Esoteric Dissertations from a One-Track Mind

May 13, 2007


Filed under: capitalism — codesmithy @ 7:30 am

I wanted to take a moment to dissuade people from thinking that I am against capitalism. I am not. I believe capitalism to be a useful vehicle to drive an economy, better certainly than its competitors. That said, capitalism has problems that must be addressed. Namely, that “externalities” are introduced, costs or benefits that are incurred by third-parties as a side effect of an economic transaction. The great motor for our capitalist economy is the corporation. Corporations are driven to make sure that all benefits are paid for, at the the most profitable point, and that all costs are externalities.

Corporations will be as quick to pollute the air as they will be to supply air cleaning solutions to those who can afford it. The justice of this situation, the creation of new problems that didn’t previously exist, for the profit of a few to the detriment of all, which can only be remedied by those who can afford it, undermines the social contract that freedom and capitalism are based. The rising tide must lift all ships.

There is only one institution that can check capitalism run amok, and that is the government. The idea that the free market can somehow regulate itself is delusional to the point of being criminal. First, it assumes that the power relationship between sellers and buyers, lenders and borrowers, and employer and employee is equal. It isn’t. Consolidated sellers, lenders and employers have more power than their counterparts for a number of reasons. The pool of sellers, lenders, and employers tend to be smaller, leaving them more opportunity to engage in cartel behavior. Sellers, lender, and employers tend to have more capital, meaning that they can more easily get effort expended on their behalf. Lastly, sellers, lenders, and employers tend to be more specialized, therefore have an information advantage over their counterparts. Each of these factors promotes an unequal relationship in the economic transaction. We can see this play out in a variety of different ways, such as companies getting laws past to lessen environmental protections in the the name of bringing jobs into the community.

The government needs to regulate the economy because it is one with the exclusive right to force. As a buyer, I might want to buy a product in which workers were paid a reasonable wage, or the environment wasn’t unduly polluted in its making. But, how could I ever know? I would have to trace back the inputs, find the manufacturer for each, ask for a tour and information that the company is unlikely to volunteer, or break the law. Even in that case, how could I be sure that situation had not changed since the last time I visited the manufacturer. This is impractical for any individual, and ruiness if every person tried to implement such a system for every purchase. Conceivably, people might form organizations to pool the effort and report the results, but even these organizations have legal limits based on private property and privacy. Regardless, how do we ensure that the organizations don’t fall under the sway of companies they are supposed to watch? We see that this becomes another type of societal oversight, implemented poorly, because of the constraints placed on it by the government.

The government is the only institution that has the power to do what is necessary. Bureaucratic government will be inefficient, but it is better than the alternatives. Departments of the government such a OSHA, and the EPA are every bit as important as the police and the military. Since, they all protect the social contract between the people and the government. The ideas stated in the declaration of independence are prophetic. Governments that do not ensure unalienable rights are destined to be overthrown by the people in the name of a government that is more likely to fulfill those rights. That said, I don’t believe there is a better system. Each represents a series of trade-offs. But, the government cannot be ignorant of its duty to the people, and that value is placed on a per-life basis, not a per-dollar one.


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