Why capitalism doesn’t work

Thursday, 30 July 2015

There are lots of reasons why capitalism doesn’t work. Some of them are ethical, some are about resource distribution, waste, and environmental harm. There’s not a lot of point arguing with a pro-capitalist from this basis, so I prefer to pick holes by other means. Capitalism does not deliver the things it claims to deliver. It does not work on its own terms for a good 99% of us. Most people in the system do not get to be as rich as they want to be.

The competitive element of capitalism means there have to be winners and losers. There have to be companies that fail, people who are paid less than their work is worth, people who pay more than the object was really worth. You can’t have profit without this combination of underpayment and overcharging. Capitalism works very well for the winners for as long as they continue to be winners, but the fear of losing is ever present. Losing your job, your home, you market share, your business, the edge, the advantage… that’s a lot of fear for a lot of people a lot of the time.

When the cost of living goes up, people push for higher wages. It’s pretty basic maths. Wages have to keep up with inflation, and inflation is the increasing cost of stuff. So, you put up the cost of stuff to increase profits, and so does everyone else, and then the workers start to squeal because they now can’t afford things. They may down tools, wrecking your profit. They may not buy because they are too poor – bang goes the profit again. The economy may falter. No profit there. You put the wages up and the profit margin shrinks, and so not very far down the line, you’ll put the price up again. Inflation is a consequence of trying to make a bigger profit. It delivers economic uncertainty, and there are always those who lose. In terms of economic gain, I don’t think most of us get much from it.

To be competitive of course, you have to drive prices down, and while you can do that by screwing the workers, producers, sourcing in cheaper developing countries and so forth, there’s a limit. What happens when the people in the developing country want a fair wage? We’ve exported jobs to China and India, where people desire western lifestyles, and they will start demanding fair payment for what they do. Getting a profit on cheap goods has depended on finding cheap labour to resource and countries willing to sell their natural assets at bargain basement rates. That’s not infinitely available.

Capitalism depends on growth, on ever bigger markets consuming ever more stuff. At present we have just the one planet, and finite resources, some of which are going to run out and some of which we over-exploit at our peril. We’ve over exploited the sea, fish stocks are in crisis. We’re over using carbon based fuels, we could render ourselves extinct. What you get when you push for constant growth, are boom and bust cycles. These hurt a lot of people for the benefit of the few.

In evolutionary terms, survival of the fittest seldom means the biggest (think about those really big dinosaurs and what happened to them) the most dangerous (like, ooh for example, the sabre tooth cats) or the most violent or aggressive. Evolution favours the flexible, and thus far we’ve done well as a species because we’ve been adaptable. A system that can only think about more exploitation, more consumption, more growth and more profit is not adaptable. The world is changing, and capitalism is a big angry dinosaur that may inf act be chewing on its own tail. As long term strategies go, this isn’t one.