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Because
Capitalism
By Dmitry
Orlov
May 13,
2016 - "ClubOrlov"
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When Barack
Obama was elected President of the United States in
2008 this was treated as a landmark event. He
presented himself as the underdog, an outsider from
a minority background, who spoke eloquently about a
fairer society, an end to war in the Middle East,
transparency in government and a green future. His
speeches promised “change” and “hope,” and voters
were infused with optimism. Eight years later a fair
assessment of his efforts is that they were hardly
any better than George W. Bush’s.
In the current election cycle there are two new
candidates pledging hope and change: Bernie Sanders
and Donald Trump. Occupying opposite corners, they
have painted pictures of two very different futures
for the United States: democratic socialist and
cult-of-personality capitalist.
Their campaign speeches are interesting to observe.
In trying to make sense of their success,
particularly in the case of Trump, it is apparent
that the idea of a savior is infectious and
appealing.
Trump presents himself as a man who gets things
done. The appeal to his supporters is that feeling
good about the future is easier when you've got a
strong man to tackle your problems – someone who
will fence off the hostile outside world, bomb the
terrorists who threaten to infiltrate our ranks, and
bring back the jobs from whoever it was that stole
them. Never mind that much of what he proposes to do
is in fact illegal under both domestic and
international law, and far too simplistic in its
conception.
In the case of Bernie Sanders, he has pledged a
“future to believe in” and that a “political
revolution is coming”. His appeal seems to operate
on two levels. On the first he articulates a vision
of an America more like Scandinavia, with free
education, healthcare and welfare for those in need.
He speaks from the heart about inequality, and wants
his campaign to “end a rigged economy where the rich
get richer and everybody else gets poorer, and
create an economy that works for all of us, not just
the 1%.” This is a common enough narrative and one
to which he has been faithful for a long time.
But beyond such specifics, there is a more general
dynamic operating. A swing to the extremities in the
tastes of voters signals that faith in the
mainstream narrative is breaking down. Things are
not working and people are starting to notice.
Huge numbers of the American population are
impoverished, two million of them are incarcerated,
and tens of millions live under the influence of
tranquilizers and sedatives. We've heard all of
these statistics before. College graduates who
expected a middle class family life are working as
waiters and bar-tenders while living with their
parents. Going to the doctor or a hospital is a
thing to be feared because it may lead to
bankruptcy. The police have become as violent as the
criminals they seek to protect us against. Climate
change carries on relentlessly, blithely ignoring
treaties and accords. Politicians tell lies, lies
and more lies, and much of the television news is
little more than a reflection of the dark hearts of
Rupert Murdoch and his billionaire cronies who own
the majority of media channels.
Sander's humanity and fighting talk are a tonic for
those who want something better to believe in. But
even he has fears about whether he can really
deliver on what people are expecting of him. In an
interview at the end of last year, he confided that
“people are asking a lot of me” and that for himself
he had posed the question: “Can you deliver what
people need and what they want?”
These thoughts are perfectly understandable, and
Sanders is no doubt aware that there is a very
powerful force working in opposition to his good
intentions. This is the prevailing incentive system,
and it is deeply entrenched and subversive.
The following extract from 150 Strong: A Pathway to
a Different Future describes how the primary
incentive system currently operating acts to thwart
even the most noble political efforts. This is what
is at the heart of the current predicament. Nothing
changes until the prevailing incentive system is
changed.
The dominant reconciling force in all of our worldly
affairs at present is the profit motive, and the
effects of that cannot be overstated. It is the
organizing principle that we operate by above all
others.
For while there are many other values that may be
considered important in our society – social
justice, environmental protection, community
engagement – no enterprise can survive without
surplus assets generated by profit. And without
profitable businesses a country or a region will not
have the tax revenues to fund its activities, and it
too will fail. Profit is therefore imperative, and
in the administration of the affairs of state and
business all other aims are secondary.
Translated into everyday life, there is a simple
creed from David Copperfield by Charles Dickens:
“Annual income twenty pounds, annual expenditure
nineteen [pounds] nineteen [shillings] and six
[pence], result happiness. Annual income twenty
pounds, annual expenditure twenty pounds ought and
six, result misery.” It expresses the relationship
that is fundamental to the capitalist system and
goes some way to explaining how the reconciling
force of the profit motive shapes much of the world
as we know it. It is a precondition of success in
our modern society that we must remain financially
solvent, and in order to do this profit is
paramount.
Before we can further explain the technical details
of how the profit motive manifests itself as a
reconciling force, we first need to identify two
other forces: the creative force of entrepreneurship
and the constraining force of limited resources. Not
all entrepreneurs can succeed in their ventures,
because only the most profitable can survive.
The Limits on Social Responsibility and Ethical
Standards
The renowned 20th-century economist Milton Friedman
also understood something of the objective
rationality of the profit motive, and one of his
more controversial theories stated that, provided it
does not break the law, under no circumstances
should a business aim to do anything other than make
a profit. He believed that social responsibility was
a fundamentally subversive doctrine, and was
scathing of those who claimed that businesses should
concern themselves with promoting desirable social
ends. In Friedman’s view, it would be tantamount to
treason if a business executive were to consider
taking on responsibility for “providing employment,
eliminating discrimination, avoiding pollution and
whatever else may be the catchwords of the
contemporary crop of reformers.” (New York Times
Magazine, September 13, 1970) While it may be
controversial and somewhat ruthless, the validity of
his theory is apparent: shareholders have the right
to sue the directors of a public company if they
believe the directors are not acting in their
interests to maximize profits.
In practice, there are many shades of gray
associated with the implementation of this statute,
and businesses adopt various policies of social
responsibility to further their interests, their
motives ranging from altruistic at the positive end
of the scale to calculated and self-serving at the
other. Somewhere in the middle of this range is the
theory of green economics, which holds that
consumers will pay extra for environmentally
friendly products, thus aligning the social good of
environmental protection with the business aim of
profit. Accordingly, a chicken farmer is able to
sell free-range eggs for a higher price to those who
oppose the cruel practice of keeping hens in cages.
But when businesses face an ethical choice that does
not result in increased profitability, the choice of
business executives ultimately comes down to whether
to remain in business or not. Regardless of the
level of social or environmental aspirations of a
private enterprise, the underlying reconciling
factor must always be profit, because without profit
the enterprise will cease to exist, along with its
superior moral and ethical stance.
And so there are many questionable situations that
arise in our society that are accepted as normal,
because companies must compromise their ethical
standards in their quest for profits. To sell their
product, cereal companies put so much sugar in
children’s breakfasts that it is damaging to their
health. Moneylenders make people slaves to debt by
giving loans to those who are in no position to
repay them. Casinos make money from gambling
addicts, and furniture companies make furniture from
old-growth rain forests. Supermarkets sell tuna
caught from stocks that are overfished and
approaching extinction. Food companies douse the
soil with pesticides, killing the life of the land.
Alcohol and tobacco companies market to the addicted
and the vulnerable. Employers put thousands of
people out of work at short notice to beat analysts'
expectations. Mining companies build mountains of
toxic tailings that leach into the ground water.
Media companies exploit the suffering of grieving
people to sell newspapers and magazines. Arms
manufacturers sell advanced weapons systems to
murderous regimes. Power companies build nuclear
power plants on earthquake fault lines. The litany
of examples of compromised ethics goes on and on,
and there are many thousands of books and films that
bear witness to them and the suffering that they
cause.
The Profit Motive is Inherently Negative
A basic effect of the profit motive on society is
that it promotes a gross form of selfishness. The
imperative of the marketplace to make a profit means
that there is little room for sentiment, for the
niceties of human dignity or compassion, because if
you take your eye off the bottom line someone will
take over your market share and muscle you out of
business. There are a few moderating influences: the
influence of the self-aware, ethically-attuned
consumers (who swiftly turn into price-sensitive
consumers as soon as ethics impinges on their
spending power); attempts at regulation through law
(which is a clumsy instrument); and the innate
goodness of people that shines through in some
situations. But in the game of capitalism the most
selfish participants generally come out to be the
winners.
The profit motive also promotes greed in its most
potent form by encouraging hoarding: the successful
competitors strive to accumulate a larger surplus
than their rivals, because the bigger their pile,
the more secure their position. This creates a class
of wealthy people who, with an overabundance of
resources at their disposal, are able to enjoy
material pleasures to an excess, while others are
forced to live without even the basic necessities.
That class of wealthy people is also able to indulge
in the more subtle psychological pleasure of
exhibiting their influence and self-importance,
which accrues to them through their control of
resources. In turn, this creates divisions in
society and establishes hereditary privileged
groups, which further amplify these patterns of
greed over time.
In any situation where there is greed, at the
opposite swing of the pendulum there awaits its
faithful companion – fear. For those who have
wealth, there is the eternal fear of losing it, and
for those who have never had wealth in the first
place there is the fear of not being able to survive
and make their way in a world dominated by greed and
selfishness. While we teach our children not to be
selfish, greedy or afraid, we do all we can to
perpetuate a system that has these three
negativities at its very core. How can we expect our
children not to see us as hypocrites?
Aldous Huxley suggested that “Our present economic,
social and international arrangements are based, in
large measure, upon organized lovelessness,” and, on
the evidence, it appears that he was right. Our
current system, governed by the reconciling force of
profit motive, is dominated by greed and fear –
certainly not love! This is a fact that even the
most fervent supporters of the capitalist system
cannot hope to refute, and while some, such as the
libertarian devotees of Ayn Rand, somehow find it
possible to rejoice in it, it stands to reason that
if we continue on this path of embracing profoundly
negative values, it will surely lead us to our
destruction.
It is true that politicians can enact legislation
that directs behavior through the threat of
punishment, or by rewarding desirable conduct, but
the law is only a moderating force. It can only do
so much. And, as was discussed in Part 3 of this
serialization, the application of the law is fraught
with unintended consequences, prone to the
perpetuation of bias, and is a driver of much
negative behavior.
It is only by addressing the incentive system
operating that we might be able to produce outcomes
that are significantly different. On this, there is
more to come from
150 Strong: A Pathway to a
Different Future.
Dmitry
Orlov
was born in Leningrad and immigrated to the United
States in the 1970’s. He is the author of
Reinventing Collapse, Hold Your Applause! and
Absolutely Positive, and publishes weekly at the
phenomenally popular blog
www.ClubOrlov.com
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