Abstract: I explain the failure of Free-Market Economics in the wake of disastrous excesses of big business and lay out what I believe to be the proper place of business in society.
The past two years have demonstrated sufficiently that capitalism may perhaps be as--or almost as--problematic as socialism. In my view, the enormous banks have been entrusted with the guardianship of social infrastructure, and it is obvious that they have severely abused their power. Blame, at least among financial circles, has been deflected, and the people who we see are responsible for the crash of 2008 are resisting punishment and demanding more freedom even after they abused what we have given them, and cannot understand that the immense loss of opportunity is wrong. Worse is that profits are up, and unemployment in the United States is still over 9%.
Business is an endeavor through which one benefits by performing a service to society. I would not deny that the allure of financial success is an important factor in running a business, but I will expound on this later. A restaurant owner provides food, a technology company improves people's lives, an agricultural company provides society with its basic resources.
All of this is perfectly fine, but it becomes a problem when the agricultural company uses toxins on its produce, or drugs its livestock; when BP destroys an entire ecosystem and ruins the livelihoods of thousands of people in the region; when banks across the country foreclose on homes without due process; when technology companies use child labor in Africa to mine the gold in their products; when tobacco companies kill their customers and deny that their product is at all harmful despite the mountains upon mountains of evidence against them; when our government starts a war to benefit its clients and energy companies. It becomes a problem when the very businesses that sustain us use destructive means to further their ends at the expense of those they serve.
Over the past three years following the start of the recession, there has been a growing trend towards "Free-Market Capitalism." This philosophy basically allows businesses to do whatever they wish, and puts power in the hands of "the market." The problem with this philosophy is that there really is no "market" in that there will always be systemic advantage and disadvantage. No one here under this system would have any opportunity as such to succeed because the businesses that are already hegemonic would have free reign to destroy the competition as they see fit. It also depends upon people having the intelligence and fortitude to use their financial resources as a kind of activism. I fully support this idea in theory--that people should use their financial resources to make a political statement--but I recognize that as valiant and noble as this notion is, in an age where oil companies command energy policy, and when for almost a decade we were giving money to the terrorists we were fighting and the regimes that support them every time we went to the gas station, our protests do nothing to combat the volumes of legislation and contracts that give favor to Exxon.
In fact, I would argue that during that time, Americans were complacent and even willful in their support for the terrorists. To have a sticker that says "Support the Troops" on a Hummer is a truly disgusting paradox. Your tax dollars go to your sons and husbands, while your gas money goes to the Wahhabi schools that produce the suicide bombers who kill them.
But perhaps worse, under this philosophy, is that the body of regulation that protects us from chemical contamination, while already inadequate, would be dissolved. Ever try to light your tap water on fire1? We have made enormous scientific and wider social progress when it comes to recognizing and banning hazardous chemicals, but here the United States is beginning to lag behind. Canada in 2010 banned BPA from canned foods and baby bottles. "The primary health concerns center on BPA's potential effects as an endocrine disrupter, which can mimic or interfere with the body's natural hormones and potentially damage development, especially of young children2." The United States has not, and a study was done that found high levels of BPA in canned food, due to the epoxy that lines the inside of the tin can3. What is truly frightening is that Dr Sanjay Gupta testified before Congress and stated that a fetus is exposed to over 3,000 dangerous chemicals through its mother before even being born4.
Under the Free-Market system, there would be absolutely no way a disinterested party would be able to declare what is or isn't safe for companies to use, and there would be no way to ensure that companies were telling the truth about what is in their products, even less than there is now.
This is symptomatic of unmitigated avarice, the greatest vice a businessman can fall victim to, where he exploits and harms society for his own gain. In the 1940s-50s a woman named Ayn Rand gave justification to this avarice, and labeled it a 'Good'; she equated a man's worth to the size of his paycheck as a measure of his productivity. If he is making a lot of money, she surmised, he must be doing something right. Not so fast, Mrs Rand. If he is making a lot of money, I would argue in turn, he must be doing something wrong. Granted, this is not indicative of every wealthy person ever, for there are a few people who are doing exactly what they should be doing, such as Warren Buffet and Bill Gates. But this is an instance where these two paragons of philanthropy and social responsibility set an example that few others in their position are following. The exception proves the rule. Where Bill Gates builds an empire upon forcing human progress forward at the speed of light and uses his fortune to eradicate disease in very poor countries, our financial institutions fabricate fragile systems upon which they amass great fortunes, deliberately blind to the possibility that their systems could collapse, and when they did, they pulled all of society with them, and then denied that they did anything wrong.
There are few better arguments that illustrate that there exists a limitation to capitalism than these, and it is upon this body of evidence that I suggest that business interests are to be subjected to the needs of society. I am not advocating here the absolution of private enterprise; I am stating that because businesses provide a service to society, they are beholden to it, and must be strictly regulated, lest these disasters continue. Businesses are only useful and should only exist if they perform a service to society. If it becomes that the business does harm to society in the process of performing the service, the business should be dissolved and held accountable. What makes no sense under this model is for businesses to not have to pay taxes. If I hold that businesses are to be held accountable to society, it would follow that businesses, in order to exist, should have to pay taxes. Most corporations in the United States do not pay any income tax, and yet they have an incredible hold on public policy6. The system is entirely backwards.
There is a possible balance to this equation, it isn't as absolutist as it first appears. Businesses, in running their affairs, should consider the treatment of their employees and society, but employees should understand what it is possible for a business to reasonably do. I would say, however, that the vast majority of legislation to come out of the Gilded Age is fair and necessary, and in instances where avarice cannot be curbed, still further regulation may be necessary.
The bottom line is that businesses are created in order to make money, but the goal is to not do business with the intent to profit at the expense of others. That is, to not be dishonest and do no harm to greater society. I would argue that a corporation that truly wishes to follow this principle would cooperate to the best of its ability with government regulators.
It is also true, on the other hand, as the current trend among some corporations that they could stand to benefit from social responsibility. People are more likely to support a business if it is seen to be doing something good for the greater community. This goes all the way back to that important and agreeable principle maintained by Free-Market Capitalism, the only problem being that this model does not do enough to ensure that the companies that do us harm disappear.
Businesses are confronted with the age-old problem mentioned most famously in Plato's The Republic: Does it benefit me more to be unjust, or does it benefit me more to be just? This argument, quite frankly could go either way, depending on a company's ability to cover itself. Included with that is the availability of an advertising budget of considerable size, so long as the company doesn't do anything so catastrophic. But even BP appeared to recover after the Deepwater Horizon disaster. I know that BP is anti-social, I know the corners they cut on that rig, and I'm sure that there are far more people who also understand that. But BP still exists, and continues to be at least moderately successful. Tobacco companies are an even more egregious example. It has gotten to the point where cigarettes are all but contraband, the warnings on packages are becoming more graphic, and yet people smoke. This has more to do with the psychology of addiction, but that does not exactly explain why people start smoking in the first place, nor does it particularly account for the continued success of tobacco companies. Tobacco companies, much like the Catholic Church, have a long and rich history, and continue to exert influence, though that is being diminished by mounting evidence against them, over health and environmental policy in the United States. With a vast advertising budget, a company can do almost anything, and therefore it only pays to be just if you lack sufficient resources to compensate.
In a fragile democracy such as ours, we have seen the danger presented when business interests compensate for The Peoples' apathy. Two days ago, it came out that Democrats stayed home on election day in Wisconsin5. When we do not participate, we give consent to be governed by interests that are not ours. It can certainly be argued that We the People have significantly less of a say in our affairs, but to use that as a justification for not participating is to cede even more ground to alien and potentially destructive interests.
1) http://www.huffingtonpost.com/2010/06/21/gasland-documentary-shows_n_619840.html
2) http://www.reuters.com/article/2010/10/14/us-bpa-idUSTRE69D4MT20101014
3) http://news.discovery.com/human/canned-food-bpa.html
4) http://www.youtube.com/watch?v=t_TXrYHIj38
5) http://publicpolicypolling.blogspot.com/2011/02/do-over.html
6) http://dealbook.nytimes.com/2008/08/13/study-tallies-corporations-not-paying-income-tax/
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