241. A puzzle of capitalism
Capitalism has many forms. Consider the corner shop (in so far as it still exists), the cafe, hairdresser, plumber, baker, bicycle repair shop, technician, inventor, and so on. One might hesitate to call them capitalists, yet they are. Capitalism is private ownership of capital and prevalence of markets[i], and those businesses fall under that.
There is a form of capitalism that builds on the creative singularity of entrepreneurship that can contribute to the flourishing of life (see item 225).
However, smaller, independent firms have in large numbers been pushed aside or swallowed up by, or have themselves grown into, the different capitalist form of large corporations, as in finance and insurance, oil, pharmaceuticals, computers and software, retailing, accountancy, internet services, etc.
How did that transformation occur?
One can well argue that it is due to lack, not excess of markets. Logics of scale stimulate concentration in large firms, yielding monopolies or oligopolies that thwart market competition. That happens both in supply (few producers) as in demand (few users, e.g. in demand for certain kinds of labour). This is basic economics. To fight this we have competition policy, or the construction of countervailing power (e.g. unions).
However, there are also different forms of market failures and excesses of markets. The classic problem is that of ‘externalities’, where damage (notably to the environment) and benefits (such as safety, education, culture, justice, solidarity, care, labour conditions, …) are difficult to incorporate in the price formation of markets.
In developed countries, local manufacturing enterprise is pushed out by multinationals moving into low wage, developing countries with abominable labour conditions, for the sake of a lower product price, leaving lesser paid services in the home country, while environmental costs rise in the transportation of products but are not incorporated in their price.
I will discuss economics and markets more thoroughly in a later series in his blog. However that may be, we cannot do without markets. We should not return to central planning.
So, here is the puzzle. There is both too little and too much market. What to do?
One can try to follow the usual path of competition policy to try and break down undesirable barriers to competition, and imposing limits to market power and lobbying. That routinely fails in the face of business power. It becomes even more difficult in dealing with the externalities, since those require constraints on businesses, which are also fought with lobbying and market power that translates into political power. See the struggles in environmental policy. Corporate power is greatly enhanced by globalization. If large multinational corporations do not get their way, they can move activities to where constraints are least.
A more fundamental problem lies in ideology, as discussed by, among many others, Foucault and Zizek. There is an irony concerning markets. They are justified as tapping into local diversity of knowledge, skills and preferences.[ii] Next, the notion of markets is taken as a universal, to be applied indiscriminately in all countries, regardless of differences in institutions and culture.
Markets are defended on the basis of their undeniable positive points, in an idealized conception of markets that bears almost no realism, while failures are attributed not to the internal problems of how markets operate, but to external muddling by politics. This is how markets have become an ideology, without awareness of its own ideology, and accusing critics of the blindness of their ideology.
Earlier in this blog (items 109, 159, 187), I discussed the notion of ‘system tragedy’. Well-meaning people are caught up in a web of prisoner’s dilemma’s, institutions, practices, distorted capitalist doctrine and corresponding rhetoric.
I am pessimistic about this system reforming itself from within. My hope lies with young people picking up the old form of small scale, entrepreneurial capitalism, not ensnared in the system, and open to new ethics and ideology (yes that will inevitably be part of it, to be politically effective).
First, an Aristotelian virtue ethic, instead of the utilitarian ethic of present capitalism (and economic theory). Here, next to values of utility, there are vales of spirit, culture, justice, and solidarity that are not all commensurable with utility.[iii]
Second, concerning ideology, an orientation of the self to the other, inspired by (but not faithful to the letter of) Levinas’ philosophy of the other. That has been an important theme in this blog.
A fundamental difference from the liberalism underlying market ideology is this. Liberalism is built on Enlightenment values of the rational, autonomous individual, striving for pure, abstract absolutes of truth and morality, in the spirit rising above the body. Here, and in this blog, I take the path opened up by Heidegger and followed, up to a point, by others, e.g. Levinas, and similar, in important ways, to American pragmatism .
In other words, I seek not a liberalist but an existentialist capitalism. Markets should form a basis for acting in the world, in construction of the self, challenged by the other.
The entrepreneurship indicated above fits well there.
[i] Perhaps one can say, in Lacans terminology, that the market is the ‘point de capiton’ of capitalism: what nails it down and forms a focal point. However, that would apply only to the economist’s ideal of perfect competition. In fact, the market itself is a multifarious phenomenon that cannot easily be pinned down.
[ii] In the thought of Friedrich von Hayek.
[iii] I developed this in a book ‘How markets work and fail, and what to make of them’, Edward Elgar, 2014