Capitalism Day

by Don Boudreaux on April 22, 2008

in Environment, Everyday Life, History, Myths and Fallacies, Risk and Safety, Seen and Unseen, Standard of Living

On this Earth Day, I celebrate capitalism — the institution that, far more than any other, has made human lives clean, safe, dignified, and culturally rich.  Capitalism is also responsible for giving people the wealth and leisure to permit them to mis-perceive nature as loving and bountiful, and to enjoy nature in a way that few of our pre-industrial ancestors could ever have enjoyed it.

So, on this Earth Day, I offer you here my essay, inspired by the work of Julian Simon, entitled "Cleaned by Capitalism."  Here are the central paragraphs:

Before refrigeration, people ran enormous risks of ingesting deadly bacteria whenever they ate meat or dairy products. Refrigeration has dramatically reduced the bacteria pollution that constantly haunted our pre-twentieth-century forebears.

We wear clean clothes; our ancestors wore foul clothes. Pre-industrial humans had no washers, dryers, or sanitary laundry detergent. Clothes were worn day after day without being washed. And when they were washed, the detergent was often made of urine.

Our bodies today are much cleaner. Sanitary soap is dirt cheap (so to speak), as is clean water from household taps. The result is that, unlike our ancestors, we moderns bathe frequently. Not only was soap a luxury until just a few generations ago, but because nearly all of our pre-industrial ancestors could afford nothing larger than minuscule cottages, there were no bathrooms (and certainly no running water). Baths, when taken, were taken in nearby streams, rivers, or ponds, often the same bodies of water used by the farm animals. Forget about shampoo, clean towels, toothpaste, mouthwash, and toilet tissue.

The interiors of our homes are immaculate compared to the squalid interiors of almost all pre-industrial dwellings. These dwellings’ floors were typically just dirt, which made the farm animals feel right at home when they wintered in the house with humans. Of course, there was no indoor plumbing. Nor were there household disinfectants, save sunlight. Unfortunately, because pre-industrial window panes were too expensive for ordinary families and because screens are an invention of the industrial age, sunlight and fresh air could be let into these cottages only by letting in insects too. Also, bizarre as it sounds to us today, the roofs of these dwellings were polluted with all manner of filthy or dangerous things. Here’s the description by historians Frances and Joseph Gies, in Life in a Medieval Village, of the roofs of pre-industrial cottages:

Roofs were thatched, as from ancient times, with straw, broom or heather, or in marsh country reeds or rushes. . . .  Thatched roofs had formidable drawbacks; they rotted from alternations of wet and dry, and harbored a menagerie of mice, rats, hornets, wasps, spiders, and birds; and above all they caught fire. Yet even in London they prevailed.

Peace and free trade.

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Sameer Dossani April 22, 2008 at 11:18 am

I realize this isn't meant to be a scholarly essay, but you've gotta be kidding me! Confusing "capitalism" (as in free markets) with all the benefits of industrialization is a stretch at best. As Ha-Joon Chang points out in his "Bad Samaratans" free markets were the exception, not the rule, among countries that industrialized. Massive government spending (think Pentagon) as well as market distortions (why didn't Doha work?) continue to be the rule for development. Since 1919, corporations have been legally bound to maximize profit, treating social and environmental concerns as externalities. The very serious environmental dangers that we face are the result of a certain kind of state-sponsored corporatism that is mistakenly called capitalism. To give that system thanks on Earth Day is kind of like asking Jews to thank Hitler on Israel's independence day.

Slocum April 22, 2008 at 11:54 am

"Peace and free trade."

Amen.

Derailled April 22, 2008 at 12:14 pm

"To give that system thanks on Earth Day is kind of like asking Jews to thank Hitler on Israel's independence day."

Wow, Godwin's Law in just one post! http://tinyurl.com/572l4

Flash Gordon April 22, 2008 at 12:19 pm

Sameer Dossani offers proof that inter-galactic travel has become a reality. Who knew?

The realism of the John Adams series on HBO was startling, showing the rotten teeth of the founders. That was just one of many hardships they endured that has since been alleviated by free market capitalism.

Sameer, one thing you will have to get used to is that on this planet almost all progress has come from free people pursuing their dreams and aspirations in free markets. Considering the field of candidates in the next election we can safely say that will continue to be the case.

The government on the planet you came here from may be different, but you are here now.

Speedmaster April 22, 2008 at 12:59 pm

Well-stated!

Keith April 22, 2008 at 1:23 pm

Quote from Sameer Dossani: "Confusing "capitalism" (as in free markets) with all the benefits of industrialization is a stretch at best."

Since industrialization was invented while the corruption of government held power seems a weak argument to condem how it evolved. Governments and corporations predate industialization by some significant time.

I also think you're comparing past practices to the standards of today. We might consider the air pollution from open burning of coal in the millions of houses of an early industrialized city as abominal today, but I doubt the people of that time who were more worried about freezing to death saw it as such a terrible thing.

FreedomLover April 22, 2008 at 2:10 pm

Sameer:

To show your true "Green-ness" you should unplug yourself from the internet immediately, and go live in a cave. Set an example for all of us Sameer, be a SHINING light!

Sam Grove April 22, 2008 at 2:33 pm

Communism can work, if heavily subsidized.

Lowcountryjoe April 22, 2008 at 2:49 pm

Sameer the fecies from your shoe to the doormat. Capitalism is a system of voluntary exchange and individual property rights; it is freedom and it is liberty. Those that abhor this system, predacated on the virtues it contains, and that wish to extinguish it, are, themselves, more like Hitler than they dare admit.

Stretch April 22, 2008 at 3:27 pm

I can't really say what Sameer actually believes, but I think the basic point that a free market and the system we actually have in place (and have always had) are not the same is one too often overlooked.

There is no question that our standard of living and level of cleanliness are entirely due to the energies of free people making individual decisions for mutual benefit so far as they were allowed to. Look at how far we've progressed in spite of government interference in the market and think about how much better off we could be.

In other words, if you define capitalism as a system of voluntary exchange and individual property rights, ie the free market, we've never actually had that. Perhaps I'm wrong, but I thought Sameer's point was not that capitalism is bad, but that it's incorrect to give full credit to a system that doesn't actually exist.

Of course, even given that we've never had a truly free market, the reason our standard of living has skyrocketed is simply because our system is relatively more free. In fact, I would say that noting the difference between our semi-corporatist system and a free market is a huge plus in favor of capitalism.

John V April 22, 2008 at 4:22 pm

the truth that I've come to understand is that our progress is due to the degree of freedom in mind and markets that we have had.

Yes, man has never had the absolute ideal free market but that is not the point. Freedom in enterprise, in the exchange of ideas and in the voluntary exchange of goods and services are the catalysts.

Insofar as govt. or the collective force as any positive role, it is in the facilitating or protecting of the integrity of the fundamentals. Everything else it does is another matter.

indiana jim April 22, 2008 at 4:24 pm

On Earth Day I generally to give the "when to cut the trees" lecture. The answer, of course, depends upon the interest rate (or rate of human impatience as it were). In Haiti, the rate of human impatience for resources is so high (because of the de facto absence of the rule of law) that it is 95% deforested; yet in the Dominican Republic (on the other side of the isle shared with Haiti) there are dense forests. Efficient capital markets and private property lead to interest rates that allocate resources to their highest valued uses in an expected sense, whether these uses are now or in the distant future. These interconnections are largely unseen by many, but the workings of the "invisible hand" have always been largely so.

Sameer Dossani April 22, 2008 at 6:02 pm

I should know better than to continue this discussion (since it's clear that only free-marketeers read this blog and it's also clear that no one bothered to read the articles I linked to), but I'm a glutton for punishment ;-)

1) If one bothers to read the economic history (as documented by Ha-Joon Chang and others) one will see that both the UK and the USA were highly interventionist in their highest growth phases. They followed an infant industry approach. In the case of the U.S., this was argued for by Alexander Hamilton, who claimed that the free market policies advocated by Thomas Jefferson would be a disaster. Hamilton won that argument. In the period between 1820-1960, U.S. average tariffs only fell below 35% after WW2, when the U.S. was the only industrialized economy left standing and therefore free trade was in its best interest. The UK has a similar story, though it dropped its tariffs nearly completely around 1875, when it was undoubtedly the world leader in manufacturing (it reimposed them when Germany started to get competitive around the turn of the century). All this and more is in Ha-Joon Chang's Kicking Away the Ladder. Also see Paul Baroch's Economics and World History.

2) On the somewhat philosophical point of "everything good that's happened is because of personal freedoms, including freedom of the market", again this is an ahistorical view. If we look at the major technological breakthroughs, there may have been some entrepreneur looking to sell his/her product to a market that was demanding it, but in many cases there were not. Government patronage (or the public university) and especially crises including wars played major parts in the development of technology.

3) I would also question the degree to which the factory worker or the coal miner or the assembly line worker is "free" in your system here. I'm an ardent believer in Adam Smith's view that the best system is that which maximizes freedom, but I think the 20th century incarnation of corporate capitalism has more to do with fascism than with freedom (strict chain of command, decisions made by a few at the top, etc.) If we were to democratize workplaces and take away the damage of Dodge v. Ford (which made profit maximization the standard for all corporations to bear), and turn corporations back to what they were in the 17th century (a loose coming together of individuals for a specific and time-bound venture, which would thereafter be abolished) I might be a proponent of the system.

4) Though I may disagree with a lot of your views, I very much admire the premise that a lot of you start from which I understand as "human freedom leads to human development". I think at this point in human history, working for human freedom means limiting the power of the corporation, which has far more control over our daily lives than governments do. As John Dewey said, "Govenment is the shadow cast by business over society".

Matt April 22, 2008 at 6:32 pm

All right, I will take a shot, as an amateur, at defining Hayek growth.

As I understand (correct me) the Austrian school (Is that us?) defines the economic agent as ranking choices that he/she faces everyday. Mainly good choices, ranking the possible utility of products we have on a regular basis, select the ones that best fit our needs.

So, aggregate growth, according to the discussion and according to what seems to be accepted on this blo9g, is that aggregate growth is the increase in the number of overall rankings the economy can make per unit time.

We can delegate the choices to a division of labor. Example: Rather than I choose between watering the lawn, fertilizing it, or seeding it; I just delegate the process to a specialist. Alternatively, as a producer or supplier of specialized labor, I will try to combine choices into one by technology. Rather than choosing between phone and dial up, I just get DSL and do both.

Cassandra April 22, 2008 at 6:43 pm

Sameer,

Unfortunately, the guild model of the 17th century is no longer viable. This model does not allow for leveraging of productivity or economies of scale nor is this model flexible enough to evolve new processes, adapt to new technologies, develop new business models, etc. in order to meet changing customer needs and successfully compete in today's globalized world.

With regard to "profit maximization as the standard for all corporations to bear", financial performance is not optional and never has been. A business must perform in order to attract and retain capital investment as well as to invest in what the business will be 10 years from now. This is true whether a business is a small company with 2 shareholders or a large corporation. Any business must offer a return on investment or investors (whether a small business owner or a shareholder) will seek a better return elsewhere.

With regard to the freedom of the "coal miner", not many of us know any coal miners. The majority of the workforce in Canada & the US are employed in service jobs rather than manufacturing and primary industries. Thankfully, many of the most dangerous jobs have been automated. Some trades have a great deal of difficulty attracting workers for example, the average age of a welder in the US is 55 years old.

The late Peter Drucker helped to delineate many of the concept of business management over the course of 60 years of writing and teaching management studies at Columbia University.

dave smith April 22, 2008 at 7:00 pm

No one will get much traction with me quoting John Dewey.

The notion that a business has more power over me than the government is nonsense, pure.

Compare the power of Wal Mart, that must build a store on every street corner because they are so scared of losing my business to the courthouse, that can call me at a whim.

LowcountryJoe April 22, 2008 at 7:07 pm

Mr. Dossani: if you have the alternatives to the modern-day conundrum civic responsiblity [if any] of the corporation as an efficient model, then by all means, take off your bunny-slippers and go run yourself a business the way you see fit. Or, continue complaining loudly on a blog where you find yourself having philosophical differences with its other members and see how far that gets you.

Also, you recently talk as though you respect liberty/freedom but I'm willing to bet that the longer you troll around these parts, the less we will discover just how genuine you are. So, let's see what you've got and see if I'm wrong about your paternalistic nanny-state embrace, big guy.

Unit April 22, 2008 at 7:41 pm

Yo, free-trade dude!

Sameer Dossani April 22, 2008 at 8:21 pm

Cassandra – thanks for your thoughts. I think the most helpful insight is the "we don't know many coal miners around here". Philosophical systems – like anything else – tend to serve the class interests of those who promote them. For those of us who do know our share of coal miners, domestic workers, farm workers and other working communities that are under attack, a lot of what's expressed here as truisms seem dubious at best.

One of those truisms "fiscal performance is not optional" is a misunderstanding of what I was saying and of the 1919 Dodge v Ford case. In that case, Henry Ford wanted to pay his Model T assembly line workers more than the market rate. His logic was that he needed more customers, and if Ford tried to lift these workers to middle class status, they would be doing the best thing for the long term profitability of the company. His shareholders disagreed and argued that he had a duty to maximize short term profit above all else. The judge agreed, setting a precedent that is still on the books.

For folks complaining about me trolling, I'll leave you in your complacent bubbles now. It's part of my job to see what mainstream economists are doing and explain their analysis (and what's wrong with it) to laypeople. Most of the time I can keep quiet. On the line "capitalism is good for the earth", I just can't. We can agree to disagree on all kinds of things, but silly statements like that should at least be backed up by more evidence than "things are better than they ever have been".

Sam Grove April 22, 2008 at 8:55 pm

which has far more control over our daily lives than governments do

Heh, governments are always oligarchical, particularly if they do anything beyond enforcing prohibitions against force and fraud.

If corporations exert undue 'control' over us, it is via their influence over politics…witness the many wealthy people who participate in the political process…and government.

So, let's minimize government, dissolve corporate charters (they can reorganize any way they wish), and see how much 'control' they can exert over us without the mechanism of control.

I smell progressive.

LowcountryJoe April 22, 2008 at 9:18 pm

It's part of my job to see what mainstream economists are doing and explain their analysis (and what's wrong with it) to laypeople.

And you get paid for that? Maybe I'll have to rethink my consumer soveriegnty paradigm; apparently there must be some arm-twisting of the readership going on in that journalistic venue.

For folks complaining about me trolling, I'll leave you in your complacent bubbles now.

Okay, muirgeo. Until later then? Well, under a different pseudonym, of course.

Sam Grove April 22, 2008 at 9:56 pm

You see, we only have two choices available to us: corporate rule or progressive rule.

In another universe where progressives rule (again):

"I think at this point in human history, working for human freedom means limiting the power of the progressive elites, which have far more control over our daily lives than governments do."

Sam Grove April 22, 2008 at 9:57 pm

LcJ, check the link.

Ryan April 22, 2008 at 10:01 pm

Peace and Free Trade to you sir as well. Actually, I think that would be a wonderful new thing to start saying to one another. Peace and Free Trade, what a wonderful thing.

Sam Grove April 22, 2008 at 10:57 pm

Sameer labors under the belief that none of us here are familiar with the history of mercantilism, in the old world and the new, and that we've illusions about some extant free market and pure capitalism vs the real world.

History is available to all, it's the interpretation that matters. I know that corporations and, in particular old wealth, have undue influence in the capitals, it is the nature of the beast, after all. My question is: why do progressives skip over a valuable lesson from the communist experiments?
Do they wish not to see how the total elimination of corporations was not a great boon to the workers.

No, they say, the problem there was a lack of democracy. But they had elections in the USSR.

Sure they were rigged, but as long as government is the key to power, it will never fall into the hands of the masses.

Sameer Dossani April 22, 2008 at 11:27 pm

Sam, why is one either in favour of the status quo or a defender of the soviet union? My views on stalinism and the failure of the bolsheviks may be harsher than yours. I say "may be" as I try not to jump to conclusions about your views, as you have about mine.

If folks think that this system is the best we can do, that's a cynical condemnation of humanity. Just because I hold that opinion does not make me a defender of state coercion and it certainly doesn't make me a defender of the soviet union. I just happen to think corporate coercion as it stands right now is worse than state coercion. If I had lived in the 19th century I would be writing about nation states; if I had lived in the 17th, I'd be writing about religious coercion. All forms of coercion are bad, or at least need to be justified. Corporate control over resources is the most potent form of coercion IMHO today.

And if everyone understands the history (and the present) why are we talking about capitalism at all? The U.S. economy is significantly driven by two state-owned entities, the Pentagon and (to a much lesser extent) the National Institutes of Health. Those entities take taxpayer money and hand it over (in sometimes the most corrupt, no-bid contract ways) to private sector entities, who are often not held accountable when they don't do the job they've been paid to do. U.S. farm subsidies given to huge companies like ADM, Monsanto, and Cargill have all but derailed the latest round of WTO negotiations. Is this a free market system or a peculiar kind of corrupt socialism?

John V April 22, 2008 at 11:45 pm

Sameer,

I haven't read Bad Samaritans but I've read quite a bit on it and have watched the author interviewed about it.

He makes some interesting points. He's big on nurturing protecting infant industries in developing countries and points out, as you say, that most of western society, came into prosperity via this route. I get it. It's interesting and I've been mulling it over. However, that's not the whole story.

He also can't show that a more open economy would NOT have prospered just the same and I remain unconvinced that they would not have.

I find Rodrik's points in his book, One Economics, Many Recipes about needing to prod and bolster basic institutions in developing nations on a case by case basis more convincing…though he doesn't and cannot really explain how to do that.

Either way, little of "Bad Samaritans", as far as I can see, really applies much to us today. We have the fundamentals in place to prosper even more greatly under freer conditions. Whether we would be at this point without an interventionist history in the 19th century is another story.

Lee Kelly April 22, 2008 at 11:55 pm

Sameer Dossani,

The only problem with what you have written is the following sentence.

I just happen to think corporate coercion as it stands right now is worse than state coercion.

There is no corporate coercion. There is only state coercion, at least for now. There are no corporations amassing armies to enforce their own laws or consficate wealth, and why would they bother? The state has granted itself those powers and politicians are pliable creatures, always ready to flip and flop any which way they think might help them achieve fame, wealth and power.

The greatest public good which a government can provide for a polity is a battery of tight controls and constraits on its own power, and this is the one public good which politicians have the least incentive to provide, since the less power which they can exert the weaker position they are in to broker deals with voting blocs, corporate lobbies, special interests, etc.

If the state did not have such power, then corporations would have no such cheap and easy avenue by which to enforce favourable legislation, or to consficate wealth from the polity. The only option available to be successful, would be to provide consumers with products or services at a compromise of price and quality which is preferred to competitors. If that is corporate coercion, then corporate coercion is something I can live with.

Jason April 23, 2008 at 12:01 am

I hadn't heard of Dodge v. Ford before, but a quick search seems to show that it was merely an issue of maintaining special dividends to minority shareholders while Ford wanted to expand market share. If you believe it is about corporations being "socially responsible", you bought into 90 year old spin.

Any organization can be a charity — simply don't go public and sell the business to investors because almost all the shareholders are going to expect a profit. To issue shares and then turn around and squander their profits is possibly fraud and certainly a failure of fiduciary responsibility.

As LowcountryJoe wrote, is that old case stopping you or anyone from starting a charity? Does it prevent you from supporting your pet causes? If there was a new case that said corporations had to donate their profits "back to the community," I and probably everyone else would liquidate their holdings in those companies.

Brad Hutchings April 23, 2008 at 12:47 am

Sameer,

Clearly, we have a mixed economy, with some sectors more driven by government control and agenda and some sectors driven by entrepreneurs. I'm fortunate enough to work in the latter type of sector. Your biggest confusion seems to be "capitalism" with "corporatism". They are no more the same than "capitalism" and "industrialization". It is strange to me that liberal minded people fear the corporation, as it's the most directly controllable tool for whatever social change agenda is in vogue. Government can push off the costs of immigration control, health care, the war on drugs, reserve armed forces, racial integration, tax collection, you name it — all on corporations. Shareholders can demand "green" behavior, or women on the BOD, labor standards in foreign markets, you name it. And corporations typically just cave in on both fronts rather than fight for underlying principles of flexibility.

But before a US corporation gets terribly big, it's very free within the confines of the capital it can raise and revenue it can ramp up to try radical new ideas and develop radical new products, to find a niche of business that nobody else is doing or doing well. It can do so outside the purview of national industrial policy, state agencies, and local planners so long as it's not doing anything too dangerous or potentially harmful. Look at Tesla Motors, bringing an electric hot rod to market (belatedly) or Google, providing valuable web applications, or SunPower, whose chairman is all business, zero ecology. Or look at the business I'm involved with (see my link), promoting literacy by selling a software product and web service to schools. Even with "No Child Left Behind", we're very free to take the product and pricing wherever we've wanted, to really understand our market and really make a difference. That's capitalism, my friend… Not to be confused with ADM pushing bogus biofuels mandate that jacks up the price of food for everyone and ensure profits for its shareholders. The latter is corporate politics of the worst kind.

Sam Grove April 23, 2008 at 12:52 am

Sam, why is one either in favour of the status quo or a defender of the soviet union?

Did I suggest that?
Was not my intent.

If folks think that this system is the best we can do,…

I certainly don't.

Just because I hold that opinion does not make me a defender of state coercion

Remains to be seen.

and it certainly doesn't make me a defender of the soviet union.

Didn't mean to imply that you did. I just get the idea from my experience with progressives that they don't apprehend the nature of political power as I do. I attempted to illustrate that by citing the communist experiments in eliminating private corporate power.

So, questions.

How do corporations exert this control?

What is the lynch pin of corporate power?

If the government is to be used to eliminate this corporate power, how much power must the government retain to accomplish it?

How are 'the people' to keep political power from getting out of control…assuming that they are able to get it under control?

Who are 'the people'?

Raker Tooth April 23, 2008 at 2:05 am

"I should know better than to continue this discussion"

You've made for a great discussion. This is really good stuff. Thanks for the contribution.

Gil April 23, 2008 at 2:58 am

I can't help but likewise ask 'what is the magical power of the corporation that separates it from ordinary businesses and make some people want to disband the corporation structure'? There aren't that any benefits I can think of that would make an unprofitable business 'profitable' just because the owner(s) incorporated it.

But still what is it called when a private person hires an assassin to bump off someone they don't like in a world devoid of government? (And don't use the lamo argument of the private person loses business and goes broke because if that were true then violence would be a rare random occurence due to quick reciprocal negative feedback, but it isn't.)

Grant April 23, 2008 at 3:21 am

Some people here are pointing to government-funded or sponsored research as support of the claim that government can do useful things with its money. I think it sometimes can, but I don't believe the examples they point to often show the results they are after. I think academics in universities rarely contribute very much in the way of critical advances. They may come up with "big ideas" (since they are paid to sit around and think of "big ideas" all day), but so do other people. The problem is that "big ideas" are rarely the bottleneck of progress; that title generally falls to small details which can be seemingly trivial to the layman.

For example, people often credit DARPA for inventing the Internet. Its true that DARPA employees were intelligent, and we certainly owe them some gratitude. However, the technology they invented (packet-switched networks) was utterly trivial to implement in comparison to the other, supporting technology which the Internet needs to function at a useful level of performance. It needs fast, small transistors (CPUs, memory, etc), and advanced software languages and libraries. Transistors are private goods, and not financed by government at all. Comparing the development of TCP/IP to the development of the hardware needing to power the Internet is like comparing a tribal burial mound to an Egyptian pyramid.

The funny thing is that the R&D which largely drives progress in software on the Internet is generally all free, and not directly financed by government at all. An even funnier thing is that much of the progress in hardware is driven by games and porn.

IMO, the primary drive of innovation is not monetary incentives, but the incentives scientists and engineers have to do groundbreaking work and receive credit for it. Politicians have extremely weak incentives to fund any sort of useful R&D; fortunately the informal institution that is science and engineering produces better results.

babinich April 23, 2008 at 5:55 am

"The way economies go from being underdeveloped, anemic, and uncompetitive to becoming developed, strong, and aggressively competitive is simple and straightforward: government steps in." – from 'Bad Samaritans'

Government steps in; yep, it sure does…

Ask the people of Zimbabwe about government intervention.

These types of assertions, with all their implicit pollyanna, are nothing more than shades of 'Gigantisism'.

You know, that rush to modernity at any cost. Ask yourself what the cost is.

This also reminds me of the implementation of the Five Year Plan series by none other than Josef Stalin.

Industrialization ('Gigantisism') at any cost. We now know the cost in terms of lives and the ecosystem.

The free exchange of ideas must be able to flow globally in order to nurture young economies and help them mature into strong and stable economies.

Yes, markets must evolve; there is a maturation process.

LowcountryJoe April 23, 2008 at 7:23 am

I just happen to think corporate coercion as it stands right now is worse than state coercion. If I had lived in the 19th century I would be writing about nation states; if I had lived in the 17th, I'd be writing about religious coercion. All forms of coercion are bad, or at least need to be justified. Corporate control over resources is the most potent form of coercion IMHO today.

- The people here are trying to inform you that some large corporations use the state to maintain or increase their profits by currying favor from congress (via political contributions for favorable laws to the corporation).

- Was there a definitive separation between church and state during the time you would have written about it? My guess is that you would have missed the boat back then as well.

- All businesses have to persuade, not coerce, their customers to remain customers. Some busineses may have more leverage in persuasion because of the nature of their business (a natural monopoly) or because it operates under favorable legislation — legislation it may have paid for (a state problem).

- A corporation has to purchase the resources that it converts into goods/services. The state just takes through imminent domain and/or agencies designed to seize one's earnings.

Still think that the state is the least dangerous?

Also, 19th century = 1801 through 1900; 17th century = 1601 through 1700. These are the time periods you were refeing to?

Hammer April 23, 2008 at 9:11 am

I am a tad surprised that no one has pointed out the highly questionable statement that the economy is significantly driven by "the Pentagon and (to a much lesser extent) the National Institutes of Health."
Really? Let's think about this for a second. If both these entities are wholly government funded, it means they are only funded by taxes. As taxes are aquired by taking a percentage of the wealth generated by the economy, and both the Pentagon and the NIoH get but a percentage of those, is it not odd to say they "drive" the economy?
Even under the very optimisic (well, pessimistic from where I am standing) assumption that the NIoH gets 50% of all tax revenue, and taxes account for 50% of all economic wealth created, that still puts the NIoH at merely 25% of the economy's total wealth. I know for a fact that the Pentagon gets far less than 50% of tax revenue, so that isn't even worth considering.

So perhaps you can explain why you think the government is such a large driver, particularly those two organizations.

indiana jim April 23, 2008 at 10:14 am

Sameer wrote:

"On the line "capitalism is good for the earth", I just can't. We can agree to disagree on all kinds of things, but silly statements like that should at least be backed up by more evidence. . . "

There is certainly "more evidence" about the earth-friendliness of capitalistic vs. less capitalistic governance. Just consider the environmental mess the former USSR created (What did the waterways in East Germany look like compared to those in West Germany when Reagan challenged "Mr. Gorbachev, tear down this wall"? Or as I posted above consider the contrast between the deforestation of Haiti in comparison to the dense forests of the Dominican Republic. One of the points you are missing here is that earth-friendliness (a relatively clean environment) is what economists call a "normal good." So one of the by-products of the increase in wealth that accompanies free-market capitalism (and yes the existence of corporations, yes large ones that accomplish economies of scale and scope) is a rising demand for a cleaner environment. Corporate sensitivity to this is palpable; after all, As John Stossel so effectively keeps explaining to the masses: they have to PERSUADE us to buy their products.

Sameer Dossani April 23, 2008 at 11:08 am

Hmm, there are far too many points here for me to give meaningful replies. I'll try to touch on a couple:

1) Babinich – The point is not "look at Zim" or "look at Stalin" but "look at the U.S." "look at Japan", etc. Yes bad examples of state interventions in development abound, but there are some good (or better) examples as well. The story of Japan nearly giving up its auto manufacturing in the 1960s is telling. When their first experiments failed miserably, the Central Bank argued for abandoning the stupid experiment and focus on Japan's comparative advantage, but the Finance ministry persisted with its subsidies and tariffs until the sector was competitive. Now Japan and cars is like France and wines, right? State intervention. There's no example of development without it.

2) A number of posts seem to be challenging me to actually list means of corporate control, so here goes. a) Corporations are hierarchical coercive organizations internally. This is almost so much of a truism as to not need evidence. Plans are set by CEOs and boards and implemented by everyone else. The further down to the ladder you are, the less say you have in any decision. This runs counter to many definitions of democracy.

b) Throughout the 20th century (and now 21st century), corporations have been able to exert undo influence over political decisions. I don't think many of you disagree with this, you just cite the blame slightly differently. Your counter-argument might be "if government's didn't have the mechanisms of coercion in the first place, corporations couldn't exert that influence". Maybe. It would depend what a society without government coercion would look like. As it stands right now, United Fruit ordered the U.S. invasion of Guatemala in the 1950s, and the oil and defense industrialists in the Bush administration ordered the invasion of Iraq (and they're about the only constituency that has benefitted from it). A handful of corporations underwrite the campaigns for candidates of both major U.S. parties, ensuring that representatives are as accountable (if not more so) to their interests (that's where the money's coming from) than that of their constituents. I suspect you share these critiques, so I'll stop here.

c) Despite their faults, accountability measures for governments at least have some hope of success. Though the democratic systems we have in place are far from perfect (I agree with many of your arguments about state control, though I suspect we mean different things by the term) even the worst of them allows for some accountability by the people. Rousseau and Hume may have overstated their case when they elaborated their theories of "consent of the governed" but I think there's still a basic logic there. What that implies in our particular example is that the votes every few years and the other democratic measures we have count for something. Maybe not much, but something. Corporations are accountable to nothing but their own profit, and explicitly so. Again, in a world without these dysfunctional entities, where free association was the norm, not the exception, and where workplace democracy was taken seriously, I would be the first to say dismantle the state and all its coercive mechanisms. As things stand now, state regulations are about the only thing that stands in the way of the annihilation of the human species, so I'd say we need them.

indiana jim April 23, 2008 at 11:28 am

Sameer seems to have missed every word I just posted. Inconvenient ideas (too inconvenient) for him/her I suppose?

Sam Grove April 23, 2008 at 11:39 am

a) Corporations are hierarchical coercive organizations internally. This is almost so much of a truism as to not need evidence. Plans are set by CEOs and boards and implemented by everyone else. The further down to the ladder you are, the less say you have in any decision. This runs counter to many definitions of democracy.

That may be (and note that corporate structure is defined by corporate law), but this may be a problem for you if you work for a corporation.
That's what you agree to put up with for compensation.

If you don't like it there, then find another job.

If you don't like working for corporate structures, then find a small business that has a different structure.

And if that doesn't satisfy you, then start your own business.

If that doesn't work for you, go stake a claim in some remote wilderness and live off the land.

The thing about corporations is that if you don't work for one, then their power over you (except in the case of 2-b) is what?

Sam Grove April 23, 2008 at 11:58 am

Corporations are accountable to nothing but their own profit, and explicitly so.

Except in the case of 2-b, they do have to account to their customers.

For example, I tried graphics tablets from Aiptek but was not satisfied. I am now happy with my Wacom tablet.
When we bought a new car, we did not buy another Saturn but bought a Toyota instead.

Please tell me what control Saturn corp. or Toyota corp. exert over us other than producing what we wanted.

Brad Hutchings April 23, 2008 at 12:17 pm

Same here Indiana Jim… I provided specific examples of how corporations are influenced and controlled and directed for what many would see as "public good". Here's another: yesterday, my inbox was filled with what many of the major corporations I do business with were doing in the name of environmental responsibility. Apparently, I'm the one person who doesn't care, but they are falling all over themselves to reduce waste, eliminate their carbon footprints, recycle, and not club baby seals. I also pointed out that capitalism is not the same as corporatism, and there's lots of capitalism going on outside of giant corporations. Grant pointed out that the Internet we know today is a result of fast and cheap computers, plentiful bandwidth, etc. All things that DARPA and Al Gore didn't give us from a central perch. But hey, Sameer doesn't like corporations. OK, we get the point already.

Sam Grove April 23, 2008 at 12:38 pm

The thing about science nerds is that they invent things to prove they can, wherever they happen to be working.

So to claim government produced the internet falls short. The internet, and its origins, was created by people for their own purposes and not to fulfill some government mission.

It was the opportunity for profit making that brought computing and the internet to the rest of us.

Brad Warbiany April 23, 2008 at 12:45 pm

Sameer,

In that case, Henry Ford wanted to pay his Model T assembly line workers more than the market rate. His logic was that he needed more customers, and if Ford tried to lift these workers to middle class status, they would be doing the best thing for the long term profitability of the company. His shareholders disagreed and argued that he had a duty to maximize short term profit above all else. The judge agreed, setting a precedent that is still on the books.

Sounds like a property rights case to me. You fail to recognize that when he incorporated, Henry Ford no longer owned the company — the shareholders owned the company. As the owners, should they not be able to decide how the company sets its priorities?

Sam Grove April 23, 2008 at 12:47 pm

But hey, Sameer doesn't like corporations.

Corporations, like people can be good or bad. Being managed by actual people, their behaviors spring from the same urges.

Obviously would should not trust corporations with political power for the same reason we should not trust people with political power.

I'm wondering if 'progressives' are a manifestation of having had to give up on communism and now are focussed on social democracy. (Well, corporations are useful, but we have to keep them on a tight leash. By god, we can find some optimum balance between 'unfettered' capitalism and outright communism.)

We can keep up the illusion that capitalism = mercantilism, we'll just never discuss the latter and use the former to cover both. In fact, there's no such thing as capitalism, but the word sure is a handy straw man.

Brad Warbiany April 23, 2008 at 12:50 pm

Sameer,

and where workplace democracy was taken seriously

What's with the democracy worship? Democracy is a means, not an end. How are you sure that democracy would be the proper means to your desired end?

Sam Grove April 23, 2008 at 12:56 pm

What is/are the desired end(s)?

Sam Grove April 23, 2008 at 1:00 pm

What's with the democracy worship?

It seems that for progressives, democracy is the desired end.

As I said on another thread:

"Part of the problem is the belief, promulgated by government and progressives that democracy = freedom.

This leads to the assumption that the slightest fraction of input represented by one's vote is an expression of substantial power over the form of one's serfdom and that THIS is freedom."

Hammer April 23, 2008 at 1:26 pm

Pure democracy is just tyranny of the majority, as opposed to some other arbitrary number of people.

Freedom is measured as the absence of coercivce force. That's it. I don't know why so many progressives have issues with that, but it seems almost universally true that they do. For what it is worth, we could have a king and be more free if his only powers were to direct a volunteer army in war and enforce a very small number of laws. Compare to early Athens, where a fellow could be sentanced to death for no real crime, just because the majority voted for it.

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