Capitalism is Bad

In my continuing series on Capitalism and Corporate Social Responsibility, I want to make two points. First, I want to point out how Capitalism has a horrible effect on our society, and its weaknesses as an economic system. The next time I approach this topic, I will point out how Capitalism is the best system we know of to manage an economy, and all the benefits that I see us receiving from Capitalism. In the future, I think that a solution to soften the blow of Capitalism and enjoy the benefits simultaneously will arrive with the proliferation of Stakeholder Theory concepts and the paradigm of Corporate Social Responsibility.

In my mind, the natural result of Capitalism is the rise of Corporations. What else would we end up with? In any system, people will find a way to band together to synergize, hide their own weaknesses, and defeat their greatest threats. A corporation is the best way to do this in a Capitalist society. A small business owner may need to be a good accountant, manager, visionary, janitor, laborer, purchaser, and salesperson on any given day. In a corporation, you can always say, "That's not my job." Also, a corporation can buy out or eliminate its competition; a small-business owner or individual is very limited in their power compared to a monolith such as Wal-Mart.

Therefore, Capitalism and Corporation will stand for the same thing in this post. Technically, each can exist without the other to some extent, but they go hand-in-hand like peanut butter and chocolate in the real world. I will use the example of the Capitalist Corporation to prove that Capitalism is bad.

The two main points of Capitalism is to own things that are worth money, and to make more money than you had yesterday. What better way to do so than with a corporation? You own stock in a corporation; the shares you own should rise in value. Also, you probably earn quarterly income from the dividends of profits. To boot, you also get a say in the business; each share you own is a vote in shareholder decisions. If you work for the corporation as well as own shares in that company, then you can directly profit from your activities.

Capitalism is Bad for The Environment

However, Corporations are groups of people whose interests are often not aligned with the interests of individuals or other groups of people. I think the example that is Hollywood's favorite is the corporation who impacts the environment. Protecting the environment does not seem to help profit margins directly in most cases (not until the EPA or KCTV5 shows up). In fact, when corporations damage the environment it is usually because it is the cheapest and easiest way to finish their product. A method that is less pollutive would usually eat up profits, raise the unit cost, or make the manufacturing time longer.

Therefore, Capitalism does not have a built-in protection for our environment. If the choice is clean water and air or higher profits, Capitalism will naturally choose profits. Any company that willingly protects or cleans up the environment is responding to an additional influence; the paradigm of pure Capitalism would not inspire a manager, board of directors, or group of shareholders to willingly give up profits for the sake of the environment.

Capitalism is Bad for Employees

There was once a paradigm among most employees; once they got a job with a good corporation, they would work there loyally until they retired. They may be able to take their experience to another company for more money, but that would violate an inner value of loyalty, it would be a big hassle, and it would look bad if they did a lot of job-hopping. Today, the opposite is true. Union jobs tend to retain some loyalty, as do government and education jobs. As for most of the corporate world, it is actually better to job-hop than to wait for a promotion.

The reason that job-hopping is more prevalent today is because companies are so much less loyal to their employees. Some companies will lay-off every quarter that they lose money because lay-offs look great on financial statements. In the way that capitalism is displayed on paper, a lay-off is a method of cost cutting and it hides how much money a company actually lost. If they can plug the leak before they run out of employees, the business world will never see how bad the business was doing. This protects the stock price; in a corporation, protecting and growing the stock price is the ONLY thing. Profits make the stock price rise, losses make the stock price fall. Managers who make the stock rise get fantastic bonuses. Managers who do not grow the stock price are quickly discarded. Layoffs may limit or level a stock price drop, so managers will protect their job by axing underlings.

My grandfather was a decorated hero in World War II. He came home and worked for a soda distributer for years in middle-management. He did well, and he remained loyal. I am sure that there were many great jumping-off points for him into competitor businesses or related industries. However, he was loyal and intended to work for the same company as long as he was able.

He was laid-off. He wasn't fired for incompetence, mis-management, or dishonesty. He was laid off because his raises over time made him expensive. In Capitalism, the object is to maximize profit; If you can use a cheaper machine, you do swap out the old machine without a thought. People are not people in corporations, they are human resources. They are a number; their profit and expenses can be measured on a balance sheet just like any other asset or liability.

My grandfather never recovered from being laid off. That company cannot be blamed for his divorce, alcoholism, heart-disease, depression, or lethargy. However, the company's actions sure didn't help. They had no idea what position they placed him in. They don't care that a man woke up one morning intending to keep helping his company make money as he had done for so many years, and found out that he was being rejected and discarded. They never factored into the equation how this would impact his pride and sense of self-worth, nor did they consider what hard questions he would ask but never be able to answer.

The managers who picked his position for elimination did not know what his wife and kids would think. They didn't consider what savings he had versus his obligations and how he had never considered having to do without their paycheck. They also didn't consider the fact that at his age, it was pretty much too late to get hired by another company at similar status and pay, nor would it be easy to start all over. The only consideration that a corporation can make when it comes to people is how much they can save or profit.

Even while you are employed, you are not always likely to treated well. A Capitalist Corporation will probably want the most talented and dedicated employees it can acquire, but only to a certain extent. That extent is based on cost versus benefit. You may be the best janitor on the planet: thorough, knowledgeable, dedicated, creative, friendly, and unfailingly honest. Even so, a janitor is a cost, not a source of profit. Therefore, he or she can only make so much money.

Therefore, a corporation will only treat you as well as they have to, and give you the least that they can get away with. The point of capitalism is making money, not making employees happy and healthy. If your job puts your safety at risk, will capitalism naturally force a company to protect you? Of course not, that is why we have OSHA and unions. A capitalist company will protect its money; therefore, they will protect their employees to avoid fines, lawsuits, picket-lines, and bad press. Take away the government agencies and regulations, the right to assemble, and freedom of the press and you will get less face masks, gloves, training, rope, and ventilation systems. Why spend money on protecting a human resource when there are 108,700,981 people in Mexico waiting to take their place?

Capitalism is Bad for Quality

What is the point of capitalism? Maximize the money that shareholders make by maximizing the corporation's profits and minimizing the costs. Therefore, if the shirt I am making can be made with $5 of cloth or the thinner $4 cloth, why would I use the more expensive stuff? Have you noticed how hard it is to find decent underwear and socks, especially at Wal-Mart or Target? Even the expensive, deluxe, premium line is crappy. I have found that you need to spend $8 on one pair of socks at the Gap or a similar place to get something that lasts a year. You can get a pair of pants that look nice off the rack and fit well, but their color fades after 3 washings because the dye is cheaper.

It is hard to find a decent item for a decent price because the trend must always be higher profits. A product may start out with great quality once it has sold for a while, the product manager will be under pressure to increase the profit margin on that item. The easiest way to do this is to cut costs and cut corners. You use cheaper ink, you use less threads, you move the manufacturing to China where cheap lead paint is available. If the product manager does not cut costs and maximize profits, they will not be promoted; they will be replaced. Therefore, why not lower the quality? The product is known to be reliable and durable by now, so no one will notice when we switch from glass to plastic.

Capitalism does not ensure that we get items that are high-quality. It ensures that we get items that are good enough. Have you seen the headlines lately? We have had baby items with lead in them, toothpaste and dog food full of poison, beef full of god-knows-what, spinach with anthrax, car tires that blow-out and kill people, and laptop batteries that self-ignite. These are the result of organizations trying to save money because that is how the game is played. If the name of the game was "Highest Quality Wins", then these events would have triggered riots, dishonored executives falling on their swords, and government figures promising swift and brutal punishment. Instead, it is taken in stride. There are a few press releases, a product recall, and it is forgotten. Firestone, Phillip Morris, and Mattel get to live to fight another day. Somewhere, a Chinese factory may have to change its name and suffer a decline in sales for a month, but the business world is rarely shocked by these scandals. There seems to be an acceptance that this is our cross to bear, a natural by-product of business.

Wake up America! It is not natural to have children chewing on lead-painted toys, not to have your dog die from poisoned dog food! What is this, Soviet Russia circa 1932? If you pay $10 for jockey shorts and do not engage in mud-wrestling, you should expect all of the stitching to hold up for months, even years. You should be able to expect that $100 shoes will remain glued or stitched to their soles, especially if they are not used in marathons. I spent over $1000 on an exercise machine earlier this year; I just found a key bolt broken off. A metal bolt is broken on a mid-grade machine? I didn't buy the Wal-mart special; I went to a specialty store and bought the top-of-the-line offered there. I would have had to be a national fitness chain to buy a better model, I think. But they saved .5 cents per bolt on this cheaper alloy and I pay the price in safety and hassle. Grrrrrrr!

As part of my job, I repair computers. When my customer buys a computer from me, they expect to be able to use it at their convenience to make money. We buy wholesale from IBM and Dell, two well-known manufacturers. We should expect a reliable computer right? I often have to replace motherboards and hard drives because they are now made to be cheap, not reliable. This means that customers have to do without this computer for the time it takes to get the parts and me onsite; it also means that they lose data often. Why? Should we expect that when we spend $800-$1200 on a computer it will fail occasionally? Wake up, people! There are computers made in 1980 that still run, but there is no way that a computer made in 2007 will be running in 2027.

Capitalism requires that we find the cheapest people and components for a product. It also requires that we provide the lowest level of customer service possible. Try this: for dinner tonight, go to a new, small, ma-and-pa type restaurant. As soon as you walk in the door, they will bug the crap out of you trying to make you happy. They want you to have a great experience, to come back again, and to tell your friends. If they don't do this, they will be out of business in 3 months.

Next, go to a corporate, fast food place for dinner. I dare you to try and find someone who cares about your experience. At Ma-and-Pa's, if you ask for a spoon you will get Ma running from the kitchen with a clean and polished spoon of every size, take your pick. At the Corporate Clown Burger, they will point at tiny, plastic-wrapped sporks across the restaurant and tell you to get it yourself. When you do, you will find they are sticky and you don't want to know why. If you complain, you will get more attitude than ten Paris Hilton's in a jail cell with no Perrier.

Just put yourself in management's shoes: Your job is to make money. How do you make money? By getting as many people into your business as possible and getting them to spend as much of their money as you can while spending as little of your money in the process. The best way to do this is to treat your customers like cattle, buy cheap crap, pretend it is great, and charge as much as possible. That is Capitalism in a nut shell from my vantage point.

Capitalism Encourages Dishonesty

There will always be dishonest people in any system. Capitalism encourages dishonest people. If my goal is to maximize profit and I can do so dishonestly without getting caught, why not? I would need to have a spiritual or philosophical system to keep me honest, as well as an effective government, because capitalism will only encourage me to get away with as much as possible.

Capitalism encourages dishonest marketing. I challenge you to watch a kid's show for one commercial break. It will make you sick, if Capitalism hasn't already desensitized you into a hollow shell. As an experienced adult, I know that this crap is not going to work as promised, nor be as entertaining as the 6 year-old actors pretend. My kids will only gain this cynicism the hard way. Later, they will watch football marketing and have to remind themselves that a brand of beer will not automatically make you desirable to super models; the opposite is more often true. As they read their email, they will have to decide which of the 1000 Viagra offers they should respond to, if any. When they start getting credit offers, will they know that this is how people lose quality of life, not gain it?

Capitalism is not designed to encourage you to be an honest customer or vendor. If you can get away with underpaying and overcharging, why not? Why not abuse and cheat your employees if you can get away with it? Why not secretly dump untreated sewage into the ocean? Why not lie about the health benefits of your product? Why not skimp on quality control? Why not market items as "Fat-free" or "Organic" when you know full-well that your product does not truly belong in that category. Capitalism rewards the cheater; nice guys often finish last.

Conclusion

Capitalism is about money, not people. As a society, we require additional measures to temper the tendencies of Capitalism. Unfortunately, Capitalism is often more powerful than any system that would seek to lessen its impact. Capitalism is the source of money, and money is the source of power. Therefore, money talks. If a corporation wants to take the land you own, pay you less than you think it is worth, and demolish the house that your grandfather built with his bare hands, they will do so; they usually hold the power.

A corporation will be offered all kinds of incentives to move their plant to your town; you will not be offered any incentives, but you will get to pay more taxes to cover the corporate welfare. The airlines were faced with bankruptcy after September 11, 2001. I was laid off that October and also faced financial hardship. The airlines were given millions by the federal government; I received nothing.

I say that pure, unrestricted Capitalism is bad. Without the outside influence of philosophical ethics, religious principles, public outcry, media coverage, and government oversight, capitalism would abuse and destroy the people and ecology that support them. Corporations have many things in common with a parasite, and both will kill off their host if their activity is left unchecked.

So now, I can take of my Birkenstocks and tie-dye, cut my hair, and let go of the tree I have been hugging. I do believe what I wrote above, but I also believe that we have never seen an economic system that is better than Capitalism. Therefore, I will balance this post soon with an essay about the benefits of Capitalism. After that, I will provide a vision of a revised Capitalism, one that minimizes the negative impact while providing similar benefits.