What—possibly—could be questionable about capitalism?
According to observations by moral philosopher Adam Smith, the pursuit of self-interest aligns remarkably with the common good. Nothing much—questionable—in Smith’s time.
A century later, however, during the lifetime of Grandpa Charles,’ capitalism’s revalidation required a more robust defense. Most recently, also, in the aftermath of the Great Recession, revalidation demands a tighter definition of possible limits on Adam Smith’s paradigm of self-interest.
What of pseudo-capitalists who behave as rentiers, even as they manage to portray themselves as servants of the public good? Or in the extreme, how about egregious pseudo-capitalists who willfully harm vulnerable folks, the planet, and everything within the collective known as “we, the people?”
Well, to begin looking at exceptions, let’s consider a farmer in Grandpa’s hypothetical agrarian community who reduces his stock of capital. What might be the economic consequences? What may be the difference, from society’s point of view, of liquidating one’s personal investment, on the one hand, and strategies that undermine the entire fabric of public investment on the other?
Well, let’s look at equine capital in the Grandpa farm illustration; two plow horses. Assume the farmer removes one horse from the field and tethers it permanently by his door, solely for the pleasure of his children.
Immediately, community members observe one horse is missing. No doubt, plowing with only one leads to declining productivity, declining output, and also declining farmer income. In turn, this leads to fewer purchases by the farmer, of labor services and finished goods. Some in the community lose out. They lose because the horse was withdrawn, limiting the common good’s potential, even if in small ways only.
Let’s also consider the extreme. Egregious pseudo-capitalist strategies are ones that cause widespread harm, often willfully. They provoke not only private disinvestment, but public disinvestment, especially. Since capital investment is about creating future capacity, disinvestment is about undermining the future and those who will dwell in it; our children and their children.
Suppose, in the Grandpa illustration, beyond merely removing one horse from production, the farmer—also a breeder of superior horses—abandons both breeding and farming. Rather than selling prized livestock to a willing community buyer, however, he liquidates in favor of a distant buyer; one ill-suited to help locals capture any value from so far away.
Among alleged, egregious pseudo-capitalist acts, one stands out particularly in this podcast series. It is the pricing strategy of the new owners of life-saving, workhorse drug Daraprim. Recall, with now-deposed Turing Pharmaceuticals CEO Martin Shkreli at the helm, overnight Turing raised the Daraprim price over 50 times, to $750 a tablet.
Yet another egregious illustration—on a much grander scale—was brought to the attention of Americans by Pope Francis in 2015. According to Francis, global corporate capitalism is heavily implicated in environmental degradation, turning the earth, he observes, into a pile of filth. Arguably, this is egregious public disinvestment at its worst.
Should anything be done about egregious pseudo-capitalism? If so, what might it be?
Coming up. Stay tuned.
From Boulder, Colorado, this is Jim Sawyer for Capitalism in Crisis.