– Northern Dragon © 2019. All rights reserved.
In 1776 the Scottish economist and philosopher, Adam Smith, released his magnum opus, “The Wealth of Nations” and laid the foundation for classical economic theory – and modern Capitalism.
The world at that time was significantly simpler in many ways than it is today, and our knowledge of economics, sociology, and politics has advanced considerably since then. But underneath all of our modern-day complexity, the economic foundation is the same: Capitalism – private ownership of the means of production and their operation for profit.
As an economic system, it has served us very well. In the last couple of centuries, our industrialised societies have developed at a totally unprecedented speed, both economically and technologically. And the enormous wealth generated is mainly attributed to Capitalism. It can come as no surprise then, that Capitalism is often viewed as a universal panacea for all the ills of society, and as an ideal means of continued welfare and growth.
If only the world were that simple…
Unfortunately, Capitalism is a truly appalling system for the distribution of wealth, general welfare, and handling environmental issues.
The last 40 years have seen a marked increase in wealth inequality throughout the world. I have written about this in an earlier post, here. Numerous studies have analysed the cause and effect of this, but fundamentally it really cannot come as a surprise at all. Capitalism is grounded in the idea that the application of capital to production produces wealth: those who have capital get richer; those who haven’t – don’t.
The accumulation of wealth inequality is thus built into the very system itself. More interesting, it seems that growing income inequality may also be a natural result of Capitalism. From a social and political angle, this is highly critical, for high and sustained levels of inequality comes attached with high social costs.
And in addition to that – and less commonly known – high levels of income inequality also come at significant economic cost: greater inequality leads to less economic growth. And especially so, if the income share of the top 1% is disproportionately large. The much-vaunted “trickle-down” effect of tax cuts for the rich is a myth. It does not exist in actual reality. If left to itself, Capitalism will – as stated – favour the ultra-rich at the expense of the poor and the middle-class.
Modern economic theory recognises such costs as “externalities”: costs of production which are borne by society at large and not by the individual company. They are, as such, “invisible” to capitalistic production. The individual company does not see the social and environmental costs it creates. When it puts a new assembly line into production, the price of that includes neither its effect on global warming nor the social cost of the growing inequality it creates. And even if it wanted to, the company would have no reasonable way of calculating such costs, for they are not part of the expenses paid for producing.
Capitalism is, in fact, blind to them.
Unfortunately, that does not mean that those costs do not exist. Pollution, global warming, destruction of rain forests, overfishing, strip mining, child labour, marginalisation of the poor, loan sharks, unsafe banking practices, black lung disease, pesticides killing off bees, plastic pollution of the seas, etc. etc. All of these and much more are costs to society and environment, incurred – but not paid for – by capitalistic production.
And because Capital does not pay those costs, society has to step in, in its place. It is the role of government to moderate and regulate free-market Capitalism. And when it neglects that duty, then it is not only failing us today but passing on the cost of Capitalism to our children and our children’s children.
The “de-regulation” mantra of right-wing Capitalism is destructive, counter-productive, and utterly asocial. It is, literally, saying: we don’t care that we may poison your water, pollute the air, melt the polar caps, crash the housing market, or whatever. We simply don’t care. Not our problem. We want to get rich, so fuck off!
You may contrast that with the Nordic societies, which – with their social-democratic policies, massive redistribution of wealth, strict control and regulation of the capitalistic marketplace, and keen social and environmental consciousness – are also, year by year, polled as some of the wealthiest and universally most happy and satisfied societies on Earth.
Raw, unregulated Capitalism leads to concentration of wealth – and universal misery.
Categories: Reflection
Tags: capitalism, economics, externalities, free market, government, hidden cost, income, inequality, Nordic model, regulation, society, wealth, welfare
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Northern Dragon 
Reblogged this on SUBURBAN TRACKS.
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Much appreciated, thank you.
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The mere mention of trickle down economics is enough to make my blood boil. I suspect the authorities knew all along that it would never improve the lowest class, see the graphic at the end of this post- https://forestwoodfolkart.wordpress.com/2016/04/28/proverbial-thursday-silesian-weavers/-
how could it when the rich depended on them to perform tasks they considered menial/beneath them?
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Trickle-down economics (or “trickonomics” as it should be more properly called) is just another way of saying: “make me rich and I’ll give you a penny.”
I was not aware of the Weaver’s Revolt ( ref. your link: https://forestwoodfolkart.wordpress.com/2016/04/28/proverbial-thursday-silesian-weavers/ ). And it illustrates a very important point: if people get oppressed to the level, where they won’t even be able to afford basic necessities, then they may very well revolt. But … being poor and without support by the military, any such revolt is likely to fail.
Conversely, we have seen again and again – for instance in the States, when the coal miners went on strike – that police and even military will be used against workers to strike down and quench any rebellion in them: https://www.history.com/news/americas-largest-labor-uprising-the-battle-of-blair-mountain
Organised unions is a help in ensuring better pay and conditions for workers. But they cannot do this without at least tacit support from government. If government has been subverted by Capital, the workers will lose out.
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If we don’t want a return to industrial enslavement or feudalistic working structures, Unions are essential to protect many hard won worker’s rights and maintain checks and balances on greedy capitalist employers. (Oo. That sounds so leftist)! But if we have no watchdog or a watchdog that is not independent from employers or goverment, workers will be exploited. This is human nature. It is more selfish, than altruistic. Unfortunately, unions are also sometimes selfish and this has led to a weakening of support by the majority of the workforce here. It infuriates me that many unions allowed corruption, greed and at times, pigheadedness and abuse of power to subvert their ‘holy war’ on behalf of the worker. Union power is diminishing in my country and that I think is worrying and sad given that for the majority of workers, wage rises seem to be something they remember dimly from a distant past. Just when we need Union support.
We too have had our ‘rebellions quelched in my memory. I despair for the future and also refer to my comments on regard to this attitude of privilege amongst some of the educated working class that do not seek to support unions on any way.
I think you are correct re government having to be on board with the idea of Unions. However, the goverment that would have been on board has not been able to secure a election winning majority and its former leader was tainted in the public’s mind with his Union background.
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Though I do not have firm info on it, it is my clear impression that unions are on the retreat throughout pretty much all of the world (in those countries where they exist at all). I would think the reason is due to two effects:
First, that unions drew their original power and enthusiasm from the great workers movements in the first half of the previous century – inspired by the communistic and social-democratic movements and as a reaction to the industrialisation. With time, that fire grows dull – and the more so, as workers generally do not live through the kind of hardships experienced at that time. I am not saying that things are great now; just that the basic needs of Maslow will generally be fulfilled, and that removes a lot of pressure from the cooker.
Second, the unions are, by now, quite old organisations – and age has a seriously detrimental effect on almost any organisation: bureaucracy, inefficiencies, and a detachment from the original roots. Viz. Parkinson’s Law: https://www.johndcook.com/blog/2009/08/27/parkinsons-law/
It is, of course, possible for organisations to revitalise themselves. But that will usually happen as a result of outside threats, and in the absence of that…
It is also worth considering, that the people who get to the top of young, vigorous organisations with a clear purpose, will often be those who mirror that within themselves. While people who get to the top of mature or old organisations will often be bureaucrats and politicians… Or maybe we can even say, that the managers of any organisation will generally (yes, there are exceptions) reflect the spirit and culture of the organisation itself…
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” ..maybe we can even say, that the managers of any organisation will generally (yes, there are exceptions) reflect the spirit and culture of the organisation itself.” Oh gosh, there that is worrying! I will comment more later tonight.
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Btw, as your posts have fallen on my wordpress readers I clicked follow by email. In my reader your last post was middle of June! Some strange algorithim, wpress uses perhaps? Or something more sinister?
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Sinister? 🐉
No, really – I have also noticed that the follow-by-mail feature is unreliable, and not only for my own posts. And I have read elsewhere that WordPress is regarded as a left-leaning milieu, so I don’t think it is intentional… 😉
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Perhaps not. Who is it that considers WordPress is left leaning? Are they talking administration or blogger communities?
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As a blogger community. Just a comment I saw on arwenaragornstar’s blog – which is rather right-leaning. 😉 But organisations tend to follow their communities.
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I will have to have a look at that blog. It is nice to know that I might be a little left leaning! Lol! Suits me just fine!
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