grow rich, and others thrown on the scrapheap of society as unemployable and therefore worthless, and somehow also morally reprehensible.

It tells you that I’ve seen societies in which the size of your bank balance is the main indication of your worth as a human being (and on both sides of the Atlantic that is increasingly true). It also, perhaps tells you that I spent a significant part of my life enslaved by the fear of loss of financial security and the need to make more (as I deal with in the second post above) and have only with substantial pain learned that that is a way to exist, but not a way to live.

But actually, if you read on in the piece I’ve quoted, it tells you not about me in myself, but about me not being a writer who confuses capitalism with a market economy – perhaps particularly a “free market economy”. Capitalism is about the ownership of the means of production by individuals, which in and of itself seems innocuous enough; you can have a capitalist economy with very restricted trade, as indeed we used to in the UK when mercantilism was the dominant economic model (and, for what it’s worth, I think the free market version of capitalism is significantly superior to the mercantilist version).

As with the rest of Elgin’s piece, however, he describes (in descibing a free market rather than a capitalist economy) an idyllic world in which everyone bargains freely for everything they want or need with others who merely wish to make a reasonable return for their labour, and if he actually lives in a world which generally operates like that, he is incredibly lucky and privileged.

Actually, in order for the bulk of his transactions to resemble the picture he paints, he must be truly privileged and have a significant disposable income as well. Those who are “scraping by” or who are dependent on low-paid employment in order to exist will not recognise that picture, wherever they live.

No society I have encountered actually operates that way. In small towns in the UK, some businesses certainly used to operate like that when I was growing up (though by and large not in cities), but not any more – that type of business owner has mostly been driven out of business by large companies, and those who survive, survive on the margins. Most typically this change is seen in the case of small retailers who have almost all fallen to the supermarkets and chain stores, which, of course, operate purely for profit; these may try to make their customers happy, but this is at the expense of their producers and their workers (and in the celebrated cases of Wall-Mart and others like them, the expense of the taxpayer who subsidises the workers’ poverty wages). Both their producers and their employees scrape along without any of the supposed benefits of a “free market”, the first because there is now nowhere else to sell to, the second because if they raise any objection they can be fired and instantly replaced by one of the millions of jobless.

His idyllic scene, of course, only works if we ignore the fact that (as he concedes)  “we live in a fallen world where people are not always driven by the highest motives”Better, I think, that we assume that people are not driven that way and be agreeably surprised if things turn out otherwise – but please, let us not make a virtue out of greed and exploitation. Elgin writes of an idealised (I’m tempted to say “fantasy”) capitalism, suggesting that greed and exploitation are not at the root of a free market capitalist economy, but this is not what conventional economic theory says; he claims “capitalism simply seeks an exchange that is best for both sides, where what is best is determined by each individual”. However. the form capitalism has actually developed to (which is probably properly described as “financialised capitalism”), does not remotely “seek an exchange that is best for both sides”, it attempts to extract the maximum price for the least possible overheads (and the wages of employees and the quality of raw materials are both overheads). Anything else hurts the bottom line, and impedes “wealth creation”.

This is traditional economic theory, which holds that the market is at its most efficient when individuals act rationally to maximize their own self-interest without regard to the effects on anyone else. In other words, it demands exactly “greed and exploitation”, and rewards both with bonuses for CEO’s and managers. This capitalism indeed does not “care what motivates a transaction” (as Elgin says later), but it also does not “care whether it is freely entered into by both sides” contrary to what he suggests – indeed, it prefers monopolies, particularly in goods which are necessities, and in labour relations it prefers that the option is “take what we offer or starve”. For example, our young people are increasingly forced to take “zero hours contracts” where they are at the beck and call of the employer, but the employer has no obligations to them.

It is unfortunately the case that in a free market businesses grow inexorably towards monopolies (or at least cartels) and as Adam Smith wrote “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” The result is that the ideal of the free market is distorted by the players in the market, until it stops being free, and until it takes at least partial control of government, as this article shows. The “wealth” (i.e. ownership) becomes concentrated in fewer and fewer hands until a very few people hold almost all the ownership and power – and money, and therefore worth as human beings.

It is also resolutely short term, because it is forced to be that way by the financial system which sees only the last balance sheet and profit and loss statement, and will take profits where it can, as there are always other bigger short term profits to be made than building for long term stability of a company. Whatever type of motivation people may have personally, finance-driven capitalism substitutes the law of the bottom line.

Elgin is, of course, right that at the root of much of this is the insurance companies, pension schemes and banks on which we normal human beings rely – and so very few of us are not in the end complicit in this system. Short term means that you do not want your employees to be loyal, just to work harder (they can always be replaced), you do not care about the environment (far too long term!), you do not care about quality as long as you can get people to buy (what, after all, are marketing and advertising for?). The fact that we are complicit, however, does not mean that the system is good…

Finally, he contrasts capitalism with socialism, which he states needs a strong central government, and suggests that as government restricts autonomy, this is axiomatically a bad thing.

Now, bearing in mind that markets (as we have seen) tend to produce monopolies, and monopolies are bad even from the point of view of the most ardent free-marketeer, and that capitalism tends to produce a smaller and smaller percentage of individuals with a larger and larger percentage of wealth/ownership, which itself distorts the market (a free bargain for something requires that you have disposable income sufficient to buy, which is increasingly not the case for a large proportion of society, and mere disparity in power to purchase negates any sense of free bargain), there is clearly a need for something to mitigate these effects (and the other negative effects I’ve mentioned above, including perhaps most strongly the short term perspective of everything), and as businesses and the markets are not going to deliver that, government must; that is to say the people acting as a whole by their representatives and employees must take a stand to prevent the domination of everything by a few corporations. Many of those corporations are now multi-national and have  wealth and power well in excess of that of some countries, so government must be at least that strong.

However, Elgin has a point with which I do agree. Just as corporations tend to get bigger, so does government, and the larger something is, the more remote it is from its ultimate owners even in a system of representative democracy. Just as by the time I have followed through the investment of my pension through multiple companies, my voice cannot be heard, so by the time my democratic vote has been filtered through a party system, a lobbying system and the necessary apparatus of civil servants my voice also cannot be heard (though it is there somewhat easier, as I can at least find where to meet my immediate representatives in person).

In addition, the financial power of big business, big finance and the very wealthy allows them to influence government in a way the ordinary individual cannot match, even in combination, just as it creates automatic distortion in markets. Elgin and myself are agreed that this is a bad thing, but he appears to consider that capitalism, left to itself, will produce a beneficial effect and that anything else is transferring power to government and is therefore axiomatically a bad thing. I consider that capitalism and government both are at least somewhat broken; capitalism needs restraining, but so does government – and we have, in theory at least, the means to restrain government via the ballot box.

I am thus very slighly hopeful, seeing the collapse of both our UK main political parties in infighting, that we may see a political restructuring here which may, just possibly, restore a small amount of control to the individual voter. Maybe in the course of that, the messages that bigger is not always better and that local issues should be dealt with by the people who live there may strike home. Perhaps, just perhaps, we could see the possibility that all of big business, big finance and big government might have their wings clipped.

It’s a small hope, but I need to nurture it.

 

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