Capitalism, in theory, depends on the theory of free markets, that is, markets where buyers and sellers are free to enter into any arrangement and there is no oversight from any authority, democratically elected or not. These free markets depend on the concept that markets self-regulate; essentially, they act in good faith and behave well because to not do so is economically disadvantageous. But, this whole paragraph is bullshit and is the foundation for capitalist propaganda in continuum from the start of the industrial period until the present.
Are market based forces, incentives and price variance necessary for a healthy economy? Sure. But they can be achieved through mixed market economies with public and private ownership, strong labor unions, and protection of human rights. They are not solely instruments of a capitalist system.
Getting to the point, the free markets based in capitalist theory do not self-regulate, in fact, the exploit and prey upon weakness. That is the design and purpose of capitalism, for the owners to retain all of the profits while controlling the labor and production process.
IF markets self-regulate there should be numerous examples of such, instead we have a few divergent examples:
Did you know that in the 20th century that the citizens of the US were being mass poisoned by lead? Lead was used in almost every product that people used on a daily basis, including massive pollutants such as gasoline. The lead industry hired scientists to produce false information and studies that denied the toxicity of its use. It took decades for real scientists to persevere and enact the reduction of lead use (through government power.) The point is that even all of the captains of industry were killing themselves, but they cared more about profits. Major failure of the self-regulating market, no? They failed to act on information for profit’s sake.
Gulf oil spill. Chemicals in drinking water. Fertilizer plants blowing up. These are all examples of deregulation or instances where regulation that is in place being unable to act due to limited resources. The Republican Party has continually championed “small government” and less regulation, they’ve successfully reduced budgets of acting agencies, like the EPA. However, in the absence of regulation, did markets self-regulate? They did not. Otherwise people wouldn’t be dead.
The Great Recession. Do I need to spell this out? We know that deregulation (such as repeal of Glass Stegall, reducing the cash banks had to keep on hand, promotion of high risk lending) was the driving force. Where were these self-regulating markets?
How about this. Forever21 primarily manufactures its clothing in Bangladesh and other Southeast Asian countries. Are they going there so that they can “self-regulate” in the absence of real regulation? Probably not. The cost of $2 items of clothes is thousands of lives of factory workers. But why is it that corporations are so eager to go to places where little protection of workers exists? They certainly aren’t going there to do the “right thing”, but they’re also not failing, as self-regulation predicts for bad agents. Doesn’t this flaw the whole premise of capitalism as unquestionably good?
But the predatory nature of capitalism isn’t just a US phenomenon, it is global. Countries that are open to trade, have “free markets” which mimic the US, and are supposed to self-regulate, have some egregious failures. In fact, Capital Flight is a function of capitalism’s need to exploit and probe for weakness or advantage. You might know capital flight from one country to another as globalization. Regardless of its name, is it a coincidence that the capital always flees to unregulated markets where human rights are nonexistent? Whenever there is an instance of capital flight, someone on the end gets screwed. Here is an example:
China. China’s environment is rapidly deteriorating. Rather than continue to destroy their environment and exploit their vast mineral resources, they have outsourced their needs to Guinea. Guinea’s government announced that it is open for trade. Problem is, the government is weak, corrupt and highly kleptocratic. That’s why China’s share of the venture is estimated at 95% by some experts. The government of Guinea is capitalist bent, but where is the benefit for the people? But equally important is the fact that Chinese mineral producers aren’t self-regulating in the face of extreme pollution, they’re just outsourcing it.
Finally, there is an irreversible blot on unregulated markets that seek to maximize profits through the most morally corrupt method, slavery. We know the history of the US. But did you know that hundreds of thousands of immigrant workers in the United Arab Emirates and Qatar are living as slaves? Modern slavery exists and thrives in “free markets”, free markets which are supposed to do the right thing through self-regulation or be driven from business for being bad agents. Here is what is really happening:
The UAE and Qatar are flush with cash and are becoming hot global destination for tourism, finance and business. Companies from all over the world want a piece of the action. What you don’t know is that Indian, East African and Southeast Asian workers are lured there in hopes of finding a job. In many cases they pay their life savings to be transported there. Once there, they have their passports taken away by their employers. Without a passport they cannot leave. Without a passport they cannot get a new job. They are not citizens. They have no rights. Essentially, they belong to the corporation that brought them there. They are slaves.
Why is this happening? Because capitalism is a system used by a capital owner to maximize their profits and minimize their cost. Why would they truly care about being good if they can get away with being bad? Most consumers don’t care. That’s why they don’t question the cost of $7 jeans from Forever21. Maybe it hurts too much to ask about the human suffering, or maybe we’ve just been brainwashed into thinking there is only one way, the capitalist way. But on the whole, the concept of self-regulation is debunked every day when “bad agents “succeed, and they do succeed.
When capitalism demands free markets what is really demanding is for you to shut up and ask no questions. Conservative economists have spun a fairytale about the “invisible hand” at the center of self-regulation, and self-regulation essential for free markets, and free markets as the essence of capitalism. But you don’t have to dig too deep to see it for what it is: a gross injustice of human rights, an unequal distribution of the profits of labor, and a giant farce.
It doesn’t mean we have to reject McDonalds or Wal-Mart. It doesn’t mean that all consumption is bad or that all profits are evil. But what it does mean is that the system doesn’t work. There are better systems, for example the Nordic Model, that keep what is near and dear (incentives), while maintaining a higher standard of human rights and worker rights and a far more equitable distribution of joint effort. But the first step in achieving any of this, is admitting when we’re wrong. We are wrong about capitalism.
KIENAN MICK is a resident of the beautiful, lake filled Twin Cities. He has a degree in Economics from the University of Minnesota, and an MS in Applied Economics from the University of North Dakota. In his spare time, he enjoys amateur photography, nature hikes, and bird watching. His interests lie in “alternative” economic systems where the public, unions, and co-ops take a greater stake in our economy.