Home / David W. Cooney / Will the Real Capitalism Please Stand Up?

 

Capitalists wonder why we distributists oppose capitalism. Distributists, on the other hand, wonder why so many good people continue to support it. I think the problem lies in the fact that there is no consistently held definition of capitalism. What do you mean when you say “capitalism?” The definition I hear most often from various capitalist pundits is the equally vague term, “free market,” but what does that really mean?

For many capitalists, particularly those of the Libertarian camp, it basically means free from government constraint. Distributists and Libertarian capitalists generally agree that the government’s ability to interfere in business and in our personal lives needs to be severely restricted. Libertarian capitalists seem to believe that, if the government would simply stop interfering, market forces would automatically sort out things in a way that is most beneficial for all. We would not have cases like the government setting up regulations that inhibit the ability of small businesses to effectively compete in the market, or actively working against one type of farming in favor of the interests of a big corporation. Additionally, the issuing of patents (in this case, software patents) enabled a single company, SCO, to attempt to crush an entire competitive market (Linux). Of course, there are numerous examples where capitalists actually turn to the government to protect the interests of big business. Clearly then, the ability of corporate interests to use their economic power to manipulate government is bad for society in general. However, corporate interests cannot manipulate the government until they have already become a significant enough economic force to do so.

Would all of the economic, industrial and trade problems truly go away simply by getting the government out of the picture? This seemed to be suggested by some commenting to Kevin O’Brien’s recent article, but I don’t believe this position can successfully be argued. After all, some who promote getting the government out of the picture also promote the continued issuing of patents, which effectively become government regulations controlling the use of a technology or idea. It is what enabled SCO to launch its crusade against Linux. However, the role of government can be one that protects the consumer as well. As ridiculous as some aspects of the SCO trial have been, the outcome thus far has been to protect the consumer in general. Additionally, big business can act in ways to harm the consumer without relying on the hammer of the government to do the work for them. In the case of Microsoft, it appears that the government acted to protect the people against the interests of big business. I think that the action was too little and too late to be much good – especially when Microsoft basically got to set the terms of its own punishment – but the case clearly illustrated how a business can grow to be a monopoly without relying on the government to help it along the way. Any accusations claiming Microsoft uses its economic power to manipulate the government includes an implicit admission that it had to grow into an economic power before it could do so. How did it do this? “Free market” capitalism.

Did not Microsoft become the software giant it is through its freedom in the market? After all, it merely manipulated opinion through marketing. Back in the days of DOS and pre-95 Windows, its software only put out messages that there might be compatibility issues if it detected a non-Microsoft version of DOS, it didn’t claim that there actually were any. Its exclusionary contracts with OEM’s were simply agreements freely entered by all sides. The OEM’s could have refused (even if doing so meant they would likely go out of business). That’s the way it is in the capitalist’s vision of the dog-eat-dog world they call the “free market.” The average citizen needs to be protected from the methods corporations use to become such an economic force just as much as they need to be protected from a government manipulated by that force. However, most people, including many capitalists were appalled upon discovering realities behind these practices. Why? I believe it is because of a general difference of the public’s understanding of capitalism compared that of the “market.”

I believe that the public’s view is that capitalism means that the market is not only free, but fair and honorable; that competition in a market is something to be encouraged because it stimulates innovation and progress in all areas; that the “freedom” of the market does not include fraudulent behavior or limiting consumer choice. Most not only accept that the government has a role, but that its role includes protecting small businesses and the consumer from abuses by big business interests. What can they do when the government acts otherwise? What is the solution? They believe in the economic power and benefit of small business and the freedom to provide for themselves. I believe the general public’s view of capitalism is simply the ability to freely invest capital in hopes of a positive return, and not much beyond that. I question, however, the extent to which the “market” shares this view.

What is the real nature of capitalism as it is practiced by the “market,” the form of capitalism under which we live? It certainly includes the idea of freely investing capital in hopes of a positive return, but it includes much more than that. For example, the market also includes the ability to freely invest capital in order to prevent others from getting a positive return. The evidence in the Microsoft case clearly shows this. Additionally, the market also includes the ability to invest capital in a way that guarantees itself a positive return by offsetting any losses (that is, real losses) to you, as is the case with standard mortgage agreements. The market sees nothing wrong with you losing your job if it can make more money by outsourcing it to another country with lower labor safety and living standards. The market considers it an acceptable practice for a large company to sell a product for a loss in order to crush a smaller competitor who may not have profits from other products to make up for such a loss. The market sees nothing wrong with depriving you of the capital necessary to compete against those already in the market. The overall result of these views is the elimination of competition and consumer choice  – the opposite of what the average person believes constitutes a free market. “The highest return at the lowest cost” is the mantra of the market’s idea of capitalism, and it sometimes leads capitalists to run their business in ways that do not protect the consumer or the worker. These practices have nothing to do with government regulation. Even if current regulations do protect and even encourage some of them, the complete absence of regulation would do nothing to prevent them. The effects of these practices are not restricted to just the small business; even large businesses can’t compete against giant ones. What is the capitalist’s response to these problems? They claim that, despite its problems, capitalism is still the best economic option for a free society. Any other system will either collapse because it can’t work, or it will eliminate freedom. I think there are good examples that allow us to challenge this assertion and ask if there isn’t another way that would be less volatile.

The truth is that anyone can work hard and get rich under the “market’s” form of capitalism. The often unsaid truth that goes with it is that not everyone can do so. For every rich capitalist out there, there is an army of low-wage workers, fairly well paid workers and managers, and extremely well paid corporate bureaucrats to support their wealth. The system depends on this structure. Even the Keyensian capitalists depend on this structure so they can periodically redistribute the wealth of the rich back to the poorer classes in order to try and keep the system running smoothly. These are the realities of capitalism as it is practiced and defended, and these realities are what cause the distributist to reject it. The reason so many of the public continues to support capitalism in the face of all this that they have never heard that there’s any alternative beyond Socialism. The fact that another alternative has been proposed for the last century has been kept from them by the interests of big business.

Therefore, are we really free to compete as entrepreneurs? It doesn’t appear so. Small business owners and farmers can attest to this. They try to compete as capitalists only to find all the odds against them when confronted with the crushing economic power of big business. Sometimes, the small producers do get heard, but often it is only after a struggle against the interests of big business which, if lost, could put them out of business. We are often told that the market’s way is better overall, that it is more economically and even ecologically sound. However, that just isn’t the case. The reality is that it frequently yields high returns for the rich at the cost of the average person, while the presence of smaller, local businesses (of all kinds) that support their local community yield the greatest benefits for the average person.

Clearly, the market must be subject to some form of regulation to prohibit these types of abuses. As a distributist, I don’t believe that this regulation should be at the state or federal level where the chance of corruption is much higher, but the regulation must be present. We are talking about the livelihoods of whole communities here. Smaller businesses need to be protected from the predatory practices of capitalism as practiced by the “market” for the sake of the average people and the communities in which they live. Therefore, the ability to regulate belongs as close to the local communities as possible. If local trade and craft guilds can be restored, they should have this ability; otherwise the city should, with the county having the ability for issues outside of city jurisdiction. Would this lead to a plethora of differing laws? Not necessarily because guilds, cities, or counties could meet to discuss issues and bring what consistency they can to among their different areas. On the other hand, if one community feels the need for a particular rule in their area while others don’t, should they be denied the ability to fulfill their local need? I think the local community should be empowered to meet its own needs. They will adjust themselves if it turns out that their rule is too burdensome on the local economy. There is no need for a higher level of government (or other bureaucracy) to dictate what’s best for them.

 

About the author: David W. Cooney

 

David W. Cooney serves on the Editorial Board of The Distributist Review. His articles have appeared in Gilbert Magazine and he has also contributed to The Hound of Distributism, a book of various authors. Originally from Southern California, he now lives with his wife and two children in Western Washington state where he works as a network administrator.

 

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11 Comments

  1. David, i agree with you in large part, but how big a town or city would we need for a guild to develop to meet the need for regulation? And how could we guarantee that they don’t act like a monopolist? Who will regulate the regulators? (I’d use the Latin phrase, but i can’t recall it exactly.)

    Viking

  2. Viking,
    Quis custodiet ipsos custodes?
    You raise some very important questions that cannot be sufficiently answered with little summary statements. I started to write a reply and it ended ended up being over 800 words. Therefore, I am going to submit it as a new article.

  3. The question of who regulates the regulators is key. The problem that we have now with the current “Capitalism” is that Big Business is in bed with Big Government (I think Belloc talked about this at least once…) and are thus doing the regulating.

    Look at every regulation that goes through, who is the support behind it? Look at Obamacare the Insurance Companies loved it. What, require everyone to buy my product? Heck yeah! Look at the “Food Safety” regulations who loved them the most? Ever sense the Jungle came out, the big Food Companies have loved health and safety regulations of food, it kills competition. I once read an essay on the decline of meat packing plants since the Jungle came out, it’s very impressive how many have been kicked out of the meat supply industry in the US.

    What if you had every little town and neighborhood and city regulating things as much as they wanted? I doubt even Microsoft could cough up enough money to bribe them all…and they certainly couldn’t fill up all the regulatory agencies with their guys! Would some places be better than others? Sure. That’s the way of the world, humans are not equal as in the same, neither are communities.

    The key is that to destroy big business we must destroy big government.

    (There is also some interesting research being done on the question of can monopolies exist for long w/o government regulation. It’s not my area, but it seems quite interesting)

  4. H. Belloc defines capitalism as the system where very few richmen owned the Capital and the common people owned only their Labour, that must offer to the capitalists to survive, ending in servilism.

    I consider myself a follower of the distributism and agree to keep that definition as simple as Belloc did in “the Servile State”. The market is not important in this, and it´s not good or bad in itself. The market could be the evil mechanism that that few powerful people would use to rule the society; or in a society of small business the market could something wonderful that allows all families to sell their production and buy other families´ one.

    And going to the idea of a “big Goverment” controlling everything we go closer to socialism, and, as Belloc also pointed, socialism is only one step beyond capitalism, cause in the second few people are owners of capital but in the first nobody is…
    So distributism, being something far from capitalism, is much more far from socialism, and not in the middle point between them, and so you feel reading “Rerum Novarum”.

    Sorry for my terrible english ;)

  5. I am new to distributism but reading as much as I can. We know that the free market economic anarchism gets co-opted by crony capitalism and corporatism. It seems that progressivism/socialism wants to use the State as a countervailing force against the excesses and abuses of crony capitalism. (Only to be co-opted, of course.)
    The criticism I’ve heard of distributivism is they want to use the Church as a countervailing force against corporatism/capitalism. Is that correct? That represents a variety of problems, not the least of which is Church lacks the social capital (pardon the term) on this continent. And no society will ever be, to a man, responsible to the Church.
    Or is distributivism actually organizing the people to balance the capitalists – roughly informed by Christian morality?

  6. Jeremiah,
    This question touches upon a topic I am strongly considering for a complete article. The short answer is this.
    The name “Distributism” represents a body of philosophically based economic ideas that are compatible with the Catholic Church’s teachings regarding social justice. Therefore, it is not practical to try and divorce the name from the Church. However, because these ideas are philosophical and economical in nature, it is not necessary to be Catholic to accept them. Indeed, many of these ideas pre-date Christ and are found in many different cultures with different faiths. This was illustrated by E.F. Schumacher’s book, “Small Is Beautiful.” The movement that was initially called Distributism or Distributivism was started by Catholics in response to papal teaching. There were, however, members of this movement then, as now, who are not Catholics, but who see wisdom in these particular teachings. Saying that one is a distributist does mean that one agrees what the Church teaches in regard to social justice in the economic and political orders, even if one rejects other aspects of Catholicism. Here at the Distributist Review, the majority of the contributing editors are Catholic. However, we do have non-Catholic members and welcome contributions and comments from non-Catholics. The purpose of this site is to present Distributism for consideration to anyone who is willing to consider it; the purpose is not to convert anyone. As you go through our site, you will find many articles concerning the Church’s teaching and disagreements we may have with other Catholics in regard to economics. In regard to these we ask two things; (1) that Catholics realize the Faith applies to ALL aspects of our lives including any moral implications of the economic and political order, and (2) that non-Catholics read these thing with an open mind and consider whether or not what is being presented is something they can accept.

  7. Alfonso,
    I agree that the market could be good or bad. I feel it is important to look at the market as it is in addition to how it could (or even should) be. This was my intention in the article.

  8. Thanks for your reply Mr. Cooney, my point is that for the market to be “good” should have a lot of small companies but not overregulation and specially at local level where corruption is higher. The “big goverment” is not very different than the “big business” and tends to the same moral corruption that is inside managing something you don´t own.

  9. Hi all,
    Thank you, David, i believe that was the Latin phrase. The word with two forms would seem to be the root for our English words “custodian” and “custody”, wouldn’t it? I’ll look forward to your future article.
    All the comments were interesting on this piece. B Douglass, have you read “The Triumph of Conservatism” by Gabriel Kolko? It touches upon your comments. Jeremiah, i agree with you in large part but think the problem with Socialism is not that it’s co-opted but that it (inevitably) puts people into authority who are just as prone to the corruptions of power as those they replace.
    Alfonso, your comments are always perceptive, and your English not as bad as you think. Believe me, having read some of the comments on the Internet by various native speakers, your English prose is easy to follow by comparison.
    Viking

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  11. Clearly, Microsoft did not grow into an economic power through the “freedom of the market”, it probably grew through Capitalism, and Capitalism is not a free market but a system of market privilege by the government in the interest of the few capital owners. Microsoft is a Corporation, and Corporation is in itself a creature of the State, it is not a product of the market. Almost all form of existing Corporate power is derived from the government. Microsoft for example benefits hugely from the powerful intellectual property laws, which is in direct opposition to the free market. In fact Government have been protecting the interest of big business since the very beginning. That includes the so-called 19th Century myth of “laissez faire” economy which was already bloated with banking regulation, tariffs, monetary monopolies, postal monopolies, corporate subsidies, licensure laws, land seizures, cartelization schemes, censorship laws, anti-union laws, and Hamiltonian “internal improvements. And did you even miss the fact that Microsoft is an offspring beneficiary of Silicon Valley which R&D is funded for decades originating from World War II (http://www.youtube.com/watch?v=ZTC_RxWN_xo), not including laws suppressing self-employment.