Defects of Capitalism
by What is happening in the US is ably explained by economists as an instance of financial mess. But, from another angle, the economic muddle in America is testament to the inherent defects of capitalism.
As a system, capitalism is never perfect. Since the beginning of the growth of capitalistic market, coinciding expectedly with the industrialization that took place in America (and Europe) towards the end of the 19th century and at the start of the 20th century, critics of capitalism have intensified their censure against the system by either debating its very principles or pointing out its negative outcomes.
A number of religions are also against capitalism. At least, the Muslim and Christians are quick to point out that they do approve neither the practice of usury or excessive charging of interest over loans, nor the values of greed and selfishness that seem to stem from the very system of this economic order. One can only think of the ethical repercussion of having no other way but up, if one has possession of capital. And the fact of exploitation or violations of human rights that are being committed in the name of pursuit of profit simply reinforces the impression about capitalism as another version of jungle, where the only the fittest survive.
Economists are also not wanting of stance against capitalism. They blame the system for unequal distribution of wealth and income among society members. Likewise, nations of capitalistic system have the typical unemployment rate of 3% to 10% in capitalistic systems; and this natural rate of unemployment in practice means the system does not allow for employment for all (or full employment). The system is also accordingly characterized by inefficiency and waste, and has a bleak prospect in terms of sustainability. For an inherent defect of capitalism’s effect on the market is the latter’s failure and instability.
Market failure is the condition of the market where there is inefficient allocation of goods and services. This results from people’s individual pursuit of their respective agenda, which do not regard the good of society at large. This gives rise to the despicable practices of monopolies, insider trading, gouging and monopsonies. Free market, as it is called, does not have provision for fair competition.
Capitalist market is not instable. This, according to Karl Marx, is on account of the system’s clumsy development, punctuated by periods of overproduction that results to stagnation or decline (i.e., recession). The clumsy growth of the system is because of the presence of contradictions right within the system. For one, capital is set to clash against labor, and overabundance and poverty are juxtaposed – which in Communist Manifesto is called a moment of barbarism.
Are these all theoretical fears? Definitely, no! To prove our point, we knew about the Great Depression. Or if one would provide that the reason for Great Depression in America was US central bank mismanagement, we still have the 1997 Asian Financial Crisis. The economic system of Argentina met the same fate in 1999; and Mexican Peso experience unprecedented crisis on the same year.
To date, premiere institutions like Freddie Mac, Fannie Mae, Lehman Brothers, Merrill Lynch, and even AIG either necessitated federal government take over, if not bail out (involving $700 billion, making it the biggest government bail out in history), or faced bankruptcy.
What is happening to date in America is unprecedented, at least according to Mr. G. W. Bush. Or in the word of Alan Greenspan, an American economist and former head of Federal Reserve of America, it is a once in fifty years, or once in a century (the guy does not forget the Great Depression). And for this reason, the US is expected to come up with also an unprecedented measure. Yes, it is going to be unprecedented for the bail out involves the use of taxpayers’ money.
This and similar occurrences in the past (such as those identified in the preceding) can be taken to be talking to us to consider the prospect of seriously considering a shift to make from: “From each as much as you can get; to each as little as you can get away with giving” to: “From each according to his ability; to each according to his need.”
To me, the former is irrational; the latter is even Scriptural.
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