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 Keynesian 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.