A number of people who comment on this site are consistently critical of capitalism. I, on the other hand, am a committed capitalist, provided that economic system is properly defined and provided it is limited to economic areas in which competitive markets work.
The system in America today–the system that pisses off so many contemporary Americans– isn’t capitalism. It’s corporatism.
In a capitalist system, it is true that some people will do better than others. There is nothing wrong with that; the promise of a bigger reward for building a better mousetrap spurs innovation and benefits us all. It’s only when the rewards are disproportionate to the value of the activity involved– and especially when those rewards become disconnected from actual economic productivity– that capitalism devolves into corporatism, and things get seriously out of whack.
Competitive markets have numerous advantages in the areas where they work. Unfortunately, in the United States, we have insisted on “competition” in areas where markets are demonstrably inappropriate. From health care to education to prisons, we have pursued a privatization agenda that benefits the entitled and well-connected without delivering any of the benefits of a true market.
That may be crony capitalism, but it sure isn’t the real deal. As I wrote a few years ago,
When what people make is a reflection of their connections and/or the success of their lobbyists, it’s time to consider whether we still have a capitalist system, or whether what America currently has is corporatism–a system where power is exercised through large organizations in pursuit of their own economic agendas, to the detriment of the common good.
Capitalism creates opportunity; corporatism keeps it “all in the family,” exacerbating inequality.
If you have any doubt that the United States no longer practices capitalism, take a look at the recent, high-profile (arguably obscene) “competition” for Amazon’s second headquarters. As the Intercept recently reported,
Amazon’s announcement thisweek that it will open its new headquarters in New York City and northern Virginia came with the mind-boggling revelation that the corporate giant will rake in $2.1 billion in local government subsidies. But an analysisby the nation’s leading tracker of corporate subsidies finds that the government handouts will actually amount to at least $4.6 billion.
But even that figure, which accounts for state and local perks, doesn’t take into account a gift that Amazon will also enjoy from the federal government, a testament to the old adage that in Washington, bad ideas never die.
Enterprise Zones, one of those ideas that the Intercept characterizes as “bad,” has been resurrected in the GOP’s 2017 “gift to rich people” tax bill.
Under the tax overhaul signed by President Donald Trump last year, investors in opportunity zones can defer paymentsof capital gains taxes until 2026, and if they hold them for seven years, they can exclude 15 percent of the gains from taxation. If investors carry the opportunity zone investment for 10 years, they eliminate taxes on future appreciation entirely. Investment managers have been salivatingat the chance to take advantage of opportunity zones. Special funds have been built to cater to people holding unrealized capital gains — such as Amazon employees with large holdings of company stock.
The article details the goodies taxpayers are providing one of the most successful companies in the country, and notes that Amazon has already received $1.6 billion in state and local subsidies for its warehouses and data centers.
On the same day as the New York and Virginia announcements, Amazon also announced a new “Operations Center of Excellence” in Nashville, Tennessee, a 5,000-worker facility for which the city gave Amazon $102 million in subsidies.
The report notes that these cash handouts don’t take into account “regulatory leniency and accelerated permitting” that Amazon projects routinely get.
We can quibble over what we should call an economy in which there is nothing remotely like a level playing field; an economy that enriches the already well-to-do at the expense of the rest of us and routinely socializes risks and privatizes profits, but we shouldn’t make the mistake of calling it capitalism.
22 thoughts on “This Isn’t Capitalism”
Adam Smith wrote that a successful capitalist system required both regulation lest markets become monopolies and worker representation lest the spoils go only to the wealthy. But why take the word of Mr. Smith, let’s listen to a more contemporary observer of the American system:
When I write about the evils of capitalism and call for regulation of corporate activities I don’t mean to give politicians a blank check to regulate the internal revenue code and use taxpayer money to pay off corporations who site themselves in “enterprise” and other such zones. I mean to regulate the activities of such corporations for the common good, the “good” in this instance meaning all the stakeholders in corporate activities, not just executives, shareholders and financiers. Regulation has taken on a whole new and unintended meaning with this unholy alliance of politics and money, one that will prove destructive in the near if not medium term. Piketty was aware of this problem and opined that a democratic society would not put up with it, but so far, we are. The solution? Different politicians; those who would regulate in the older sense of the term.
Sheila writes, “we have pursued a privatization agenda that benefits the entitled and well-connected without delivering any of the benefits of a true market.”
This is called Neoliberalism and it was instituted under Ronald Reagan and Margaret Thatcher. It came from a book they both read by an author I cannot recall. Thomas Piketty completed his economic masterpiece and contributed the redistribution of capital upwards to none other than Art Laffer. The Laffer curve and trickle-down economics. He is now employed by the Koch brothers.
The problem with capitalism is it’s predictable…play Monopoly over Christmas with family and see how it ends. 😉
It also insists on unlimited growth but as the planet is telling us, we live on a finite globe.
We’ll be shifting into what’s next when the Democratic Socialists hit Congress in January. I’m expecting some very interesting debates/discussions emerging from this class. 😉
Even CPR is dangerous if not done right…er…correctly. Citizens United supports corporationism and cronyism; I have always wondered who paid how much dues to those members of SCOTUS who passed this vile bill into law.
Regulations are necessary in all businesses at all levels; but especially the largest corporations who rake in the most profit while forcing smaller businesses out of the market. Those same regulations were enacted to protect American people, the consumers, from what amounts to price gouging on our most needed goods and services. Consider for a moment only the health care corporate system we struggle to literally LIVE with today. Once upon a time health care was ABOUT health care, not profit for corporations who do their banking out of this country to avoid paying taxes. Read your history (or watch the movie, “The Grapes Of Wrath”) to see why the Glass-Steagall Act was enacted after the 1929 stock market crash. It was gradually weakened through both party administrations until Bill Clinton repealed the remaining vestiges of the original law and George W. ran with the benefits of NO regulations.
The Indianapolis Star’s USA Today insert on Sunday, November 25th, ran an interesting article; “Changing times create big trouble for recycling”. The U.S. has for years sent cardboard to China to be recycled into new boxes which are then shipped back to this country for sale and use by corporations and trickle down to those boxes we buy to use for birthday and Christmas gifts. “Earlier this year, China, which for years has been America’s go-to nation for processing recyclables into new boxes, started rejecting all but the cleanest, purest loads.” A wise decision by China due to the source of those “unclean” loads which reminded me of a Nuvo article, “MONEY TO BURN” I clipped and saved from 2015. “Indianapolis signed a new contract with a firm called Covanta without the appropriate application of the Waste Disposal Statute, Ind. Code 36-9-31, controlling such contracts and the process by which they are entered into.” What good are corporate regulations when they are ignored by our elected officials? Covanta declared they can sort the clean, usable recycle materials from regular trash and garbage pickups, a baseless declaration if you think of the contamination of unsorted weekly pickups.
It appears that many local governments, Indiana included, have become Republican corporations in the guise of capitalism. This fits in with our current Capitalist sitting in the Oval Office and dispensing our tax dollars willy-nilly at his personal whims and becoming wealthier by the hour.
“We can quibble over what we should call an economy in which there is nothing remotely like a level playing field; an economy that enriches the already well-to-do at the expense of the rest of us and routinely socializes risks and privatizes profits, but we shouldn’t make the mistake of calling it capitalism.”
“but we shouldn’t make the mistake of calling it capitalism.”
Nor should we make the mistake of calling capitalism under any previous or dreamed of future incarnation “good”. That fairy tale vision of capitalism resides only in the minds of those who are on the receiving side of the game. For everyone else, it is an endless taunt of “I got mine, too bad about you.”
I believe this is what we (some of my poli-sci friends and I) were trying to point out to people – Capitalism left the room a long time before – it had become what Dwight D. Eisenhower referred to as the Military Industrial Complex – run by Corporate and Bank structures backed by the conglomerate Insurance companies. We are supposed to be a country that is a Democracy by government and that uses Capitalism to grow its economy… But the money grubbing entities of corporate America see it differently – now corporations are the ‘government’ behind it all. And that is fact. All one need do is watch CNBC, and CSPAN… listen to who is ‘really’ talking in the chambers of our government.
The architect of today’s capitalism, Alfred Marshall, said it was a mistake to make unlimited growth in the production of “goods” the goal of capitalism. Instead, it should be growth in the production of health. So instead of “homo economicus”, which strips away everything but individual choices in the marketplace, we need “homo salutaris”, or the “healthy human”. Humans can’t be healthy without healthy networks of relationships in healthy families, communities, and ecosystems. For an economic theory that rethinks capitalism to achieve this, check out the Regenerative Economics of the Capital Institute. It’s exciting stuff!
as we watch amazon make counter enterprise zones ,known as main street. if you watch local markets which are not,deep in mass populated areas,you can see a little better view,when a walmart moves into a small rural area,local shops fail immediatly. im watching another trend, being i haul a bulk load of wahtever, seems American markets have been gentrified by brand name items,all corprate logos,all subsidiaries of such,massed into one.as the local market for a local buisness to buy from such corps, so called territory area,for sales,and sales people,of such items, flounder when online comes a knockin?. ive watched this,and get some amusing talk,its always the local buisness gets taxed to death,really? no other reason? try the corprate you buy from,dosent give a shot if you live or die,after getting you to market for them..like checking a item in a store,and then buying it online,again,someone missed something,local survival. if your local rep ( state or corprate)just sold you out for a tax inventive( no i did not mispell) buisness to move in,then your not paying attention. expecting someone to represent you,instead,represents the corps,all the way down the line, they just sold you out,plain and unfortunatly,simple$$$..farming is probably the biggest fall guy,he has to use proven methods today to not only compete,but to even make a profit,or,even be in buisness, seed,ya gotta have the right ground minerals,oh yea, fertilizer,what brand?herbicide?pesticide,no wait monsanto has genetics we dont need that,we can use only roundup. the equipment..I now farm,(i dont say own,because the banks are not giving out loans unless equal collateral is met,try that,and you will see how menuchin and ross are ready to pounce,like 2008)5000 acres ,my time line,is critical,get the biggest and best,only a few corps here folks,that make colored tractors.ones who readily lay off and hire as needed to build this stuff..anyway,if you can picture how main street even survives today,in any city is amazing. like our local restaurants here in nodak, when the oil field was booming,and has since 2013 fallen off over half,as far as money spent in that immediate area,the prices here never returned to what the local wages are tied to.sysco,gffs,orr,etc,restaurant food suppliers,never cut the price of wholesale food,when it dosent have the demand,where we pay 11 bucks for breakfast, i buy the same exact breakfast in houston for 7 bucks, and my wife is a truckstop waitress in nodak, we both see the scam. (it must be a immagination here,bcause local thinking cant get over you have to pay someone 11 bicks a hour to work a job,its just sinful) (o.k, sarcasm aside,its just a annoying fact,buisness owners here work in a land locked land and mind,nodak wages like most,suck) when we look at supporting main street,we do not have the wages(pocket money) to do this,and corp america is just happy with that fact.anytime they can cut costs,anyway,anywhere,its a done deal,at anyones expense,now dont sell me the need and new product innovation etc, any buisness will change to meet the needs,its just gotten now,that corprate america has taken full control of you,and your main street,and like the small buisness owner who was betrayed by his local official,mayor,council,govenor,your lack of concern for small buisness,has carried over to your wages today,and survival of the so called working class.i refer to as economic slaves to corp america,as thee i sing,, best wishes..
Economic systems are not “good” or ‘bad.” They either work or they don’t work, but they only work if the practitioners adhere to the “rules.” An example of this would be communism, which doesn’t work at all for large economies, but is just fine, thank you, for cloistered nuns.
We, being only human, have a difficult time adhering to rules when we see an advantage to be gained and nothing to be lost by going our own way. Even while Adam Smith was laying out the rules of capitalism, they were being violated. Why? Because there was nothing to be lost.
today at dw.com story on google still tracking consumers after droping google for a search engine,seems euro is going to again take google to court over privacy issues, er
The author of the book and the philosophy that Reagan (In the person of Donald Regan) and Thatcher embraced was written my Milton Friedman and co-authored by the cabal of economic “experts” at the University of Chicago.
Those of us critical of capitalism on this blog, myself included, often forget to add adjectives like “well-regulated”. Oh, and during Reagan’s terms (I think), the Taft-Hartley Act stopped being enforced, thus allowing more monopolization of business. How many of us played “Monopoly” as kids and adults? That game was invented in the 1930s. You don’t suppose….
“Ayn Rand’s ‘philosophy’ is nearly perfect in its immorality, which makes the size of her audience all the more ominous and symptomatic as we enter a curious new phase in our society….To justify and extol human greed and egotism is to my mind not only immoral, but evil.”
— Gore Vidal, 1961
Americans are in a borrowing mood, and their total tab for consumer debt could reach a record $4 trillion by the end of 2018.
That’s according to LendingTree, a loan comparison website, which analyzed data from the Federal Reserve on non-mortgage debts including credit cards, and auto, personal and student loans.
Americans owe more than 26 percent of their annual income to this debt. That’s up from 22 percent in 2010. It’s also higher than debt levels during the mid-2000s when credit availability soared.
The Federal Reserve plans to raise interest rates several times this year, which will inevitably make consumers’ debt burden more expensive. https://www.cnbc.com/2018/05/21/consumer-debt-is-set-to-reach-4-trillion-by-the-end-of-2018.html
Chris Hedges has written: Neoliberalism’s Dark Path to Fascism.
As a ruling ideology, neoliberalism was a brilliant success. Starting in the 1970s, its Keynesian mainstream critics were pushed out of academia, state institutions and financial organizations such as the International Monetary Fund (IMF) and the World Bank and shut out of the media. Compliant courtiers and intellectual poseurs such as Milton Friedman were groomed in places such as the University of Chicago and given prominent platforms and lavish corporate funding. They disseminated the official mantra of fringe, discredited economic theories popularized by Friedrich Hayek and the third-rate writer Ayn Rand.
Once we knelt before the dictates of the marketplace and lifted government regulations, slashed taxes for the rich, permitted the flow of money across borders, destroyed unions and signed trade deals that sent jobs to sweatshops in China, the world would be a happier, freer and wealthier place. It was a con. But it worked.
General Motors The auto maker is closing five plants in Ohio, Michigan, Maryland, and Ontario, with plans to cut thousands of office jobs in January—slashing a total of 14,700 jobs.
The U.S. government spent about $50 billion to bail out GM. As a result of the company’s 2009 bankruptcy. April 30, 2014: The U.S. government lost $11.2 billion on its bailout of General Motors Co (GM.N), more than the $10.3 billion the Treasury Department estimated when it sold its remaining GM shares in December, according to a government report released on Wednesday.
There are differences between the Republicans and Democrats on Social Issues, woman’s rights gay rights etc., they are one party for the most part – Republicrats Corporate Puppets.
Great discussion today!
Thanks Sheila for a great one. And to the respondents for their thoughts.
While studying business at the Univ. Of Texas, Dallas, I was confused and appalled by the fact that Corps are given right as aneeded individual, and yet no responsibilities to abide by the individual imperatives toward country and others. This has led us deeper and deeper into a Corporatism type of overarching economic and social strategy in government policies.
We as individuals seem to appear to be the loosers in this model. All is about the game of profit, wealth, bigger, better, more powerful. And yet there seems to be less and less regulation on corporate actions particularly with regard to many of the people who help ensure their continued existence. Yes, the top dogs get the big bucks to ensure the long lifetime and profit as sustenance for the Inc. However the foundation is built of lower level workers with little power.
I’m glad Chris Hedge’s newest article was mentioned by ML. Now, can anyone imagine Chris Hedges debating a Goldman Sachs hedge fund manager?
What if you never stopped playing Monopoly? Maybe just put it away until next Christmas and then played it again. Picked right up where the winners owned most the board and the losers went bankrupt over and over again. Doubt you would find any takers.
Einstein’s dictum was brilliant. Still relevant today because we are still in the predatory phase of capitalism. My god, how long have we been in select regions of Syria, Iraq, and Afghanistan? We aren’t there for peace.
It strikes me that every country in the world today has a mixed economy; some capitalism, some socialism if you base definition of those on who owns the means of production, all of us or some of us. Some countries rely more on socialism, some more on capitalism.
The other simple thought that enters here is that what allows Capitalism to serve society are three things; competition, regulation, and regressive taxation that redistributes the wealth that Capitalism can only redistribute up, back down to an equitable distribution. That means that is appropriate for some markets and not others.
What has rendered the current system dysfunctional is that too many people have been led to the notion that more unregulated uncompetitive capitalism is better than it is because socialism is so bad because it is loosely related to communism and tyranny. That’s exactly the message that those benefiting from unregulated non competitive capitalism get wealthy on.
It’s another result of allowing people to get their education from entertainment media rather than legitimate sources.
I can’t and won’t argue that there has ever been a better economic system than capitalism, but that’s more of a limitation on mankind’s imagination than it is a compliment. Like democracy, which can be easily perverted and strongly challenged by a single moron determined to do it harm, capitalism has been so twisted and convoluted by its user community that it injures far more people, and especially more vulnerable people, than it helps.
Is there a bigger joke than the immortal phrase “the free market?” There are 1200 lobbyists in Washington, most of whom are earning their keep, whose sole goal is to assure that the market is not free. If the employer who writes their generous monthly check finds out that he is gaining no market advantage by employing a poor performing lobbyist, that underperformer will be dismissed quicker than Trump can fire a cabinet member. When those lobbyists enjoy the cooperation of congressmen looking for campaign contributions, as they mostly do, the market becomes a plaything for the lobbyist and the leech who pretends to represent constituents. Need an example? Think about drug prices.
One of capitalism’s greatest offenses is an inability to prioritize in any way that makes sense for its citizens. We – our society – are now mass producing a plane for $120 million that no one has a use for, and $8.5 million tanks that are transported to the desert to sit until they rust out.
Maybe this is what Sheila means by corporatism, but the second most comical aspect of capitalism is the pressure it applies to executives to think in terms of quarters, three months at a time, rather than focus on long-term business interests. Many of America’s best and brightest accountants spend most of their time deciding in which quarter to take profits to make the CEO look good. Is that a good use of a college degree?
But to me the most offensive element of capitalism is its assumption that if workers are doing well, the market is about to crash, inflation is near, and the economic cycle needs a good cleansing. Is it not possible to come up with an economic system that would allow the people who produce the goods to share in the wealth?
The tenets of capitalism, one of which is the cheapest labor is the best labor, create situations that are devastating to economies, destructive of communities, and soul crushing for people who have dedicated their working lives to a plant that has decided to close. GM is doing exactly what capitalism prescribes – it is destroying lives – when it lays off 14,000 workers for the sheer joy of restructuring for a changing market.
Let not get into externalities! The way capitalism heedlessly plunders the environment in search of greater profits guarantees that if climate change doesn’t ruin our quality of life, all other forms of pollution will.
Without economic justice there can be no political justice. Half of America’s citizens own 2% of its wealth, a measure of income inequality rivaled by Uganda. Need more evidence? You live in the country with the highest incarceration rate in the world. The second biggest sin in America is to be black, for which you will be punished. The biggest is to be poor for which there is no redemption promised or delivered. Conflating democracy and capitalism is an intellectual mistake most of us have made our whole lives. But China is enjoying greater success in the capitalist arena than America ever envisioned, and their form of government has little in common with democracy. All I’m implying is that some degree of control over the excesses of capitalism may offer opportunities we have never seriously considered.
Yes, capitalism is the greatest economic system known to mankind. Poor mankind.
Thank you for confirming the tenets and major topics of my book, “Racing to the Brink: The End Game for Race and Capitalism”. I researched my butt off for it and I’m now seeing that I was mostly correct. Too bad so few people bought the book. LOL.
Vernon; maybe the world, or at least those in this country who read books, are waiting to see how it ends.
The one sad spectacle from the Hudnut administration was the destruction, literal destruction, of much of downtown Indianapolis to open Circle Centre Mall which is barely hanging on at this time. Part of my job was working on the Mall development and I was still here when downtown was known as “The City of Holes” due to the actual holes where department stores used to be. and due to the destruction, the city was a dirty place with trash blowing down sidewalks. Downtown was an interesting and busy place; I loved it with the endless variety of specialty stores, big name department stores, 5 and 10 cent stores, fine restaurants, food courts, hair style salons, a wide variety of movie theaters with live concerts and theater at times. Doctors, dentists, attorneys, businesses of all type and always the beautiful Monument Circle. Melvin Simon and Associates simply added another of their Malls to replace the downtown and a little more than 20 years later Circle Centre Mall is partially empty like their outlying malls…those which are still open. Corporatism at its worst.
Sheila – I think I am in need of better vocabulary here. I wouldn’t call you a Capitalist, but I don’t have a term. You see, I agree with you that Crony Capitalism, Corporatism, or whatever, isn’t actually Capitalism.
However, when I think of Capitalists, I think of Conservative think tanks with the mission statements that say “Capitalism, competition and free markets are always the answer — whatever the question”. You, on the other hand, accept that everything has its place, and Capitalism’s place isn’t everywhere. If you accept the notion of mixed economies, of places where Capitalism isn’t the answer, then even though you believe that Capitalism is great “in areas where it works”, I think we need another term to describe you and your position.
Just my take.
I just watched an NPR report regarding 3D printing for manufacturing parts which could put tool and dye makers out of jobs. And then there are trucks that will drive themselves. Automation is contributing to the demise of many good paying jobs for people who went to trade school or who have a high school education. Capitalism does support innovation. Capitalism is amoral. It never raises ethical questions around whether or not an innovation will contribute to the greater good in the long run. It does not ask who might be harmed or what the impact on the health of the planet would be. Corporate America is very short sighted and fails often to understand that putting profit before people and the health of the earth is very short sighted. I suspect that if my fellow citizens wish to counterbalance the “corporatism”, we will have to develop supportive communities where we share our material wealth in a rather socialistic way ie elders developing co-housing to creatively address loss of income and the need for social support.
I had to hunt for this blog; the best topic fitting the Facebook post from my City Councilor David Ray this morning; I stated in earlier blogs dealing with reasons to vote for any and all Democrats, this is why I voted for this “D” again.
He was very “excited” to announce the coming installation of FOURTEEN new streetlights on Mitthoeffer Road between Washington Street and East 10th Street; this will only have meaning to Indianapolis residents. Those FOURTEEN new streetlights will light the night along the near dead Washington Square Mall and its empty parking lot for protection. This Mall is another of Melvin Simon and Associates (a major national mall corporation) dying malls. There are many residential areas which would benefit by new streetlights to protect residents. Is Melvin Simon and Associates considering shutting off their parking lot lights to save money? The stores in the Mall along Mitthoeffer Road have been long gone, as well as those along the 10th Street back side of the Mall.
We definitely need some new Democrats to represent residents and to put our tax dollars to much better use in this dangerous city with historic record setting criminal homicide deaths for the third year in a row. Mr. Ray was not seen or heard from until shortly before November 6th when he began seeking reelection. Considering he replaced Councilor Mary Moriarty Adams is a sad situation and a good reason to look deeper into our City-County Council here and exactly WHOSE needs they are meeting…and WHY?
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