(Walnut Street Bridge and Hunter Museum on the bluff, Chattanooga, Tennessee. Downtown is to the right of this photo.)
When I hear people say capitalism isn’t working, they’re mainly talking about its effects. They fume about increased taxes on ordinary people to subsidize lower taxes for wealthy people and companies. They experience a declining standard of living. They lament increasing homelessness, hunger, cold, stress, and exhaustion from working harder for less real spending power. In the UK they highlight the exploding need for food banks, reappearance of rickets and scurvy in the past dozen years (diseases of inadequate nutrition)…
Exactly what are some of the policies producing such effects?
Earlier this month BBC Radio 4 nominated one: The directors of a publicly held company are responsible to the shareholders of the company, first and foremost.
Sounds good, right?
What if what is best for the shareholders is detrimental for the community, or society, or the environment, or the entire planet?
That’s too bad. If the directors don’t do what is best for the shareholders, consequences for the directors can be worse than simply getting voted out of their seats on the board at the next shareholders’ meeting. In a publicly held company, they could be taken to court by shareholders and punished for not doing what would have benefited the shareholders most.
We still haven’t dug deep enough into what that means. What is the measure of what’s best for the shareholders?
Money. Capitalism looks at everything through a money lens. Anything that has to be seen in some other way is dismissed.
That is the crux of the matter when people say capitalism isn’t working. Its sole measure of value is one-dimensional.
Shareholders of privately held companies can and sometimes do explicitly decide maximum profit is not their primary goal, but the biggest companies tend to be publicly held. (There are exceptions. Twitter is apparently about to become an exception.) In publicly held companies, the standard is that the company should strive for the best benefit of the shareholders, and the only measure of best that matters is money.
Plenty of bad things happen to people as a side effect of the way certain big companies make money for shareholders. Cancer from smoking. Black lung from mining coal. Silicosis. Asbestosis. Dioxin exposure. But the money lens of pure capitalism ignores these and even bigger harms.
We get upset with the major oil companies for their role in wrecking the climate, but they’ve been doing what capitalism encourages. They’ve been maximizing money for their shareholders. Everything else is less important. Even survival of life on earth is less important.
This is why a purely capitalist system would not be feasible. It would destroy everything in the name of making money. Capitalism has to be constrained by laws and regulations. Driven by its addiction to maximum money, it perpetually seeks to loosen its fetters. What we think of as capitalistic economic systems are based on capitalism with limitations to harness its all-consuming nature.
When people in such a system say capitalism isn’t working, in essence they mean its craving is not sufficiently corralled. At the least, an intervention is needed to bring the addiction within tolerable limits. At the most, once in a while a country tosses the addict out, sometimes to replace it with a nominally socialist or communist system.
Not that those replacements have a great track record. If they did, there wouldn’t be so many capitalism-oriented systems. When we get the constraints more or less right, capitalism has been highly effective at improving standards of living and generating innovations.
When we get it wrong, the money lens afflicts more and more of society. In the pandemic it has been glaringly obvious which nations are most heavily in thrall to money. Both of my countries are in that category, willfully thronging into a mass disabling event in the name of propping up short term profits and gross domestic product. Weirdly, some places that have opted not to protect public health purport to be somewhat socialist or social democratic, yet their choices favor money over all else. It has been a startling illustration of the adage to believe what people do more than what they say.
Look at our laws, regulations, norms and public policy decisions to see how much the money lens has spread. It didn’t happen suddenly. It crept in over time.
More than a dozen years ago, living in Worcester (England), I remember being stunned by a decision to cut off the only bus route to the hospital a mile short. Many people in the UK don’t have a car, don’t get a driver’s license, and rely on public transportation. The last mile of the bus route to the hospital was deemed not profitable enough, so that mile of service was stopped. For many people, the bus was the only way to get to the hospital when they needed medical care that could only be done there. That last mile was farther than they could walk and many didn’t have enough money for a taxi.
Public uproar got the last mile of bus service reinstated. But such decisions have been building momentum over the years. Now there are so many last-mile situations, it isn’t possible to generate a public uproar over every one of them, so the uproar is becoming more general. It manifests in elections in some places, riots in other places (remember widespread UK riots in 2011?) , more migration away from insufferable conditions…
The closer to pure capitalism we get, the simpler decisions become. Crunch the numbers, see what generates the most profit, and that’s the option to take. But it’s a beast eating itself as it runs.
Decisions are more complex when we take away the money lens and consider more than separate buckets of profit.
As an example, Chattanooga, Tennessee, decided long ago to run electric buses downtown. This was part of an effort to clean up the city’s air, which the EPA deemed the worst in the USA at the time, even worse than Los Angeles. Local industry had collapsed, taking the local economy down. How could new businesses be attracted to a place with (as a comedian put it) “chunks of metal in the air”?
To encourage people to use the electric buses, Chattanooga decided not to charge fares for them at all. The city runs the buses at its cost. Riding those buses is free. Riding ordinary buses in the surrounding area is not free, but those buses are subsidized.
It looks like a very uncapitalistic decision, yet the city is business-oriented.
Chattanooga doesn’t see everything through the money lens. Paying for downtown buses and subsidizing feeder-route buses encourages use of public transportation and encourages people to go into the core of the city. Fewer cars drive downtown. This results in less wear and tear on roads so they take reduced maintenance cost. Less parking space is needed and more space is available for business premises. Downtown hums with commerce, generating tax revenue for the city. On the whole, the city’s money spent on bus services has proven to be a good investment, but some of the benefit is not readily measured in money and some of the money buckets are designed never to make a profit.
Spreadsheets cannot capture the value of having the heart of the city buzzing with people who are either doing something productive or enjoying themselves. When Chattanooga embarked on its makeover, it had been the main maker of military ammunition in the USA, a dirty business that collapsed after the end of the war in Vietnam. Downtown was dodgy to visit in daylight and dangerous after dark. Now families can and do walk around downtown after dark. They may be visiting the aquarium, the IMAX theatre, the Discovery Museum, a festival at the riverside, a restaurant… Yes, all those things generate profit for businesses, and tax revenue, but the biggest benefits are not financial. Quality of life is not entirely a matter of money.
It takes effort to think and act in such terms, especially when the main aim is not entirely profit and capitalism says the main aim should be money.
We’ve allowed the money lens of capitalism to insinuate itself nearly everywhere. When people say capitalism isn’t working, that isn’t strictly true. The constraints that make it tolerable are broken. Capitalism is showing its nature, devouring everything its loosened limits allow it to reach.
It takes more work to think, plan and act with a view toward a better whole instead of only more money. It’s hard to use the dynamic creative nature of capitalism, yet hold it back from going too far. But it’s worth the effort. If you ever visit Chattanooga, go downtown. Walk the riverside from downtown to the Hunter Museum on the bluff. You’ll see what I mean.
We can fix this mess. We just need to put in the effort.