Wednesday, May 1, 2013

Democratic Capitalism's Current Model: It's Very Good For Business; Yet It's Very Bad For Humanity

The Individual & The Economy

If you would ask me what political-economic system I favour, I will say without hesitation it's democratic capitalism. It's stable with a fairly long testing period; it creates wealth and provides jobs; and it favours competition, which should be good for the average citizen in better products and services. That's the model in theory.

Now, if you ask me if I favour the current model of capitalism I will say “no.” Why the contradiction? Here's why? Capitalism is actually not an old system; it dates to the time that Adam Smith wrote his Inquiry into the Nature and Cases of the Wealth of Nations, in 1776, the same year the United States came into being. Smith's book is simply known as The Wealth of Nations, and it is the capitalist bible, defended like all theories with a admixture and faith and credulity by the capitalist faithful, who find no fault in a model that is more than 200 years old.

That it has been tested is true, that it might have run its course in its current form is now open to discussion. If capitalism finds it acceptable that almost 200 million people, or 6% of the global workforce (12% of those under 24), are unemployed; that financial markets make a shambles of capitalism's supposed amoral policies; and that current government policy find it acceptable that companies make obscene profits while laying off staff, outsourcing operations to save money, and thus benefiting from tax laws to funnel money offshore and pay reduced corporate taxes, then the current form of capitalism is great. Wonderful. But for whom?

Consider the following article in The Hill's Congress Blog (“Small business opposes multinational corporations' tax avoidance,” April 9, 2013), by by Frank Knapp, Jr., vice chairman, American Sustainable Business Council:
Small business owners are keenly aware that multinational corporations are legally escaping paying much, and often all, of the highly publicized 35 percent U.S. corporate income tax rate. In a poll released early last year by the American Sustainable Business Council (ASBC) and others 80 percent of the small business owners surveyed said that U.S. multinational corporations using accounting loopholes to shift their U.S. profits to offshore tax havens is a problem. Seventy-five percent said that big corporations using tax loopholes harms their own small business.
Accounts of giant businesses like Boeing, General Electric, Pfizer, Microsoft and Honeywell International using offshore tax loopholes to dramatically lower their taxes – often to zero -- are all too common. U.S. Public Interest Research Group just released report showing that each of America’s small businesses on average picks up the tab for $3,067 to cover the costs of tax avoidance by U.S multinational corporations playing the offshore profit-shifting game.
Legal but unethical, to be sure, that small business is subsidizing large multinationals. Where is the outrage on Capitol Hill? Such is one of the many examples that defy the ideas of a fair and just tax code, and yet it persistsIt's wonderful for such large business concerns, no doubt, but what about the rest of us poor slobs, who are not at the top of the heap; is this what is called the Just Society in capitalism's estimation? Economic policies, like the dreadful and faulty austerity measures that have been crippling Europe are set by the wealthy for the wealthy, a point that Paul Krugman, an anti-austerity economist makes in a recent article (“The 1 Percent’s Solution”) in The New York Times:
You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.
Well, not really, if you view society in a different way than most economists, who are blindly devoted to their mathematical models, a faith that is no different than the faith of religious adherents, minus the deity of course. We are now as far as we can be from a just society. This inequality escapes the politicians for the most part, except for U.S. President Obama, who is only one man among many.

View are shaped by experience, no doubt. Blind acceptance of the current model is done for the same reason that all people accept things without question—ignorance, willful or otherwise, of the true facts. The ignorance serves the purpose of the faithful, especially since the economic policies are considered the gospel truth, and like all such truths they need be defended. Why? Because such individuals who run large corporations, numbed to the realities of the less fortunate, benefit from its  dissemination and employment. In other words, they make money. Heaps of it.

The New Economy is the Disposable Economy, and workers are both at the disposal of mercurial employers and easily disposed of, when no longer needed. Gary Gutting, a professor of philosophy, at the University of Notre Dame, makes this salient point in a recent opinion piece in The New York Times:
Second, the trend toward “disposable jobs,” which expects a worker to run through, over a lifetime, a series of quite different positions to meet market requirements, destroys the satisfaction of a sustained vocation. With planning, skill and luck, it is possible to navigate the currents of capitalism to a lifetime of satisfying work. But the system itself is geared more to profit than to worker satisfaction.
Blind devotion results in inhumane actions and the use of rhetoric, in this case economic, to hide the facts. Thus, businesses and their enablers hide behind arcane business language that communicates nothing important, a strategy to report nothing, especially important when businesses reap huge profits at the expense of workers, whom they pay a pittance. It's not justifiable or defensible, hence the sleight-of-hand tricks that businesses employ to deliver financial results. “We are doing well, but not well enough yet to hire.” Or current legislation “protects shareholder value,” as if that was all that mattered.

As for the one thing that matters most to individuals—a job and preferably a well-paying, meaningful one—that time never comes, unless the government ponies up (your) money. Corporate welfare is a wonderful idea; was that in Smith's bible? So, companies, particularly large corporations, multinationals, transnationals and governments love capitalism the way it operates today, essentially with few rules and restrictions.

Michael Sandel, who teaches political philosophy at Harvard University's Department of Government, says in a Telegraph article, by Alastair Palmer, (“What Money Can't Buy”) that this type of behaviour, monetizing all transactions, including human ones no doubt, diminishes human dignity and humanity in general.
Sandel argues that this sort of corrosion of decent behaviour happens when money takes the place of moral values. He believes that the “marketisation” of existence erodes the more important values which we ought to be trying to protect: dignity, freedom and social solidarity.
So do the political economists working chiefly in “think-tanks” who have never worked at a “real” job; their disconnect from reality is so obvious that it's risible. Charts and mathematical algorithms will not give a clear picture of the economy, and certainly not at the micro level, where it really matters. In an article (“The debt to pleasure”) in The Economist, the idea that people act according to the theory of homo economicus (“economic man”) is contrary to human experience: 
Much of this may be alien to modern-day economists, but it is in line with the conception that other disciplines have of human decision-making. Psychologists have long known that people’s choices and preferences are influenced by others. Biologists have a much clearer understanding of altruism and kindness, whether to kin or strangers, than economists, who typically emphasise the dogged pursuit of self-interest.
That's why economist generally failed to predict the economic meltdown of 2008, whose palpable consequences are still felt today for hundreds of millions of individuals and their families around the world. The current model of capitalism is a failure, in that it has failed the individual whom it has supposed to protect; predictably following current trends, it will only get worse. More job losses; higher corporate profits; greater government inaction; greater defense of capitalism as the best economic system in the world. The writing is on the wall; the scenario has been set.

If you sense some anger, some heat in this essay, you're right; but it's more of a righteous (read: moral if you will) indignation, mixed with sadness and despair that we are heading irrevocably in the wrong direction—toward a greater problem. The individual has been left stranded, alone, unprotected. Everyone ought to be concerned at the way capitalism has become a means for corporations to rape the economy, with governments acting as devotees with their shut-eyed unquestioning  support of current practices.

As for the citizens, some have and continue to raise awareness, but it might be too little, too late. The consequences to humanity are widely apparent, that is, for those who have not given up, or have gone into a narcoleptic trance or depression. Current democratic governments, for the most part, have created a legislative system that represents the few at the misery of the many. Such is far away from a Just Society.

I still hold the idea that change will happen; this will take time, preferably soon, and not in a generation or two. The reasons are clear enough: the current form of capitalism is not self-sustaining. Think about it the next time you blindly defend it.

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