Published: 2013-04-07

Capitalism

I just saw an article (link), there is also a somewhat less dramatic, but perhaps more accurate account (link), about a foreclosed grocery store. After the bank took possession, bank officials ordered that all the left-over food should be dumped in a landfill instead of being distributed to the needy (of which there are many in the area in question, which has a 41% poverty rate). There were literally people lined up in the parking lot, yet they were physically restrained by police (since, of course, the food was still technically property of the bank).

The article has an interesting quote that really gets at the core problem with capitalism as it is currently implemented in the United States, and really around the world.

In a capitalist society, the motive behind the production of food is not to feed people, housing is not made to give them shelter, clothing is not made to keep them warm, and health care is not offered primarily to keep people healthy. All of these things, which are and should be viewed as basic rights, are nothing other than commodities-to be bought and sold-from which to make a profit. If a profit cannot be made, usually due to overproduction in relation to the market, the commodity is considered useless by the capitalist and destroyed.

This almost perfectly parallels a passage from Adam Smith in which he describes the beauty of the market. Essentially, he notes that the baker does not bake to produce bread for his neighbor, he bakes to create a profit for himself. The idea, of course, behind capitalism (at least as it is taught in school) is that the baker does, in fact, produce bread for his neighbor. This is, in some sense, a victory because it aligns the interests of baker and neighbor and leads to the production of bread with a minimum of what we can think of as "friction". No one had to tell the baker to bake, he just did.

Of course this is an understandably attractive idea, especially given the awful results humanity has witnessed when it has tried other methods of incentivizing the baker (although it would be naive to say that all other methods have failed, some have worked out just fine at various times and at various scales).

The problem, however, is that it does not take long for the baker to realize that he can turn his economic role into political power, and by so doing increase his profits even further. This is what we see today, and this is the failure of modern capitalism in my eyes.

There isn't anything particularly market-driven about our economy at this point. The market, such as it is, is really more of a meta-market, where economic and political power are bought and sold in Washington and on Wall Street. There is certainly competition, but it is not competition between bakers to produce the products that people most want to buy at the prices people most want to pay. Instead, it is competition between bakers for political favors, laws to restrict competition, punish harmful truth-telling, and generally restrict the rights of smaller actors within the market.