Big Business Corporatism Versus
Free Market Capitalism Right now, there is a lot of talk about the evils of “capitalism”. But it is not really accurate to say that we live in a capitalist system. Rather, what we have in the United States today, and what most of the world is living under, is much more accurately described as “corporatism”. Under corporatism, most wealth and power is concentrated in the hands of giant corporations and big government is used as a tool by these corporations to consolidate wealth and power even further. In a corporatist system, the wealth and power of individuals and small businesses is dwarfed by the overwhelming dominance of the corporations. Eventually, the corporations end up owning almost everything and they end up dominating nearly every aspect of society. As you will see below, this very accurately describes the United States of America today. Corporatism is killing this country, and it is not what our founding fathers intended. Corporatism is actually not too different from socialism or communism. They are all “collectivist” economic systems. Under corporatism, wealth and power are even more highly concentrated than they are under socialism or communism, and the truth is that none of them are “egalitarian” economic systems. Under all collectivist systems, a small elite almost always enjoys most of the benefits while most of the rest of the population suffers.The Occupy Wall Street protesters realize that our economic system is fundamentally unjust in many ways, but the problem is that most of them want to trade one form of collectivism for another. But our founding fathers never intended for us to have a collectivist system.Instead, they intended for us to enjoy a capitalist system where true competition and the free enterprise system would allow individuals and small businesses to thrive

"The fuction of government is to represent the middle income and working people rather than just the wealthy and the powerful. [We have come to] worship greed."

-Representative Bernard Sanders

ism

Definition and Origin:

Capitalism is defined as an economic system characterized by private or corporate ownership of capital goods; by investments that are determined by private decision; and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

Adam Smith is often referred to as the “Father of Capitalism.” He described a system in which an “invisible hand” would maintain the market without government intervention. The government exists merely to protect individual rights, which according to Smith, also include the establishment of an "army to protect against foreign invaders; a police force to protect against domestic criminals; and a court system to settle disputes that arise, enforce contracts, and punish criminals according to objectively predefined laws."

Objections to American Capitalism:

no capitalismCapitalism is based on “free enterprise” and individual rights. This misleadingly suggests that capitalism is economically and socially progressive. However, it rather “benefits the selfish interests of a few, the privileged elites of the developed world, and damages the interests of everyone else. This is basically because, following Marx’s theory if surplus value, when a capitalist makes a profit, they are essentially stealing value which is produced by labor.”

“Capitalism discourages local production and encourages unregulated growth of gigantic cooperation that exploit local labor for profits elsewhere.” This is justified by the fact that crimecapitalism undergirds “the freedom to act as an absolute by right” and the “credo of the rational egoist who recognizes no authority higher than his own judgment of the truth.” Such a theory provides a scapegoat for people who harm others in the pursuit of self-interests. According to capitalist, violating one’s rights for the “public good” is contradictory since that individual is a member of the public, too. Based on this individualistic mentality, capitalists are able to vindicate themselves from the immorality of inequality. It allows them to be free of conscious despite that they live in a country where 23.5% of the country's total income is made by the top 1% of Americans.

Capitalism purports that it is a system that promotes “free will;” however, the economic disparity that capitalism evokes diminishes the possibility for social mobility, thereby constricting people to not only certain classes, but also to certain environments and opportunities. Capitalists will refute that the poor are disadvantaged and unable to gain any wealth because they have none to begin with, and attest to that fact that rather those who are poor are not opportunistic or capitalist corruptionmotivated. Capitalists often affirm, or at least suggest, that those who are poor are so willingly because the “free enterprise” system of capitalism is constructed so that anyone, with hard work, can gain wealth.

Capitalists espouse supply-side economics, otherwise known as the “trickle-down economics,” in which providing tax cuts and other benefits to businesses indirectly helps the rest of the population by incerasing investments in infrastructure and markets. However, this translates in to tax cuts on capital gains, corporate income, and high individual income taxes, thereby exclusively benefitting the wealthy.
Capitalism encourages corruption, economic disparity, individualism, hyper-competitiveness, and consumerism. This wensite is an objection to the viability of an effective capitalist governance, with focus on its political, economical, and societal effects.

American Capitalism has Failed and Needs to be Replaced
Posted on October 3, 2011 by Bob MacDonald | 5 Comments
Participatory Capitalism is the Answer to What Ails Our Economy
It is news to practically no one that the American economy continues to bumble and stumble along at a disheartening low level of activity. Fourteen million people who want to work cannot find jobs, and new unemployment claims continue to rise. Home sales stagnate, prices fall, and foreclosures mount. The sad state of the economy has millions of Americans questioning whether capitalism really works. A recent national survey, for example, showed that 75 percent of those polled say the country, meaning our capitalistic economy, is on the wrong track.

And it is. But it isn’t capitalism per se that has failed us. It’s the new breed of capitalism that has pushed us off course. And it can be fixed.

Capitalism Worked Well for Thousands of Years

There is evidence that capitalism existed in a rudimentary form among Assyrian merchants as early as 2,000 BC. Over the ages, capitalism has evolved into many configurations, but the basic tenets of the system have remained steadfast: Capitalism is an economic system under which a country’s trade and industry are owned privately, rather than by the government, and those who take the risk to invest in the success of a venture receive the rewards.

Under traditional capitalism the employees who provide a service to the enterprise receive wages, but do not have an ownership stake. This means the workers receive their agreed upon compensation, irrespective of whether the enterprise makes a profit or a loss, but have no rights to the profits. That does not mean, however, that workers do not take a risk. If the enterprise is not profitable, the workers risk loss of benefits, reduction in pay and even unemployment.

The early European immigrants to America were by definition risk-takers who sought the opportunity of religious, political and economic freedom. Well before the revolution, this fundamental desire for freedom planted the seed of capitalism deep into the furrows of the American economic system. The adoption of the US constitution in 1787 only served to codify America’s commitment to capitalism and rightly so. The incentive of private ownership and the motivation of profit, combined with the actions of the government to encourage individual freedom and effort, are the primary factors that allowed this country to develop its bountiful resources and become the world’s political and economic leader. Americans and capitalism were meant for each other.

Capitalism tends to evolve through a number of iterations and American capitalism is no exception. Early American capitalism was a form of Mercantilism. During this time the young American government viewed the development of private business interests to be in the best interests of emerging national well-being and economic stability; and it took an active role in developing private enterprise. Once a solid base of private enterprise had been established, the system changed into what is called Free-market Capitalism. (For America this was during the late 19th and early 20th century.) Under this form of capitalism the government withdraws and allows the “free-market” to find its equilibrium in terms of supply and demand and prices. The government views its role as limited to protecting property rights (but not necessarily individual rights). During the 1930s – in response to the Great Depression – President Roosevelt guided America into what is called Social-market Capitalism. In this phase, while there is still private ownership of production, the government does become involved (lightly at first) in regulating the actions of business in the areas of competition, prices and consumer protections. Also during this period the government will begin to provide “social safety nets” with programs such as social security, unemployment benefits and labor rights.

Where Capitalism Took the Wrong Turn

America has now moved into a form of capitalist evolution called Corporate Capitalism. Under this configuration the basic elements of free-market and private ownership remain, but the system is dominated by hierarchical, highly bureaucratic corporations that are fixated on narrow self-interests for profits with little or no concern for the best interests of the nation, society or workers. And therein is the problem.

As corporate capitalism takes hold, mergers, acquisitions and technological advances create larger and larger corporations at the expense of smaller ones. This results in the construction of higher “barriers to entry” which diminish the incentive to innovate and reduce potential for real competition. This causes private capital to become concentrated in what is nothing short of an oligarchy of private capital.

When private capital is concentrated in the hands of a few, it facilitates the creation of vast political and economic power that can’t be effectively checked, even by a democratically organized political society. One need only make a cursory review of the current election financing system to see this harmful concentration at work. In a recent ruling (Citizens United v. Federal Election Commission) the Supreme Court gave license to corporations to spend unlimited amounts in election campaign financing. The power of this concentrated private capital to influence elections can easily overpower the electorate, strangling the free-flow of information to the electorate and severing their connection with the elected representative. As a consequence, the voter is deprived of objective information to make election decisions and those elected as beneficiaries of corporate financing are less inclined to represent and protect the interests of individuals.

An even more daunting threat posed by corporate capitalism is when economic power becomes so concentrated in larger and larger institutions that the failure of only a few of these corporate oligarchs can trigger the collapse of the entire system. We came to understand the cost and pain of this potential catastrophe when the phrase “too big to fail” entered the lexicon of economic discussion.

The Antidote to Concentrated Capital and Political Influence

When the power of concentrated private capital is allowed to combine with the power of political influence as it is under corporate capitalism, it is not unusual for corporate profits to soar, while employment remains flat or actually declines. The truth is that corporate capitalism is a corrupted form of capitalism, so much so that it should not even be called capitalism. It is corporate capitalism that has failed the American Dream and needs to be radically reformed. To regain the vibrancy of a growing economy, America should institute a new form of capitalism called “Participatory Capitalism.” Under participatory capitalism, ownership is redefined and everyone who takes the risk of working with an enterprise and has the ability to add value are allowed to share in the value created by their efforts.

What makes capitalism the most efficient and equitable economic system devised by man is the simple idea of risk and reward. It’s called “having skin in the game.” Capitalism offers individuals the freedom to risk their personal capital in an enterprise with the understanding that failure of the enterprise will mean the loss of their capital, while success of the enterprise will translate into a significant increase in capital.

The great historical capitalists of America – Rockefeller, Ford, Carnegie, Harriman, Durant and multitudes of others – all accepted the risk of investing their personal capital. They arrived on the scene when America needed the infusion of huge amounts of capital and commitment to build the infrastructure – factories, transportation, steel and energy – needed to lay the foundation for economic growth. These great entrepreneurs truly had “skin in the game,” and it showed in the results they achieved. Of course, they were lavishly rewarded for the risks and efforts they took, but they earned and deserved it.

The Era of the Fake Capitalists

Today that system that worked so well to stimulate the American economy is despoiled and infected with fake capitalists. Those who run the gigantic corporations of today no longer have any real “skin in the game.” And yet, they expect to be rewarded – in the form of obscene salary and bonuses – as if they did. Few of these individuals have put their personal capital at risk and any ownership they have was given to them by the board of directors. If they do fail, their fall is cushioned by the comfort of multimillion dollar severance packages. How can this be called capitalism? It is even stretching the term “capitalist” to apply it to shareholders. When someone buys stock in Ford or General Electric today they are not putting capital into the company so it can expand and grow. They have no material power to add value or make a difference in how the company performs. The capital they “invest” goes, not to the company, but to the person from whom they purchased the stock. This is no more than a form of gambling.

Actually, in a world of participatory capitalism there is nothing wrong with the concept of compensating the CEO (after all, he is really just an employee) on the basis of how a corporation performs over time, except that it does not go far enough. Today there is a new type of “capital” that is needed to build the future of an enterprise just as much as the cash of Rockefeller and Harriman was needed to build the infrastructure of the economic system. Modern capital can be defined as the education, experience and commitment of the employee that is invested in the enterprise. The employees of an organization are no longer automatons hired to perform tasks, but highly educated individuals who have the talent and power to add value to an organization and thereby determine its future. If individuals are willing to invest their personal capital of talent, experience and commitment in a company, then they should share in the value they add. In reality, these brave souls are the true capitalists of the day. It is no coincidence that private equity firms – who are putting old-fashioned cash into a company – will not invest unless there is a wide swath of ownership and risk shared by those who work at the company.

What will save capitalism in America is a return to the basics of capitalism that demands true risk and offers reward for those who have the power to add value to an enterprise and invest their capital – in any form – that gives them “skin in the game.”

And the Moral of the Story …

Two actions are needed in order to re-invent real capitalism in America: It starts with balanced participation of government to re-establish an environment that assures true competition, creativity and innovation. As the “trust-busting” efforts of government in the early 20th century opened the way for widespread economic opportunity, the government now must use its regulatory authority as an “oligarchy-buster” to make sure that no enterprise becomes so large or reckless that its failure will threaten the entire system. This should be combined with the creation of participatory capitalism that recognizes a new definition of investment and ownership. It is one that allows those who take the risk of adding value to an enterprise to be rewarded by participating in the value they add.

To do so will bring a re-birth of true capitalism to America and with it a revitalization of the economic effort that created the economic power of America.

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This entry was posted in Business Management and tagged Bob MacDonald, Capitalism, corporate capitalism, history of capitalism, Participatory Capitalism. Bookmark the permalink.

The United States is built upon an economic system to which we have applied the label “Capitalism.” We have been conditioned to believe in the virtues of this system, and we often accept this uncritically. We are told that capitalism is far better than socialism, communism, fascism, etc. And yet Noam Chomsky, when asked what he thought about capitalism, replied, “I think it’s a great idea if we were to ever try it,” (Chomsky, 2002). The question we must ask is, what does Mr. Chomsky mean when he says such a thing? To answer this question, we must explore the dichotomy between the theory of capitalism, and capitalism as it has come to be practiced in reality.

The US was created during the American Enlightenment, and its political ideas were based primarily on the philosophy of John Locke. Locke argued that people have certain inalienable rights such as the right to life, liberty and property (Stanford Encyclopedia of Philosophy, 2009). It is this right to the private ownership of property that is central to capitalist theory. Socialism and communism, by comparison, are essentially collective ownership of property. The question of capitalism turns on the word “private.” To Locke, private ownership of property meant ownership by persons. This is an important concept because if a person is able to own property, then that person is presumably able to own the product of his or her labor. The central tenant of capitalism is the idea that the individual can trade his labor for property in its various forms.

The issue that exists today is related to the word “person.” In Locke’s day, the word “person” was used to describe a living, breathing human being. That definition has changed since then. It was with the introduction of the 14th amendment to the US Constitution that the courts began to redefine the word “person.” The 14th amendment was implemented at the end of the Civil War as a means of ensuring all people (particularly the recently freed slaves) equal protection under the law. The 14th amendment reads as follows:

SECTION 1.

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
– 14th Amendment to the United States Constitution

Capitalism or Corporatism? - Exposing The TruthCorporations soon began to use this law to their advantage. In 1886, the Supreme Court case of Santa Clara v. Southern Pacific Railroad Company resulted in a ruling in which it was determined that corporations were “persons” under the law and thus could use the 14th Amendment to protect their rights. This meant that corporations were now entitled to free speech, protection from searches and seizures, and could not be discriminated against. Suddenly, corporations (artificial persons) had the same rights as real people (Hartmann, 2010). With that, the floodgates were opened, and corporations began using the 14th amendment to consolidate corporate power. Indeed, of the 307 14th Amendment cases brought before the Supreme Court from 1886 to 1910, only 19 dealt with African Americans, while 288 were lawsuits brought by corporations seeking to expand their newly acquired rights as Constitutional “people” (Hartmann 2010).

With the acceptance of the corporation as a legal “person,” corporations could now own property as persons. The result of this has been that vast amounts of property are owned and controlled collectively, in the form of the corporation, while maintaining the illusion that said property is actually owned individually. We now consider this to be “private” ownership of property because it is not state owned. But it is still collective in that corporations are collective by design. Therefore, the end result for the average human “person” is a collectivization of property; the only difference being that the government does not have direct control of that property.

Collective ownership of property is socialism/communism, and if we look at the average worker in the average company, we see this borne out. The moment the average worker enters his or her place of employment, he or she walks into a socialist environment where his or her value is a function of what he or she contributes to the profitability of the company. A wage is paid, but that wage is not the full value of the labor produced by that employee; it is instead a reduced value, the difference between the actual value and the reduced value being that which the corporation takes from the employee in the form of profit. Many companies coerce the prospective employee into signing intellectual rights clauses relinquishing any marketable ideas or inventions the employee might develop while working for the corporation. The individual worker no longer owns the product of his or her own labor, the corporation owns that product. The worker has thus been reduced to a cog in a machine. This is the antithesis of the Lockean philosophy upon which the US was founded.

The result of this is the concentration of wealth (and therefore power) in the hands of an oligarchical few. Since corporations are treated as “persons” under the law, they can now contribute to political campaigns under the full protection of free speech afforded natural persons. With the Citizens United ruling in 2010, corporations can spend all the money they want on advertising during campaigns without having to disclose what they are spending. Thus corporations having far greater influence in governmental matters and the passing of laws than the natural person has. The result has been a continued shift of power into the hands of the few who manage the corporate interests. This has become so prevalent that government, in many ways, now acts as the enforcement arm of corporate interests.

Because money is now thought of as speech, the voice of the natural person or human being is drowned out by the noise of the corporation. This results in the corporate person having a greater influence on the government than real people do. This is not capitalism; it is instead corporatism, a system where corporate interests and government interests are the same. A free society depends on the voice of the people—real people—bei

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