Arguing Free Markets Vs Capitalism

Brian bird-dogged a post by a fellow of the name Hugh Aaron over at the Biznik site who reflects on career and capitalism...  I reproduce here with my comments between the   ***  ***

Being a product of the capitalist system, born into it, raised in it, educated in it, I never questioned its morality. 

*** I wish you first defined your term, since capitalism has about 2 dozen distinct versions, depending on who you are talking to... but from the rest of your post it seems you are talking about the “liberal-mercantilist” version which is a fairly common understanding.  How did it come to pass that as you were being educated, you did not come to question and test the system in which you were raised?  This seems unlikely.***.

I saw that it created a disparity in income and standard of living among the population but I attributed it mostly to the difference in individual native ability or education or just plain luck. Living in Chicago during my college years I saw the enormous slums and riots there more the result of racial prejudice than of the system. In other words the opportunity to succeed was always there; it's the American ethic.

***It would seem to me a system that supports the evil of racial prejudice is something to question, indeed. ***

Believing this as gospel after graduating college I went to work for several different companies, both large and small, in various industries for the next twenty years.  There I observed that the incomes of the top managers and owners were far beyond anything that I could aspire to, at least as an employee. The solution would be to somehow start my own business, as my father did. And the underlying assumption was that money would determine the measure of my success. After all, it defined the American free enterprise ethos.

I was a perfect candidate to achieve that success. I was a believer in the system without regard for, or really awareness of, its negative aspects. It was total acceptance; I had faith in its rightness as if it were a religion. 

***We tend to admire a system that works for us, and denigrate those who cannot advance in a system that does not work for them.***

So after two decades of being a cog working for other companies, I went into business, a manufacturing business, where I thought I would have total control over my destiny, and where nothing I did could harm anything or anyone else so long as I was honest and acted within the law. I couldn't have deluded myself more.

While I was in business – having sold the business I'm now retired – you might say I was a type A personality, driven, meeting crises head on, hiring and firing people strictly from the point of view of whether they benefited the enterprise or not. We polluted the air, generated toxic waste which ended up in landfills, and sold materials which often caused environmental damage, and even health risks. Nothing that we did was illegal. Everything we did was sanctioned by our government and our community and considered beneficial to the economy and the nation.

*** Very well put.  You might read The Transformation of American Law, 1780 to 1860 by Morton Horwitz to see how, case by case, property rights were destroyed by government to yield the result you precisely describe: originally the litany of abuse you outline would have resulted in tort, restraint, and reparations.  The American government changed all that, and what you described followed.***

And in some sense it was. Our company gave people employment; it manufactured much needed industrial products; it paid ever increasing taxes to our town and the nation; it contributed to the general prosperity of the community. Indeed it was a typical capitalistic model to be emulated. 

***Precisely the rationale that led to the destruction of the protections of common law we once had in USA.  And the argument is rooted in survivorship bias, “since I was successful, it must have been good.”***

Yet, gradually, as over the years I witnessed our success, I began feeling something was wrong. Something was incorrect with the model, and with my thinking. I began questioning my original concept that capitalism had no downsides.

***Bertolt Brecht said, recapitulating Catholic theology, a man can reform his life with his dying breath.***

I began to be bothered seeing my workers, many years older than myself, doing difficult physical work at a time when they should be easing off. I began to worry whether they could maintain their standard of living when they retired. I came to realize my company was no more than a dictatorship in which no one had any say. And I came to be concerned with where our waste hauler dumped our waste. And on a personal level, I began to see that my family was paying a price as a result of my relentless driving, and dedication to the business. Materially, they were better off than most of the people in our community, in our nation, but on an emotional, human level they were deprived. This was perhaps the worst negative of all for being a capitalist.

***This is a matter of choices, not a system.  ***

I know of no other economic system that offers more than capitalism. I recall as a young man during World War II admiring the Communist system because in theory it was supposed to equalize the distribution of wealth. Our nation, the world, was just recovering from a destructive depression in which poverty was the norm. Many questioned our system then. 

***This contradicts your opening statement that you never questioned the system.  Not to be picky, but you need to tighten up this schtick. There are better systems than capitalism, one being the free market.***

Of course, in Soviet Russia under its dictatorship the government never practiced what it preached and it failed to recognize the inherent human need of its citizens: personal incentive. And personal incentive, for whatever gain whether money or the simple desire to do good, is the main feature of capitalism, the force that drives it.  We now know that political freedom is not necessary for capitalism to thrive. Witness China today.

***Well, now, as one who was there doing business while the gang of four was in power, and still there, I have to disagree.  Deng Xiaoping based his reforms on consultations with Hong Kong and Singapore leaders...  the practical fact is under Communism the Chinese presently have political freedom superior to what we have presently in USA, and their economy and wealth distribution attests to it.  The labels don’t work... China was hardly ever really communist, and it is hardly capitalist... it is enjoyng the accident of too small of a ruling elite to do much damage to what is in essence largely a free market.***

Under capitalism there's also the assumption that money is the driver. One would think so after seeing the outrageous incomes paid to corporate CEOs these days. Not necessarily so. In Japan, for instance, the CEOs are not motivated by money. Exorbitant salaries are peculiarly American.  I discovered that while managing my company being creative in meeting the challenge of succeeding was far more gratifying than the large income I was drawing. And eventually I found that bringing all the employees into a unified effort and cultivating their trust and devotion to our cause by opening our books and consulting them at every turn, listening to their ideas and implementing them, was the most satisfying reward I ever received in running the business.

***In retrospect, does it bother you that your employees, given your transparency, fully aware of your operations and all the implications,  failed to vioce any objections to the exploitation litany you outlined above?***

But we must understand that living in a capitalist society requires a trade off. To succeed in business involves sacrificing such responsibilities as being with one's family often when they need you, of putting aside personal feelings and empathy when they interfere with the bottom line, 

***Just so, but who said we are obliged to participate in such a system? Do we not have many examples of alternatives in play, such as the Sikhs, Orthodox Jews, Amish and countless individual others who eschew the capitalist system yet thrive in family and fortune?***

of being single minded of purpose while failing to consider a larger purpose, the community, of trying to destroy one's competition who is seeking to destroy you.  

***Competition means to “strive with” not combat, “fight with.”  You do not see competitors like Michael Phelps trying to drown the other swimmers, he studies other swimmers to see how he might do even better.  It’s not what you think that makes you happy or unhappy, it is what you do.***

Capitalism is no nirvana. It is very hard on its participants, but you'd never know it they way it is touted in the media. I encourage people in business who accept blindly the demands of capitalism, whether leader or worker, to compromise. Remember who you are, and those who love and depend on you. Don't let the system make you become someone else.

***Hang on, since you are admittedly late to the game of reflection on the system, and since you insist you have little in the way of reflective capabilities, should you not first spend some time reviewing some working options to capitalism rather than lay down some platitudes?  In a few weeks there is the Mises University that you would find enlightening. It may help you to see that one need not at all participate in capitalism, a system that is well and truly as evil as communism.  It is bad advice to suggest people should continue in an evil system, but behave themselves.  Check out the alternatives, such as free markets (properly defined) and see if you might offer better advice.***

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