This article describes the basic idea of capitalism and explains its flaws.

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The era in which "advanced societies" addressed the flaws of capitalism with policies that narrowed the gap between what the wealthy class provided and what people needed is coming to an end.

These societies, including our own, are now under enormous pressure to forego these policies and unleash corporations from any government restraints at a time when most of the world's wealth is already in the hands of a few with the predictable results that billions are living in extreme poverty.

Because of the centuries-old, worldwide system of patriarchy, the burden of eking out a living in desperate circumstances falls heavily on the shoulders of women. The United Nations has found that women do 2/3 of the world's work, but receive only 10% of the world's income and constitute only 1% of the world's property owners.

Apologist for a Post-Feudal System

 

The beliefs that many of today's Republicans, the neo-cons with their global enrich-the-rich scheme, those Tea Partiers who wrap their political agenda in religious theology, wealthy individuals like Grover Norquist and the Koch brothers are drawn from the writings of an eighteenth-century figure, Adam Smith, author of The Wealth of Nations and, by all accounts, "the patron saint of modern economists."

In Adam's Fallacy , Duncan Foley, a professor of economics at the New School for Social Research, critiques Smith's theories. Smith was basically a moral philosopher so he makes the argument for capitalism based on those terms. As Foley puts it, Smith set forth "the apparently self-contradictory notion that capitalism transforms selfishness into its opposite: regard and service for others. Thus by being selfish within the rules of capitalist property relations, we are actually being good to our fellow human beings."

This belief was echoed recently in the words of David Koch, the sugar daddy for the Tea Party, a number of governors as well as members of Congress including our own Scott Brown, who had this to say about his wealth:   "I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington."

However, as Foley points out, "The psychological failing of Smith's (and, by extension, Koch's) rationalization is that it requires a strategy of wholesale denial of the real consequences of capitalist development, particularly the systematic imposition of costs on those least able to bear them, and the implacable reproduction of inequalities that divide people one from another in society."

As a consequence, over the last century, governments in "advanced societies" regulated working hours, for example, and established minimum pay and vacation time, oversaw working conditions, provided compensation for injury or sickness incurred on the job, guaranteed retirement and unemployment benefits, set up product and food safety watch dogs, instituted universal health care, funded education, and so forth.

In other words, contrary to Smith's analysis, capitalism does not automatically confer on people a good standard of living with jobs for everyone and products at reasonable prices.

Nevertheless, the true believers are now engaged in slashing government programs that funded by our taxes aid us and help our communities.

Speaking recently at the Iowa State Fair while a chant of "Wall Street Greed" came from the back of the crowd, Mitt Romney placed his foot on a bale of straw and whinged, "There was a time in this country when we didn't attack people based on their success." Well, he doesn't want people taxed based on their success, either.

The " Virtuous Spiral"

Smith theorized that the division of labor into ever smaller tasks would make for greater efficiency and, therefore, greater profits. Foley explains that Smith believed that the division of labor would be linked to extending the market. By reinforcing each other they would create a system of positive feedbacks, forming a continuous "virtuous spiral" of economic development that would make nations wealthy. A heady scenario, to say the least.

Although Smith did not want governments imposing limitations or restrictions on, or intervening in, this fragile spiral, he recognized that a few situations might warrant such actions.

Division of labor gave birth to the assembly line that Henry Ford, for example, used in manufacturing Model-T's. As Foley points out, the cheaper his cars the greater volume of sales Ford needed in order to cover his costs and still make a profit.

It is the profit, not just for Henry Ford, but for all for-profit enterprises, that drives economic growth and the need to find new markets and more consumers or to entice regular customers into buying more products or services from a business. Without growth, many enterprises stagnate and fail.

Although Smith believed that workers would be able to easily move from one employer to another, he and his followers had to grudgingly acknowledge that this division of labor would mean unemployment for workers who would be laid off. But, as Foley tells us, the moralizing Smith made an abstract trade-off: the evil of unemployment for a few would be compensated by a good -- cheaper products -- for the many.

It is likely that Smith would willingly accept, as does today's American shopper, a similar trade-off: unemployment for those in the US whose jobs have been outsourced in return for cheaper products at Wal-Mart et al. Little regard is given foreign workers who are underpaid and labor under intolerable conditions.

In fact, businesses have found that a pool of unemployed is a plus because competition for jobs keeps wages depressed. Full employment, on the other hand, which rarely happens except in wartime, gives workers the edge.

Right now our unemployment rate has risen to the point where it is also hurting the economy. It is depressing demand for goods and services, resulting in more layoffs. This "downward spiral" is deepening the depression, or causing a "double dip" recession as some economists like to call it.

Smith believed as did the "voodoo economists" of the nineteen eighties that capitalists would reinvest their profits in new businesses, keeping the system well-oiled. (Pun intended.) But it hasn't happened because the wealthy are making money through multiple paper transactions paid for by the rest of us.

Hard as it is to imagine, there is a magnitude of difference between what the people of the world face today and the worldwide depression people suffered through in the thirties. Adam Smith understandably never envisioned our two additional crises, which are outgrowths of the economic system that he endorsed.

Not only are we being confronted with disasters, like Hurricane Irene, brought on by climate-change, but we are also coming to understand the impact of a hundred years of unfettered plundering of the earth's resources for "selfish" purposes.

A New World is not only possible but necessary

 

The political and financial leaders who oversee this economic system and "its implacable reproduction of inequalities" cannot be expected to do anything other than preside over its collapse.

We need to start now to create new ways of living together that does not "divide people one from another." We can think in global terms by developing a consensus locally that we do not want our young to be killing people so that capitalists can steal their resources and their labor.

We need to lay the foundations for our new world by starting at the local level to discuss how we can live together cooperatively and live more simply with concern for everyone.

Our survival is at stake.

Authors Bio:

Now retired and a writer, I am a feminist and political activist, a radical Democrat (have come to dislike the term "progressive"), and a blogger. Have done political tours of Cuba, Nicaragua, Honduras, West and East (way back when)Germany, China, etc. Learned a lot about the US through other people's eyes. Wrote about my life in "Discovering America: A Political Journey." And was one of six winners of an international essay contest sponsored by Cuban ministeries.