On Capitalism

One of the most frustrating examples of partisan political discourse is the habit of people on the left to proclaim “Capitalism is evil!” and the habit of people on the right to proclaim, “Capitalism is the best of all possible systems!” Both claims are simple-minded and mistaken. Capitalism is neither good nor evil. Capitalism is like fire: if it is carefully tended, it powers the engines of economic growth and innovation. If it is left untended, it becomes a destructive force capable of devastating neighborhoods, cities, states, and entire countries. Yet, conservatives and liberals are locked in opposition to one another. Conservatives dare not admit the dangers of capitalism, and liberals dare not admit the virtues of capitalism, lest it weaken their respective positions. 

The Left looks at capitalism.

The New Independent Whig, if nothing else, is meant as a tribute to the wisdom of the Founders. The Founders articulated a brilliant vision for United States government in the Declaration of Independence and the United States Constitution. But in other, lesser-known documents and speeches, the Founders warned the American people of the factors that might defeat the promise of America. These factors had to do with the risks associated with untended capitalism.

The Founders warned us against relying on political parties to express the will of the people, because political parties will set Americans against one another if it will achieve their goals. The first and foremost goal of a political party is to win an election. It achieves this goal by (a) inflaming the passions of party members, to turn out the vote, (b) dispiriting members of opposing parties, so they will stay at home on Election Day, and (c) raising money, by any means possible. With each election cycle, the cost of winning an election increases. It took Scott Walker and his allies 130 million dollars just to stave off a recall election in Wisconsin. That was roughly the amount of money that the Democrats paid for the presidential campaign, back in 1972 (dollars adjusted for inflation, source). 

The American people understand what is happening. Consider the results of a poll which shows that 74% of Republicans and 73% of Democrats agree that the Citizens United Supreme Court decision will have a corrupting influence on politics. Two-thirds of Americans believe, quite reasonably, that an ordinary voter has less access to political candidates than big donors to Super PACs (source).

The Founders also warned of the dangers of extreme wealth concentrated into the hands of a few, because the wealthy will always seek to influence government. The patriot Samuel Adams said, “Some will say, is it a Crime to be rich? Yes, certainly [if it is] At the Publick Expense.” 

This is the view shared by many of the Founders. The Founders did not oppose the idea of capitalism and they did not oppose the accumulation of wealth. However, they were deeply frightened by the prospect that people who hold inordinate wealth could start buying elections. And if they buy elections, they will advance policies that serve their own private interests. 

The interests of the wealthy are often hostile to the interests of ordinary working people. The Founders believed that, as long as the American people remained alert to this danger, they would elect ordinary working people to the House of Representatives and the Presidency, to stand up for the interests of ordinary working people, to enact laws and policies that benefit all Americans, and not just a few. 

To illustrate how the interests of the wealthy differ from those of ordinary Americans, consider the following. Ordinary working people might prefer to see jobs kept in the United States; the wealthy few will seek cheaper labor in other countries. The wealthy benefit from economic austerity measures; it allows them to preserve the real value of their wealth against the effects of inflation. Ordinary working people will find that, as austerity measures increase, their children will receive a poorer education, crime will rise owing to the lack of a police force, roads will fall into disrepair, and businesses will fail. The wealthy oppose Social Security because it adds about 6% to the cost of employing an American worker, but ordinary Americans benefit from having Social Security. The wealthy benefit when they are exempted from taxation, ordinary Americans suffer from it.

John Adams was also concerned about the concentration of wealth in a few hands. In a letter to Thomas Jefferson, Adams offers a telling parable. He imagined boys playing with frogs that they catch by the water’s edge and a frog saying to the boys, “What is sport to you is wounds and death to us.” In this parable, the boys are the aristocrats – that is, holders of wealth and influence. Among the aristocrats, Adams observed weakness, folly, pride, vanity, and selfishness; the want of Principle, avarice, unbounded ambition, and unfeeling cruelty. The frog represents the multitude of ordinary men and women who foolishly allow themselves to be “taken in by their tricks.” 

Thomas Jefferson agreed. He wrote, “Experience declares that man is the only animal which devours his own kind, for I can think of no milder term to apply to ... the general prey of the rich on the poor.”[i]

John Adams saw that most aristocrats of his day arrived at a position of wealth and influence through the inheritance of wealth. They were born and raised exposed only to other aristocrats and their only contact with members of the poorer classes came from dealings with servants, groundskeepers, and tenants. From the perspective of the aristocrat, the poorer classes are people that they command and people from whom they extract money.  

Today, when looking at the 20 wealthiest people in America, one sees that 4 of the 20 are heirs of Sam Walton’s fortune and did not earn the money through by their own labor. Sam Walton, as you may know, was responsible for the spectacular financial success of Wal-Mart. 

In other instances, we see examples of self-made men. These include some college drop-outs named Bill Gates, Larry Ellison, and Michael Dell. 

But there is also another pattern that may be discerned from looking at the 20 wealthiest people in America. Take Michael Dell, for example. His company, Dell Computers, has become enormously profitable by outsourcing American jobs. He is one of the legendary “job-creators” who has hired 20,000 people in India to answer customer phone calls, and thousands in China to manufacture computer components, while firing thousands of American workers. 

When Congress was putting together financial stimulus legislation in 2009, one of the provisions in the legislation was that federal stimulus money should only go to American made goods. Dell employed his money and influence over politicians to strike that provision. 

A social safety net, envisioned by Foxconn (source).

Dell, like Apple and Hewlett Packard, hire their Chinese workers through a company called Foxconn. Foxconn employees are expected to share cramped, company-owned dormitories with 6 other employees (source). Working conditions there are so grueling that 9 Chinese workers committed suicide by jumping off the roof. Since then, the upper levels of factories have been ringed with suicide nets, security patrols walk the rooftops, and employees are asked to sign a pledge not to kill themselves. Employees may decide not to kill themselves, but die nonetheless in explosions, such as the one which killed two last May (source). Overtime is mandatory and unpaid. In exchange (following a recent increase brought on by adverse public opinion), starting employees receive a salary of  1,800 yuan or $290 dollars per month (source). 

Ordinary Americans have been made fools by partisan politics, some unwilling to see the virtues of capitalism, and other unwilling to see the evils of capitalism. And as Americans remain divided on this purely academic question, our jobs continue to be sent overseas, and foreign laborers are tortured and killed by the ruthless monsters who operate companies such as Apple, Dell, and Hewlett Packard. If Americans continue to sit idly by as these monsters are allowed to roam unchecked, the future will be even darker than the present. The evils we allow to continue overseas will come home to roost.

For more information: link

Update, 10.17.2012: Foxconn employs underage workers as young as 14 yrs (here)

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[i] letter to Edward Carrington, 1787