First off, let me say I believe in capitalism. However, I think American capitalism has acquired a number of flaws that prevent it from functioning efficiently.
Today in lecture we discussed that one advantage Capitalism has over Communism is Capitalism's inherent adaptability. The points I am about to make are probably being made from a vantage point inside Plato's cave - as I am not an economic expert - but I will share my thoughts anyway.
What happens when capitalism stops adapting? What if the short-term profit derived from stagnation exceeds the short-term profit of innovation? I think the environmental crisis provides the perfect lens through which to examine these questions. Producing environmentally friendly technologies involves initial high costs for business, and also threatens the economic status quo. Oil companies are some of the most powerful corporations in the world, and through Super-Pacs and other financial means, their interests are now disproportionately represented in the American government. Every year, Oil companies get billions of dollars in subsidies, dwarfing what is invested in new technologies. The disciples of Adam Smith like to say that the invisible hand will sort all things out in time. However, the invisible hand is guided by only one thing - profit. I do not think the profit motive is moral or immoral - I just don't think the profit motive always leads the invisible hand in the direction of progress or looks beyond the immediate future.
As it is expensive to abide by environmental regulations, and even more expensive to evolve entirely, it is in big business' interest to keep things the way they are as long as they are turning profits. In a sense, Oil companies are too big and too intertwined with government to have to adapt. As a consumer, we are at the mercy of business - not the other way around - which is backwards in Capitalist terms.
On a slightly unrelated note, here is a South Park parody of the BP oil spill and the proceeding apology.
Cave dweller
What happens when capitalism stops adapting? What if the short-term profit derived from stagnation exceeds the short-term profit of innovation? I think the environmental crisis provides the perfect lens through which to examine these questions. Producing environmentally friendly technologies involves initial high costs for business, and also threatens the economic status quo. Oil companies are some of the most powerful corporations in the world, and through Super-Pacs and other financial means, their interests are now disproportionately represented in the American government. Every year, Oil companies get billions of dollars in subsidies, dwarfing what is invested in new technologies. The disciples of Adam Smith like to say that the invisible hand will sort all things out in time. However, the invisible hand is guided by only one thing - profit. I do not think the profit motive is moral or immoral - I just don't think the profit motive always leads the invisible hand in the direction of progress or looks beyond the immediate future.
"There, there it is again-the invisible hand of the marketplace giving us the finger."
As it is expensive to abide by environmental regulations, and even more expensive to evolve entirely, it is in big business' interest to keep things the way they are as long as they are turning profits. In a sense, Oil companies are too big and too intertwined with government to have to adapt. As a consumer, we are at the mercy of business - not the other way around - which is backwards in Capitalist terms.
I am not denouncing capitalism - I am just reflecting on the problems that arise when stagnation is subsidized and encouraged by the government. The government's support of big oil goes against pure capitalist free market principles. Ironically, it is the right-wing that is fastest to give financial support to the oil industry. Rather than aiding in perpetuating the status quo, I think the government needs to implement tighter regulations and encourage innovation over the status quo.
In terms of staying competitive with other nations, we are already lagging behind most other industrial powers in the development of clean, sustainable energy. Perhaps the greatest irony in all of this is the fact that our environmental future is not the only thing at stake - if we do not adapt, we will not be able to compete in the global marketplace moving forward. Economic progress is founded in innovation and adaptability, not the perpetuation of dying ideas.
Ultimately, I do believe capitalism can be adaptable given the right circumstances. However, in order for business to evolve, there needs to be room for competition and new players. We can not have just a handful of a few elite corporations that are too powerful to challenge in the marketplace.
Ultimately, I do believe capitalism can be adaptable given the right circumstances. However, in order for business to evolve, there needs to be room for competition and new players. We can not have just a handful of a few elite corporations that are too powerful to challenge in the marketplace.
On a slightly unrelated note, here is a South Park parody of the BP oil spill and the proceeding apology.
An enjoyable post as always, Nick. I think the course blog is starting to get really interesting as we start engaging more contemporary issues. Here are some thoughts that came to mind reading your post. First, yeah, capitalism is adaptable, but I find (as you apparently have) that it works better in theory than in practice. The idea of the free market is that every company has an equal chance in the marketplace and that the best will rise to the top. Unfortunately, the truth of the matter is that companies accumulate power over decades and become able to squeeze the competition into oblivion (as oil companies have done to one another and more recently to alternative energy startups) - the "little guy" just can't compete. I come from a family with three generations of small business ownership, and I can tell you from personal experience that my mom's bookstore has a lot of trouble competing with Amazon and Barnes & Noble. The free market doesn't exist, and the market we have isn't regulated into the best possible form of itself. It's a jungle out there. To paraphrase Churchill, capitalism is the worst economic theory, except for all the others.
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ReplyDeleteNice post, Nick. I myself have a problem with capitalism. Back when the United States was isolationist, capitalism was working and the United States was successful. But now, like you, I believe that the current situation of job loss is due to our government's inability to evolve. With globalization, the U.S. knew it was going to lose jobs due to competition and other countries having the resources to make things at a cheaper cost. Still, the U.S. globalized because the competition would allow for more trade and cheaper imports. The only thing is, the U.S. didn't sufficiently account for the losers in the American job market that lost their jobs due to globalization. My main problem is the safety net of social security isn't a sufficient answer for the losers of globalization. These unlucky people are looked down upon in society while being forced to find new jobs.
ReplyDeleteIn the future I think the problem will settle itself as Americans will only look for jobs that are available in the U.S. but for now the working class is struggling to fit into this post-globalized world.