Free markets and competition essentially ‘force’ businesses into the best (economic) behaviors, because if they don’t do it, some other company will, and will metaphorically take their lunch.
It’s good theory, but it’s not reality. Not anymore. Initial economic theory never knew what today’s globalism was going to look like. The game of capitalism and free markets changes substantially from the 1800s world of limited markets with few people to use them, to the 2000s world of a market with an infinite number of suckers to buy whatever you want. There has been a subtle paradigm shift.
One can now make big money screwing over one’s customers, and new ones will replace them. Nobody will take your lunch, because if you can sell something everybody needs (bottled water), or even wants (cellphones), there’s a replenishing supply of tons of people willing to consume your product. If you get unpopular, you can just move to another country with fewer laws and sell your product there, possibly with a higher profit margin (fewer regulations) allowing you to make just as much money with lower-volume sales. Granted this is how it’s always been, but I feel like today’s scale of population and globalism has somehow changed the feasibility of bad behavior in a way that we may not yet understand.
The market force of the people has moved to a much slower speed — in the old days, if there was a shitty product, you’d tell the guy next to you at the market, and it would spread around the town in a day. They even used to have professional rumor companies (before slander laws) that would go to train stations and pass the bad word. Nowadays, it is different. While we have vast communiation networks that are unparalleled by anything mankind has seen, there are simply too many people on the planet for us to be as closely connected as we were in the small-town days. Even with the internet.
It’s doubtful that that kid in Iran is going to know what my problem with product X is. I may blog about it, but he’s never going to run into my blog. And in fact, if you criticize a corporation too harshly, they may sue you. And guess who is going to win in a legal pissing contest between a lone blogger and a mulit-national corporation? The game is stacked. But the fact of the matter is — that kid in Iran is never going to know why he shouldn’t by product X that I had a problem with. Thanks to globalism, a company can sell product X to anyplace in the world. That is a huge market. You could piss off 99% of the planet, and stil have 10 million customers. That’s not how it worked in the 1800s.
The market force of the producers and corporatins, meanwhile, has moved to a much faster speed. In the old days, if you failed in a market, you have to ride your horse to another town and try to drum up business again. Transportation was not cheap; we didn’t even have combustion engines or oil. Nowadays? Just sell it online, and the whole planet is your sucker. If you stop selling well in America — go sell your product in China instead. The cost will not be that much more; shipping corporations have created an economy of scale in transporting products that did not exist back in the 1800s. Even as a civilian, I can ship somethign to China for an extremely cheap price. Something someone in the 1800s could not have done.
Most of our economic theory (Adam Smith, and the “founding fathers of capitalism”) came out in the 1700s and 1800s, right? This was a time when even our founding fathers failed at adequately writing a constitution that still applies today. The constitution has been largely shot down, one amendment at a time, due to creative legal intepretation. Every amendment is now a razor-thin wire, barely holding up. The 1st, 2nd, 4th, 5th, and 10th amendments especially have been shat on. What happened?
Quite simply, the founding fathers needed to catch a glimpse of the future. They needed to see how the world changed, and how what they said on paper actually does not make total sense in the 2000s. They needed to be more clear about free speech, gun control, declaration of war — and perhaps how votes are counted after the 2000 Election debacle in Florida.
Now consider the founding fathers of economics. Similarly, they laid out their theory in a non-globalized, colonial world. The “Invisible Hand” of the market that we were taught about in school was actually supposed to be the invisible hand of GOD, not of market forces. (Though tTis may be the matter of some debate.) In other words, even when initially coined, the idea of an “invisible hand” that fixes the market was only believable if you believed in magic sky fairies (God) pulling the strings of our economy like a puppet. The fact of the matter is, if you take out mythical entities such as God, even the creater of the free market didn’t believe it worked.
Also, Adam Smith also believed that the rich should be taxed at a higher rate than the poor. Take that, free-market capitalists! I’m just mentioning this because a lot of people who think that a free market magically fixes everything also think that a Flat Tax is fair. A flat tax absolutely is not fair, and Adam Smith agreed with this.
So anyway — our constitution has largely failed because the GREAT men of the 1800s were not so great as to be able to see into the future.
By and large, I feel the same way about lassez faire/free-market capitalism. It was an idea proposed by GREAT men of the 1800s, and made a lot of sense at the time. But the ideas did not properly consider a future which none could have possibly imagined, and thus suffered some entropy when faced with a modern reality.
The founders of our constitution could no more imagine how much law (and the interpretation thereof) would change over the next 200 years than the early proponents (“founders”, if you will) of capitalism could imagine how much economics and the global market would change over the next 200 years.
Perhaps this is why the great Thomas Jefferson considered revolutions mandatory, happening on average every 200 years? Perhaps Jefferson had the humility to know that even his own enumerations of his own basic ideas could not possibly be refined to withstand he could never glimpse.
And I’m not saying capitalism doesn’t work. Free-market capitalism works for MARKETS. If I’m going to have a yardsale or a flea market or a farmers market, that is the system that it will work by.
But the whole planet is *not* one big MARKET. It’s something else. Call me crazy, but I’m going to call it a “PLANET”. A “MARKET” does not have INFINITE people. A “MARKET”, in old world understanding, was really limited to a particular locale and subset of people. Today the global “market” effectively *is* infinite, with a global population at record levels that are being broken every second. I feel this somehow changes the parameters of basic economic theory.
I’m not smart, educated, insightful, unbiased, or ambitious enough to write a treatise on just how and why everything changes, or to enumerate the methods by which these mechanisms occur. I’m not observant enough to see every gear turning, and to understand how every piece of the machine works together… I doubt many are.
But I do feel that what is happening in our society today is, in some ways, mirroring the fall of communism in the early 1990s. They simply faced their economic collapse 15 years earlier than us. They lost. And now we lost. America is no longer going to be in control of the world’s finances — the other leaders of the world have basically already decided this. The world has seen our ways as being largely wrong, and it’s time that we stop clinging to futile old dogma. Both with religion AND economics.
Even pre-economic crisis, I felt there were many things wrong about the way we were doing things. (Just look at the homeless, for example. Oh I forgot — they “don’t want” to work and chose this!) (Or spend a summer reviewing medical records and notice how it “costs” $500K every time someone dies, even though everyone who dies doesn’t have $500K.)
Neither the far-right system of communism or the far-left system of capitalism is going to take the world to its future. People need to wake up and see that everything isn’t merely a two-sided dichotomy. That is American false dichotomy thinking, and is also a cause of the “two-party” system.
I heard once that the Rastafarian god is capable of seeing issues from more than one (or two) sides at once. We should try to do the same in considering economic theory for the future.