Why Capitalism Doesn't Work, and What Could Be Done Instead

eic.rsc.org, accessed 12/10/2017

To begin this post, I think it's important to first define what Capitalism is.  Just as there are, in fact, many different varieties of Communism, Socialism, and other social systems, so too are there different forms of Capitalism.  Without a critical examination and a clear definition of the thing that I'm in opposition to, I might as well be making arguments at a featureless blank wall, which is neither terribly productive or useful for anyone's time.  The definition I will use is my own, and has been informed through my observation of the actual function and apparent logic of the system in question (since I do live in a society that has adopted Capitalism in the 21st century United States).  My definition of Capitalism then is as follows:

An economic system where an individual or minority group owns the means of economic production for the purpose of maximizing financial revenue and minimizing financial costs for that individual or minority group by any means necessary.

Capitalism first is an economic system, as opposed to a political system, such as democracy or totalitarianism.  Capitalism as an economic system can exist in either a democratic society (such as the United States) or in a totalitarian one (such as Fascist Italy or Spain in the mid-20th century).  While there are dynamics between the economic and political systems in actuality, it helps for the purposes of this line of reasoning to think of these two systems as different from each other.  You are welcome to disagree with this differentiation.  However, I do not think it would be profitable either for your line or reasoning to do so, since it does not change the function and logic of the actual system that we live with in our real world.  I am merely trying to articulate a specific point, and doing so requires some omissions of facts to do so in a way that can be understood by people.

It should also be made clear that Capitalism as a system is not the same as economic markets.  A market, in my mind, is simply the space between which two or more entities where they exchange goods and/or services for other goods and/or services.  Capitalism simply refers to the economic system of ownership of the means of production, versus the legal and physical space in which people and organizations trade and exchange goods and services.

To continue with explaining this definition, capitalism is a system where an individual or minority group of people owns the means of production and the fruits of those means of production.  These individuals are called "the Capitalists", and they, through one means or another, have come to be the legal owners and defacto controllers of the machines and companies that generate wealth in societies.  This is opposed to alternative systems of capital ownership, such as Socialism (where all people on the payrolls of companies legally own the means of production), or Communism (where the government legally owns the means of production).  This legal definition of ownership is one of the key defining traits of Capitalism and, as I will argue, is one of the critical flaws in its systemic logic and function.

Moving on in the definition, under Capitalism, the means of production are explicitly to be used to maximize financial revenues, and to minimize financial costs for the legal owners of production (the Capitalists).  While the real wealth of society, arguably, is in the actual goods and services that are produced, distributed, consumed, and potentially recycled by the society at large, Capitalist companies instead focus on the means of exchange, money, as their chief objective and goal.  With Capitalism, the goods and services that are produced through the collective efforts of people, machines, and the environment are only the means for getting money rather than the end goals in and of themselves.  Companies in Capitalism measure their success by their bottom lines, which are their net profits (revenue minus costs), while those bottom lines influence the shareholders' (Capitalists') perception of value in the company and its products.

Finally, in Capitalism, the normative values behind the logic of the system are mute when it comes to calculating the toll of the production on the rest of the society and the environment, or the values are explicitly indifferent or hostile to other people who do not have legal ownership of the companies or to nature itself when and if environmental concerns conflict with the Capitalists' bottom lines.  This is what I mean when I say Capitalism's focus is on the maximization of financial revenues, and the minimization of financial costs by any means necessary, because it is another apparent trait of the Capitalist economic system and logic.  Unless the society or the environment interferes with the maximization of financial revenues, or the minimization of financial costs, Capitalist economies are indifferent to the well-being of either, and may in fact be hostile to one or both of them.

I would argue here that we have a clear view of what Capitalism is and how it works.  You are welcome to disagree with any part or set of parts of my definition, and I would be glad to hear alternative definitions of Capitalism.  The reason I chose this particular definition of Capitalism is because it is how I have seen the system work in my 28 years of life in a Capitalist society, after having met and socialized with Capitalists and non-Capitalists.  You can call this a strawman definition of the economic system itself.  However, I would again be willing to hear alternative definitions to hone my own definition, and I am prepared to challenge alternative definitions with evidence and facts from the logic and function of the system, and its adherents.

Why then do I think that Capitalism, according to this definition, is problematic, and what can be done better to improve the system?

To begin, it's socially and economically exclusionary.  While supporters of Capitalism may point to the fact that anyone can own capital or a share in the means of production, I would point out that all means of productions are ultimately the products of past efforts by other people.  If you raise wealth to buy a machine for a factory by taking out loans from a bank, the question then becomes "who made the wealth that the bank just lent you?", and "who made that machine that you just bought with that lent money?"  Even in the unlikely event that you invent a new machine on your own, there was very likely some kind of training, knowledge, or expertise that enabled you to come up with the new idea or invention in the first place.  In short, all means of production are produced socially, and therefore, cannot be said to be owned exclusively by one individual or group of individuals.  When you start having those means of production be operated and maintained by other people who are not you, your personal ownership of that capital diminishes even further, as you can't even derive the benefit of the machine without other people's assistance.  Why then should one person, or one group of people who are so divorced from the actual production of goods and services be granted exclusive and superior legal ownership of those means of production at the expense of other groups and factors which play critical roles in the production process and the production of the means of production?

This is not to say that you do not have a personal right to the items you personally buy for your own personal use.  An item of clothing that was produced by the machines is your's to have and do with as you will.  But why should the machine that made the clothing that you personally did not produce or invent independently of others, the workers that aren't you who made the clothing, and the resources that went into the production of that article of clothing be beholden to and owned exclusively by the Capitalist?  Indeed, how is this different in practice from the Communist systems of the 20th century where the means of production were, again, legally owned exclusively by a single individual (the Premier) or group (the Politburo)?  What of the medieval feudalist societies of the past that the original Capitalists rebelled against in Europe?  How are the Capitalists different in practice from the land-owning aristocracies that extracted so much personal wealth from the efforts of the people who were deemed "peasants" or "serfs", and wasted so much of it on unnecessary expenses and caprice?  I really would like to hear convincing arguments to refute these points, although I doubt they will be forthcoming in light of the evidence from Capitalists' practices and Capitalism's function over the centuries.

The final problem I see with Capitalism is its myopic focus on the financial and material benefits at the expense of the social and environmental concerns of our world.  I do acknowledge that it is possible to have material wealth and comfort without harming either the society or the environment.  But, under a Capitalist economic system with a Capiatlist's logic, both of those concerns seem to get lost in the rush for financial profit and material wealth.  Humans who are inclined to pursue financial and material wealth seem prone to succumbing to what can only be properly described as greed.  Indeed, some humans seem to have a tendency to overindulge as per their own temperament and interests when they are able to.  I do not believe it is a universal maxim that all humans are inherently greedy and selfish.  It's just that some humans are more at risk of succumbing to greed and overindulgence than others, and that those who are most prone to this kind of behavior tend to be drawn to careers and jobs that yield the most financial and material reward.  Since Capitalism does not adequately mitigate against this hazard on its own, and sometimes can encourage greed to flourish destructively in the society and the environment, it can be seen as a system that enables greed to come into being, rather than as a cause of greed itself.  Capitalism then puts society and the environment at a greater unnecessary risk of being destroyed by the Capitalists' unbridled pursuit of financial and material wealth as opposed to alternative economic systems.

I then am left with two main critiques of Capitalism as a desirable economic system from my definition of it:

1. The exclusive ownership of the means of production by and individual or small group (rather than the personally owned products of those means) is unjustifiable and dysfunctional considering the inherently collaborative and collective nature of production itself.
2. There is a greater and unnecessary risk of enabling and encouraging socially and environmentally destructive behavior from people who are most prone to such overindulgence, greed, and poor priority-making.

 What then is an alternative to such a system?

To address the first critique, an economic system that places legal ownership of the means of production and the produced wealth from that production (as opposed to the privately purchased products of that production) in the hands of those who operate and maintain the production processes as a group.  An individual under such a system could not be the direct owner of a factory or company, but a part owner with the other workers in the company.  Such a system of group ownership with equitable sharing of the wealth realized through the production process would make the system not only more inclusive and "fair", but also arguably more functional and productive as well (since everyone in the production process has more incentive to produce for themselves than for the absentee Capitalist owners we currently have).  While there are legitimate legal concerns over having dispersed ownership of a company, it can be resolved by continuing to have an executive C-suite of company officers who are responsible to and for the well-being of the company.  I don't have a problem with these individuals being paid more relative to their workers if they're actually shouldering the legal responsibility of the company.  My objections are with absentee shareholders or individual executive-owners who use companies for their exclusive benefit (or fiefs, if you'd prefer) through the simple hiring of other peoples' labor and capricious use of the environment's resources.  Legally, such a feat could be accomplished through changes in corporate law and regulations by the public institutions of the social unit.

To address the second critique, I would recommend the presence of a separate entity to regulate and oversee the private for-profit companies that is accountable to and focused on the society and the environment as the companies are on their financial health.  Fortunately we already have such an entity, although in a Capitalist society it often gets neglected or usurped by the Capitalists for their own ends at the expense of the society and the environment.   This entity is often known as the government in Western societies, although it is really inclusive of all public social institutions in the given social unit.  Because there is a tendency for the Capitalists to manipulate the government to suit their own shorter-sighted vision of success, the public institutions need to be designed and operated in a manner that prevents the minority group from taking over at the expense of the larger social and ecological systems.  The government needs to balance the demands of the for-profit companies with the rest of the society and the environment; a task that can be made easier by eliminating the Capitalist class as legal owners of the for-profit companies in favor of decentralized, collective ownership.  Such an ownership scheme in the for-profit world would bring the companies interests more in line with the society's interests, as the owners of the companies become the residents of the society itself.  Public institutions can then create spaces where people can equitably discuss, define, and influence the production of public goods and services, protect the environment, and regulate the behavior of private companies in the market, such that the social unit itself produces the desired social, economic, and environmental outcomes for the larger social unit more often than not.  Practically speaking, this would require a reshaping of our public institutions to produce those institutional structures which are conducive to this democratic and inclusive system of operation at the expense of individuals or anti-social groups with preferences for hierarchy and centralized power and wealth.

With the public institutions mimicking the lower level private organizations in society in logic and function (as I previously described in the preceding paragraph), society as a whole can be effectively operated and managed for desirable domestic outcomes.  The next challenge is then organizing internationally and globally to produce more desirable outcomes for the whole species.  However, if one thinks about it for a bit, one can see that the logic of inclusion, respect, and pro-social empowerment can be applied across nations.  I honestly think we can work together as a species to tackle global challenges in public health, economic regulation, environmental sustainability, and misery reduction if there is buy-in from other public institutions across the planet.  Without this sense of collective purpose and genuine cohesiveness across public institutions and public officials, there will likely be no collaboration and cooperation to tackle the key problems we experience from local through global levels of social organization, just as a single nation cannot survive long or well without sufficient collaboration and cooperation within its own geographic boundaries from among the people sharing that territorial space.