Friday, December 6, 2013

Errors of the capitalists

Pope Francis has gotten a lot of press coverage for criticizing "trickle-down economics."  Some are furious, some delighted.  All are pretty much ignoring everything else he said in Evangelii gaudium, which is a shame because it's amazing stuff.  (When I'm done reading it, I'll share my favorite bits here.)

What really gets me is the way some capitalists are showing their true colors by how they react to Francis's words.  I've gotten in a few debates about it, and I can't help but feel a bit puzzled.  The Catholic Church has always criticized capitalism -- that is, business-favoring policies that result in vast wealth for a few and poverty for the rest.  At the same time, the Catholic Church has no problem with capitalism -- that is, markets which function with little government involvement.  Francis's critics seem to be under the impression that he is criticizing the latter, when he is really criticizing the former .... but the trouble is, the former is actually quite popular with a lot of people, and they are just as offended to hear that criticized.

Here's a list of things I have heard capitalists say which I absolutely repudiate.  None of them is something I think is essential to belief in a free market.

"Pro-business is pro-market."

No, if you favor businesses specifically, you don't have a free market.  The point of a free market is allowing businesses and individuals to meet each other on even ground.  Businesses that don't build up good relationships with their customers, fail to pay good wages, or prioritize short-term stock prices over long-term success will eventually fail in a free market.  Being pro-business means not letting these bad businesses fail, but propping them up with a lot of special help.

People choose to favor business because they think the benefits will "trickle down" to the rest of us.  This, John informs me, is called Keynesianism and he says it doesn't work.  I don't need to be an economist to tell you it doesn't work, because it's what we have and it's not working.  When my county built a nice building for free so that Walmart could move into town, it did not stimulate the local economy one whit, only harmed locally-owned businesses.  When the federal government bailed out failing banks, it didn't help the poor who lost so much in the recession.  In Francis's words, "the poor are still waiting."

"Any money I spend stimulates the economy, so it helps the poor."

More Keynes.  Keynes taught that if you smash a window, it stimulates the economy because it creates work for the window repairman.  That may be so, but it doesn't necessarily help the poor.  It just creates activity, moving cash from the window owner to the window repairman, while destroying a resource.

Sometimes economic activity benefits the poor.  More often, it causes a flurry of activity which makes a ton of money for a few before drying up and bursting the bubble.  Usually the rich can cash out with plenty, but the poor lose out.

I saw someone say, in all seriousness, that buying a t-shirt made at a sweatshop is like giving to charity because it makes a job for someone in a third-world country.  After all, a dollar a day beats no dollars a day!  But that ignores the fact that the sweatshop is dominating the economy of the region and often destroying its natural resources, so it is preventing people from making money in other ways.  When the sweatshop decides to close its doors and move to somewhere where the labor is cheaper -- which it will -- the region will be left in worse straits than before, now that the local economy has been destroyed.

When you spend money, you choose which sectors of the economy will grow.  It's like voting.  Vote used, vote fair trade, or just give the money to charity.  Spending money to get what you want is not tithing.  If you think private charity will take care of the poor, you have to actually open your wallet and donate.

"Wealth is a reward for virtue."

Someone actually called the Pope a heretic for denying that God favors the rich.  Catholics believe that God rewards the virtuous with wealth!  Right?  WRONG!  Calvinists believe that.  So, I believe, do Mormons.  Catholics believe that the Lord hears the cry of the poor.  Now, it's not bad to be rich -- but it is hard for the rich to get into heaven, so from a spiritual perspective you're probably better off being poor.

Money is morally neutral.  Having it doesn't make you better than anyone.  If you are a lazy bum who inherited millions from your dad, you don't get to call a poor person lazy because he is still making minimum wage.  Some people who are lazy succeed.  Some people who work hard don't.  Working hard may help your odds, but there is never a guarantee and a lot of it is luck.  God doesn't hand out money to the deserving.  He wants to get you to heaven, not buy you a flat-screen TV.

"Uneven distribution of wealth is not a problem."

Theoretically, one would think this ought to be true.  Wealth is not a zero-sum game; it is possible for the rich to get richer without the poor getting poorer.  Since wealth is a product of human labor, you can make more of it.

However, this ignores two things.  The first is that wealth is a product of human labor and natural resources.  Human labor is virtually infinite, but natural resources are not.  If the rich buy up all the land, or all the petroleum, or all the iron ore, there really is less for everyone else.  The poor are then being priced out of resources which they need.  Speculation on land has driven up its price, which made a fortune for many real estate investors, but the result is that I can't afford to buy a farm.

The second is that wealth tends to translate into power.  If I can afford to retain a lawyer and sue people, I have power a poorer person does not.  We all know well-funded candidates win elections while those who can't get funding lose.  If Bill Gates gives candidate A ten million dollars, while I speak for an organization of a hundred thousand people who all care deeply about candidate B, but can only give him ten dollars apiece, odds are good that candidate A will win.  Bill Gates just has a louder voice than a hundred thousand average Joes.  Maybe this shouldn't be true, but it's pretty hard to deny that it is true.  When Washington State defeated an initiative to label GMO's, 52% to 48%, it may seem that Washington voters don't like the law.  But considering that the No side raised $22 million, almost all from out of state, while the Yes side raised only $7 million, what that says to me is that money talks and an expensive ad campaign convinced a lot of people who otherwise wouldn't have cared one way or the other.

This latter problem could be helped with laws: laws requiring the losers of lawsuits to pay all legal expenses, laws limiting who can fund campaigns.  Of course it seems unlikely that you could find laws that extinguished all graft and corruption.  But if you could, I'll tell you one thing: you'd see inequality reduced a great deal.  When the rich have more of a say politically than the poor, it's not surprising to see that the law favors the rich and they get richer.

"Solidarity [community, cooperation, fighting injustice, helping the poor] is code for government."

I got in a debate with someone who kept insisting Pope Francis was calling for more government involvement.  When I asked where he said that, she quoted this line: ""Growth in justice requires decisions, programmes, mechanisms and processes specifically geared to a better distribution of income, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality."  Yes, government can do this.  So can private organizations.  So can individuals.

If we admit that only government can assist the poor or prevent injustice, libertarians lose the race right out of the gate.  Saying "helping the poor is what government does, and I hate government, therefore poor people don't exist / could help themselves if they weren't lazy scum," just shows you to be a jerk.  We have the responsibility to help the poor.  If free markets do this best, then that's what we should have.

I wish libertarians would lead with this more.  Instead it seems they are so attached to their ideology that if they can't see an easy free-market solution to a problem, then it's not a problem.  Why not say, "Of course I care about the poor, I simply don't find government is doing a good job, so I founded this nonprofit to teach job skills / invested my money in microlending to finance entepreneurs in the Third World / had some homeless people over to my house for Thanksgiving"?  Libertarians should be the loudest about helping the poor, because they ought to know that when you get rid of government solutions, the private solution has to be ready to bridge the gap -- and that private solution will only work if you get people on board.  I simply can't believe that "private charity will take care of it" when currently people give so very little to the poor.  Even with government solutions, poverty still exists; and even with taxes, you probably still have a few bucks to spare.  Until you can match those two things together on a small scale, I'm not going to believe you will ever do it on a large scale.

"The main goal of a CEO is to increase profits for the shareholders."

I have been reading a series of articles in Forbes calling this "the dumbest idea in the world."  And it is.  The premise is simple: since the shareholders own the company, the CEO is their employee, so he's morally obligated to work for them first.  And after all, making the company succeed is what generates profit for the shareholders, so everybody wins.

The problem is that there are many ways to generate profits for shareholders besides just running a successful company.  Especially in the short term, you can generate profits by raising prices, laying off employees, or shutting down research and development.  Sure, this hurts your company in the long run, but the shareholders -- and the CEO is a shareholder too -- can cash out and move on.  It doesn't matter if your company goes under; there are other companies and you can buy their stock and run them into the ground too.

This idea hurts everyone.  The smart choice is to worry about pleasing the customer first, then the employees, then the shareholders will naturally make a steady profit as your company continues to do well.  Prioritizing things this way will help the market as a whole.  Doing things the other way around is going to be the death of capitalism.  It incentivizes businesses to behave badly and hurt customers and employees.  I could go on, but if you're interested in this topic, you should read the whole article.

"Greed is good."

No, it isn't.  There's a deep chasm between "less government involvement is good" to "anything I do, so long as it's for my own benefit, is okay."  Greed is bad.  It's harmful.  It leads people to bend and break laws to make money, to do things that aren't illegal but are unfair and wrong, and to ignore their duty to their fellow human beings.

Believe in free markets if you want to.  I do.  But that doesn't give you permission to be a jerk.


Enbrethiliel said...


There's a LOT to discuss here, so I'll have to hop back later with a longer comment, but I wanted to say one quick thing. It seems to me that the problem with shareholders is the mirror image of the problem with employees (a.k.a. "wage slaves"). That is, there's no real relationship between them and the corporation. The corporation could treat them like kings and they'd still sell their stocks for random reasons beyond the company's control--just as an employee could bust his back for a company for decades and still be laid off without getting a say in the matter.

The disconnection (dare I once more say, the alienation?) is really incredible. But then again, why should I be surprised? If we don't mind eating food that is grown for us by strangers and shipped in from another region, because it "frees" us up to do work that we may never see the direct fruits of, then we opened the door to disconnection in every part of the economy. =(

Sheila said...

Very true. And that's why I say many of the problems in the economy are social and spiritual problems, not legal ones. Sure, there are laws that encourage bad behavior and discourage good behavior. But the most important thing, without which we will never have justice, is good behavior from each individual. That, I think, is the main thing the Holy Father was talking about in his words on the economy, and the people shrieking about government and law were missing the point.

The trouble is, if you act like you do have a relationship with your company, you're likely to be screwed. My dad never sold his Washington Mutual stock because he worked there and he loved the company and even though it wasn't doing well, he didn't want to help the company's stock price fall by selling his stock. Well, the people in charge of the company were involved in some pretty shady stuff and the whole thing went under, leaving him with a bunch of worthless bits of paper.

Or when John stayed working for the newspaper because he believed in its mission even though all the signs pointed to disaster, and was rewarded by losing his health plan and taking a big pay cut when he agreed to stay on. It takes some mutuality to form actual relationships, and when you are operating in good faith and someone else isn't, you're liable to get screwed. That's why so many people seem tough and loud about looking out for number one .... it's because they know if they don't, odds are good no one else is looking out for them either. It's a hard trap to get out of, once a society has fallen into it.

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