The Problem is Capitalism
The Problem is Capitalism
(Updated below.)
We are subtly taught that hunger, poverty, economic downturns, environmental disasters, are all natural phenomena, like the weather. There’s not much you can do about them, so the theory goes. The best you can do is hunker down and be ready for what comes. Really?At the federal and state levels, budgets are being slashed. We’re told we need to cut back, lower our expectations and accept “smaller government”. The US is awash in red ink, running huge deficits, but the problem isn’t that average Americans have been living beyond their means.Our schools are under funded, our teachers are underpaid, our infrastructure is falling apart, people who have jobs work longer and harder for less pay, and services that used to be widely accessible are cut to the bone or available only to those with large incomes. But as we’ll see shortly, productivity and total wealth have increased steadily for centuries, both in absolute and per capita terms. What gives?There are currently more than 14.8 million unemployed in the US[1]—the largest number since 1948 where figures are first available[2]—but it’s not as if there’s no work to be done or money to pay for it.43.6 million in the US live in poverty[3]; 45,000 die per year for lack of access to healthcare.[4] The numbers of sick and starving world-wide are bleaker still, but the problem isn’t lack of food, medicine or resources.[5]For decades, we’ve endured war after war and squandered trillions on the military, but we’re less safe than ever[6]and we’re asked to believe that our enemies are the poor, jobless, hungry, exploited people who live outside our borders.The environment is being destroyed, our food and water are being poisoned, but it isn’t that we don’t know better or lack the means to prevent it.The problem is capitalism. Capitalism: the economic system that puts profits above human needs. The system whose measure of success is not what’s good for people or the planet, but simply what gets the greatest return on investment. And if it turns out that war, racism, unemployment, exploitation and disregard for the environment are profitable; hey, that’s the price you have to pay for “freedom”, by which is meant the freedom to make a profit.So much of what’s wrong with our country and the world can be understood when you simply follow the money. It’s not emphasized in our education or upbringing, but all of the wealth in our country is produced by working people and working farmers. Allof it. Working people: those of us who go to a job every day, who have nothing much to offer in the market place but our ability to work, who would quickly starve if we stopped selling our labor. Working people: 94% of the population.[7]Wall Street traders, bankers and speculators and corporate CEOs produce absolutely no wealth. They extract wealth from the economy by moving it from one column to another, and for this they earn large salaries and bonuses. But these professions contribute nothing to the aggregate wealth of society.Now consider this: Productivity of US workers has increased steadily, going back at least to 1900. Some years, productivity increased more than other years, but the overall trend was up, up, up. Over the decades, every hour of work has produced more and more value. Figure 1 shows the change in productivity overall. Figure 2 shows gross domestic product per capita, from 1900 to 2008. What’s crystal clear is that the value produced by an average worker in a year has increased more or less steadily over the years. An average worker in 2008, for example, produced 1.7 times as much total wealth per year as a similar worker in 1981.
Figure 1. Productivity change in the non-farm business sector, 1947-2009[8]
Figure 2. US Real GDP Per Capita[9]
So how come we don’t feelwealthier? How come there isn’t more money for education, health care, libraries, infrastructure, the arts, and other social services that would benefit the majority of Americans? Because capitalism doesn’t work that way. Under capitalism, you don’t get to keep the full value of what you produce. You’re paid a wage or a salary which partiallycompensates you for the wealth you created. What happens to the rest? The principle of the “free market” says that the value you produced belongs to your employer. And what does your employer do with the portion they skim off the top of the wealth that you created? Whatever they want! They may choose to reinvest some of it in the business; they may use some of it to pay themselves a large bonus; they may use some of it to finance an antiunion drive or to fund a political campaign.
Workers produce wealth; some they keep and some their employer appropriates. What decides how the pie gets divided? Clearly, the larger the share of the pie that the employer takes, the less the worker gets. One party’s gain is the other’s loss.
Those at the top siphon off money in other ways as well. Workers pay taxes to the federal and state governments. These contributions are supposed to be put to collective use for the common good. But all too often, tax dollars are diverted into the pockets of the rich through regressive tax structures and schemes such as the recent Wall Street bailout. War spending also diverts huge sums from the common pool into the pockets of the big “defense” industry conglomerates.
So there is no single “America”. There are two Americas. There is the America of working people and working farmers, those that produce all the wealth, fighting to keep as great a share of the pie as possible. And there is the America of the capitalists, who don’t produce wealth directly but who are deemed to have the moral and legal right to keep as much of the wealth that working people produce as they can get away with.
But wait a minute, you say, this can’t be right. Aren’t workers paid a fair day’s wage for a fair day’s work? No, not at all. With the invention of agriculture and the domestication of animals more than twelve thousand years ago, something monumental occurred in human history. For the first time, the average person could produce more wealth in a day than they could possibly consume in that time. And as we have seen, productivity took off from there. It’s the fact that the average worker produces more wealth in a day than they can readily consume which makes the capitalist’s slight of hand possible. The wage you’re paid is what you need to get by, adjusted by how effectively you’re able to organize and fight for more. The amount the capitalist keeps is above and beyond what you could use right away, so you don’t miss it…until they say there’s no money for education, health care social services and the like. Then you might consider how the wealth you produced could be put to better use, pooled with others and invested for the common good, instead of lining the pockets of a few at the top.
But wait, there’s more. Over time, automation and efficiency in industry increases. This is chiefly where the steady rise in productivity comes from. However, there is a perverse consequence of automation under capitalism. As more machines and less labor go into producing the same products, there is less room for the capitalist to skim profit off the top. After all, feeding machines half the electricity or raw materials they need to function doesn’t produce favorable results. The only place to skim is by paying workers less than the full value that their labor produces. But as the proportion of labor embodied in finished goods shrinks with automation, the amount the capitalist can skim off the top—what they euphemistically call profit—also declines. The following graph illustrates this trend.
Figure 3. US, German and Japanese Manufacturing Net Profits Rates.[10]
Over time, the average rate of profit declines. In the face of inexorable automation, there are only two ways to maintain or increase profits: 1) sell more widgets, or 2) force workers to accept an even smaller share of the value they produce.
With this way of looking at things, is it any wonder why workers’ standard of living is always under attack? Is it any surprise that the our government—which is owned and controlled lock, stock and barrel by big business—pushes for constant, unsustainable growth and ever expanding markets? And, since the entire planet, spare Antarctica, has been carved up into nations, expanding markets and acquiring more resources means stealing someone else’s, a job the military is uniquely suited to carry out and has been called upon to do with some regularity.
If you’re going to navigate difficult terrain, you need a good map. But the map we’re given in school for understanding our political and economic universe is as useless as the notion that persisted for millennia that put the Earth rather than the Sun at the center of our solar system.
A better model recognizes that our economic system is fatally flawed; that capitalism promotes hunger, unemployment, inequality, war, and environmental devastation because it rewards those that profit from them. A better model would recognize there are two Americas, one of working people and another of big business, each with opposite and irreconcilable interests.
Ironically, working people are the vast majority, but the minority that controls big business runs the country. They control the economy and control the disposition of society’s collective wealth. They control the government and own both the Democratic and Republican parties.[11] In elections we are allowed to choose between the candidates of one or another of the big business parties, but there is never any way to vote against war, exploitation, economic inequality or destruction of the planet. Heads they win, tails you lose.
The first step to breaking any addiction and beginning to heal is to fully understand and admit to the problem. The problem is capitalism.
So what do we do about it? That is the subject of part II, The Dorothy Syndrome.
Update:
Capitalism encourages irrational thinking. In order to move beyond capitalism, we need to be able to see clearly and understand what’s possible. Let’s look at an example.
Under capitalism, full employment is impossible. Why? Workers and industrialists have opposite interests. The more workers are paid, the less profit there is for the capitalists. If everyone had a good job, the balance of power would be shifted decidedly in workers’ favor. With full employment, when workers go on strike, there’s no one the bosses can hire as strike breakers. With full employment, a threat to fire a worker for union activity or for speaking out is no threat at all since there are plenty of other good paying jobs to be had.
But what do defenders of capitalism have to say about unemployment? They can’t admit that full employment and capitalism are irreconcilable as this would call attention to one of the fundamental problems of the capitalist system. Instead, they arguethat “full employment” really means 6 percent unemployed. They argue, irrationally, that a certain amount of unemployment is natural, normal and simply to be expected. In the US, 6 percent of the working age population amounts to 9.3 million people—more than the populations of Los Angeles, Chicago, Philadelphia, San Francisco and Kansas City combined!
In a rational society, the total work would be divided among those available by reducing the work week with no reduction in pay. As productivity increased, individuals would be able to work less and still produce everything society needs. There would be no clash of interests between workers and employers because all major industries would be publicly owned and run by the very people that work there.
[1] http://www.bls.gov/news.release/empsit.nr0.htm
[2] http://data.bls.gov/PDQ/servlet/SurveyOutputServlet
[5] Eric Holt-Gimenez and Raj Patel, Food Rebellions: Crisis and the Hunger for Justice
[6] http://www.salon.com/news/opinion/glenn_greenwald/2009/10/20/terrorism
[7] Those making less than $150,000 per year. http://pubdb3.census.gov/macro/032005/hhinc/new05_000.htm. and http://en.wikipedia.org/wiki/Household_income_in_the_United_States
[8] http://www.bls.gov/lpc/prodybar.htm
[9] http://www.measuringworth.com/datasets/usgdp/result.php
[10] Source Brenner, Robert, 2006, The Economics of Global Turbulence (Verso), P 7. See also http://www.isj.org.uk/?id=340#115harprof_26