28 April 2011

Competition and Capitalism

I remember as a child watching the Wild America series seeing three female lions hunt a Wildebeest.  After they killed it, a male lion approached, scared the lionesses away, and started eating their kill.  In both instances, the killing and the stealing, the narrator intoned it was an example of the survival of the fittest.  The footage left an indelible picture in my mind of the fierce competition that exists in the world.

So it was that many of us were introduced to the ostensibly inherent presence of competition.  From the beginning of life, many of us, especially in the US, are taught that the key to success is to win at all costs.  As most Americans head off to school around the age of five, and quickly find that out competition is embedded in every activity from answering questions in class to being first in line.

This idea of competition stands as the centerpiece of the American capitalist machine that ingrains its mantra of rugged individualism and ambition as the certain path to success.  Adam Smith wrote in The Wealth of Nations that competition is the result of self-interested individuals vying with other equally self-motivated individuals for accumulation.  Smith argues that the result of open competition will be the production of the goods that society wants, in the quantity society wants, and at the prices that society is able to pay.  For Smith, it was competition that controlled rampant greed and self-interest.  The reason one ambitious person won't get all of the wealth is that there are others who are competing with him/her.  As long as there is competition then the society functions healthily.

According to Smith's theory, the struggle to accumulate wealth keeps production growing and keeps the labor force working.  The natural downfall of the system is when the the capitalists run out of their means to produce, namely the laborers.  In order to combat the loss of laborers, Smith introduced the law of population.  As long as the population grows, there will be more and more laborers to produce. 

In Karl Marx's critique of capitalism, Das Kapital, he paints the picture of a perfect capitalist system that must keep producing so that capitalists can keep accumulating. As Robert Heilbroner wrote, "he [the capitalist] must strive for accumulation, for in the competitive environment in which he operates, one accumulates or one gets accumulated."  In other words, if you aren't taking advantage of someone else, someone else is taking advantage of you.

The flaw in this logic, as Marx illustrates, is that if all of us endeavor to be entrepreneurs and successful capitalists, everyone will strive to accumulate, wages of the labor force will rise, rising wages leads to no profit.  The entrepreneur must introduce time-saving and labor-saving machinery in order to continue earning profits.  This is of course an overtly simplified summary of Marx's criticisms of capitalism.  But what Marx describes as the result of the competition between capitalists is "That which is now to be expropriated is no longer the laborer working for himself, but the capitalist exploiting many laborers. This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralization of capital."  In other words, fewer people have the ability to accumulate the wealth in the system.  Competition effectively eliminates competitors and monopolies rule.  As fewer people obtain more of the wealth and control the commodities, so "grows the mass of misery, oppression, slavery, degradation, exploitation."

American capitalists will argue that the fall of the Soviet Union marked the victory of capitalism. (It should be pointed out that again the capitalist is winning or losing a competition.)   But capitalists fail to realize that not every system requires competition in order to operate successfully.  Unlike the basic tenet of capitalism, a socialist society is not naturally promoting competition amongst its participants.  On the contrary, a socialist society is more concerned with the collaborative efforts of the whole versus the singular accomplishments of the few. 

A capitalist might argue that without competition, there is no innovation or motivation to create.  Is it possible for a socialist society to encourage innovation?  On smaller scales, there are communities, companies, and villages in the United States that function this way.  Additionally there are countries that function more communally than does the United States.  Japan, Korea, and Finland are just a few countries in which society is more concerned about the whole versus the individual yet offer remarkable innovation.  One of the healthiest countries to be born in is Finland.  In each of these systems, capitalism is at work but it is highly regulated by a central government.  The result is far more cooperation and collaboration and far less income, education, health, and legal disparity.

Looking more closely at Japan provides a good example.  First is Toyota's CEO who earned $900,000 in 2009.  Japan ties the earnings of CEOs to a percentage of the average workers' salary.  Second, in schools, the beginning teacher does not teach full time.  For the first few years, a beginning teacher spends time planning, observing other more experienced teachers teach, and receiving myriad feedback on the effectiveness of his/her teaching.  The focus in the school just as it is in the corporation is how the individual effects the functioning of the whole.  Third, health insurance is far more efficient and reliable than the US system.  When the Japanese establish their health care system, they analyzed many different systems and purposely chose not to follow the US model.

In contrast, in the US in 2009 Rick Wagoner the CEO of GM earned some disproportionate amount of money in the 10 to 20 million dollar range.  In American schools, beginning teachers get thrown into a classroom, told to make sure no students get hurt, receive less books than students, no resources, and get little if any support.  If that teacher seeks help, he/she is placed under scrutiny and suspicion of being an inadequate teacher.   Is it at all surprising to learn that the average beginning teacher today lasts about 4 or 5 years before burnout sets in?  In health care, there was an attempt to establish a national health care service that was denied by conservatives who believe in privatizing the health insurance industry.  The belief being that competition will bring prices down.  It hasn't and it won't.

The differences are startling.  In Japan the community comes together not in a competitive or malicious manner, but in a much more constructive and collaborative manner.  Every citizen has affordable health care coverage.  In the US, the teacher and CEO are thrown into the fire and expected to thrive on his/her own or face replacement, although the CEO is compensated disproportionally, and thousands have gone bankrupt unable to pay for the costs of their own health care.

In Korea, the same illustrations can be drawn.  However, there are indications that the capitalist effect is taking root in Seoul.  Recently protests erupted over concerns about corruption in the government, about some people gathering more wealth at a faster pace compared to the average workers.  The Gini index indicates that income disparity is a growing global trend, even in Finland and Japan and Korea.  The trend will continue as the capitalism thrives on cheap labor.  As the wages of global labor rise, however, corporations will rely on more and more drastic measures in order to accumulate.

The growing disparity in America and internationally indicates that Marx's criticisms of capitalism carry more weight, and perhaps more accuracy, than can be quickly denied.  Trends indicate that the income gap is in no way closing.  Conversely, poverty in America is on the rise while the population of the working (or as in the case of Milwaukee, non-working) class (the proletariat) is growing.  There is some hope that the situations for most of the world's poor may be improving (see Fareed Zakaria) even while income inequality rises.  But America will be judged on how it tends to the welfare of its people.  Smith also recognized this responsibility and noted that "no society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and miserable." 

Is this happening in the US?  Are the greater part of the population poor and miserable?  Examples abound, e.g. Detroit, Milwaukee, etc.  It will be interesting to see how the cities hit by the disastrous storms this week rebound from the devastation.  Is this the next Katrina recovery, which has not been handled admirably?

Reflecting on the scene of the lions, what I failed to recognize was the coordinated hunt of the lionesses.  What turns out to be a more accurate observation of nature is not the sense of competition but that animals display a large variety of collaboration and cooperation techniques.  Although life is a struggle, it more often than not turns out to be survival of the most adaptable and the most cooperative. "Despite the depiction of nature "red in tooth and claw," cooperation is actually widespread in the animal kingdom."

Who will adapt to the changing climates of the world markets?

Will America be able to compete in the face of growing disparity and amidst the rise of the conservative base that seems determined not to negotiate and collaborate? 

What will America look like in 50 years?  Will many of the cities be abandoned because of the reckless decisions of current legislators who gave up on public education, public transport, went all in on privatization, and left the poor in the cold?
Read more about Marxism: http://www.marxists.org/archive/marx/works/1867-c1/
Read more about the debate between Socialism and Capitalism: http://www.idebate.org/debatabase/topic_details.php?topicID=400
Read about the defense of Socialism: http://www.marxists.org/archive/bax/1898/12/defsoc.htm
Read more about Socialism: http://home.vicnet.net.au/~dmcm/
Read about economics: http://www.pbs.org/wgbh/commandingheights/hi/resources/
Read about political science and animal behavior: http://politicalscience.stanford.edu/faculty/weingast/BiologicalInstitutionsManuscript1.pdf
Read more about Capitalism and Competition: http://jparnell.com/blog/?p=254
Alfie Kohn's book on competition: http://www.alfiekohn.org/books/nc.htm

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