Failure in Capitalistic Societies
Specific Failure
As heartless and cruel as I am, I really prefer to see people just slip and fall rather than go homeless or die. Slipping and falling is a comedic staple, but the Three Stooges would not have been as successful if it had turned to gore.
But failure is another corollary aspect to the fundamentals of Capitalism.
If I own some particular thing, you cannot own it. You might be able to go get one just like it, but you cannot have mine so long as I will not give up ownership of it. If I own the only one in the whole world, I could have quite a money-maker on my hands so long as others are willing to pay for what I have.
Let’s say I have the only Sparkle-Widget in the whole world and you want it. You can have it, you know, for a gazillion dollars. What’s that? You don’t have a gazillion dollars to spend on my Sparkle-Widget? Well, guess who isn’t getting a Sparkle-Widget, then? If you guessed the city of Losertown, population you, you guessed right!
Now, let’s pretend like I am the owner of the only Sparkle-Widget in the world and no one wants it. Sparkle-Widgets are soooo last season and even then only in Jersey… SOUTH Jersey.
Hi! Anyone want a Sparkle-widget for a gazillion dollars now? I don’t think so.
What if I was a Sparkle-widget factory? I would be unemployed! Poor! Oh no!
Do you suppose that’s unfair?
If you do, then why won’t you buy my Sparkle-Widgets? Why don’t you get your friends to buy them so that I don’t go into the poor house? What else do you want me to do?
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.
-- Adam Smith
Personally, I do not have the tendency to romanticize the life of a beggar. I tend to advise those in obsolete industries to get jobs elsewhere when this happens and most people listen.
It may surprise you, but LOTS of people do expect just what I described. They do expect people to buy things just to do a solid for those who make them. Doubt me?
Think: Farm Subsidies.
Food is so readily available and inexpensive that there is actually excess production of food here in the United States. Our government buys (Translation: Steals my money to pay for things I am clearly telling them I don’t want.) extra food from farmers so they don’t go to the poorhouse.
Farmers of America: YOU ARE NOT STUPID! YOU ARE NOT INEPT! YOU CAN DO SOMETHING OTHER THAN FARM! STOP FARMING RIGHT NOW!
They won’t listen. They never do.
To make matters worse, the impact of perfectly capable Americans farming all over the place is causing some REALLY poor people in Africa and India and places to be poor. I’m not kidding.
If you think our poor people are poor you have not seen pictures of India or Africa. I refuse to go to India, actually, largely due to all the poor people there. And King Cobras. Mostly because of the poor people, though, because I wouldn’t mind seeing a King Cobra as long as it doesn’t spit in my eyes.
Nevertheless, I would pay an Indian like $6 a day to farm for me. Rather than pay some American farmer like $500 a day to do it. I have no idea what farmers get paid, but I would bet the rent that there are some Indians out there who would pick up a hoe this minute for $6 a day. (Not a street Ho. A hoe hoe. Merry Christmas!)
If America were truly a Capitalist system, many farmers would not be farmers today. Many automaker employees would not be making autos. Many miners would not be mining. Instead, those jobs would go the way of the fire-starters and dinosaur clubbers.
I imagine that the animal fat lantern makers of America were really pissed about electricity. Just like most of the horse-drawn carriage manufacturers were pissed about the automobile.
But these “failures” are necessary for the continued growth and progress of the system and society as a whole.
I’m not denying that it is unfortunate and sad when someone loses their job or cannot make enough money to get Tiny Tim a new wooden leg. I’m saying that if those things happen, it’s probably time to pursue a higher paying job. If you literally cannot get a higher-paying job (and I really believe you haven’t been trying), then you need to cut costs. Teach Tiny Tim to write software or something and bring home some bacon.
General Failure
True, Laissez-faire Capitalism cannot fail. Not really. It’s sort of like a perpetual motion machine.
At the dawn, each member of a society is wholly self-sufficient or at least potentially self-sufficient. One can raise one’s own food and build one’s own shelter. Things are easier, true, when others help out, but it’s at least theoretically possible for each person to be self-sustaining to an extent.
As things progress, however, people get more specialized. Some people are good at raising food. Others make clothes. Some build houses. Gradually the division of labor is very broad and each individual trades with another his services for theirs. Trade starts as barter but then a monetary unit is introduced and things go on swimmingly.
Today, work is highly specialized and most people are not self-sustaining. Sure, I could grow corn, but my flour-making abilities remain untested.
Historically, people like to cite the Great Depression has a failure of Capitalism. The reality is that the Great Depression is one of Capitalism’s successes, but few people are willing to talk about widespread devaluation of financial markets and rampant unemployment as a good thing.
The Great Depression was the effect of a bubble market bursting. Various kinds of work across several sectors were over-valued. Money itself was overvalued in that there was not enough wealth behind the money to support the growth the market experienced. Basically, everyone in the market was kiting checks and the Great Depression started when people started trying to cash in.
We tend to think of economic bubbles in terms of the dot-com bubble or the tulip bubble, but the Great Depression was a bubble in the financial market, the act of overvaluing the potential for wealth-creating capacity throughout the system without regard to the fact that the amount of gold, which
In the late 90’s we saw similar market crashes around the world and the fundamentals of those situations in Mexico, Japan, and the rest were the same and even exacerbated by the lack of the gold standard which leaves the value of money completely fluid and subjective.
But the thing to note is that in all of these cases, there was no such thing as a complete crash. People did not suddenly revert back to agrarian societies and bartering. No, the market simply reverted back to what it was a little before the bubble started and got back on track.
The really, really scary part about all this is that there is not an economy out there today, that I’m aware of, that has a monetary unit based on any objective connection to actual wealth. In essence, we have been living in a bubble since we divorced ourselves from the gold standard and because of that it is entirely possible that markets will collapse all the way down to the point where barter is the only feasible method of trade. Again, I would cite post-WWII Germany.
World leaders today look around keen to catch bubbles before they get too big or before they burst. They’re engaged in a juggling act because they want their cake and eat it, too. They want the boom and apparent wealth of the bubble, but they do not want the crash.
I do not mean to turn this into a diatribe about the fundamental weakness of monetary systems that lack an objective connection to actual capital, but that is core to why Capitalist markets have appeared to go through periodic failures over time.
It’s not that bubble markets are not possible in Capitalist systems. Bubbles are absolutely possible and even so likely as to be considered inevitable in Capitalist systems. But they are not a necessary aspect of Capitalist systems such as specific failures are.
If everyone lived in cages, there would be no risk that anyone would steal another’s property. But who wants to live in a cage? So, we live free and someone just might steal something someday and all we can do is address that when it happens. It does not mean we should live in cages.
The same is true about Capitalist systems. Bubbles might happen and they will burst, but who wants to live in a system where bubbles can’t happen? That would have to be a non-monetary, non-Capitalist system and who wants that?
Bursting bubbles are just the market correcting itself. They are specifically tragic events because people lose so much, but generally a very good and healthy thing for the system to go through.
We should actually be more afraid of the fact that our leaders are doing so much to prevent bubbles from bursting because the longer the market goes without resetting, the bigger the bubble gets and the more tenuous it becomes and the more catastrophic the failure will be when it does.
Posted by Flibbertigibbet at November 14, 2004 02:05 PM
