A reader emailed me this piece tonight calling for the elimination of capitalism based on 6 points. This is an argument that I have seen cropping up increasingly with time so I felt a proper rebuttal was necessary. I offered my responses in bold:
- Amorality – increase of individual and corporate wealth is the only core principle of capitalism. Recognition of any social concern or relationship to the natural world that transcends the goal of increasing capital accumulation is extrinsic to the system.
CR: This is a broad generalization intended to demonize all capitalists. Individual or corporate wealth is not the “only core principle of capitalism”. Yes, it’s true that there are some capitalists who view the world through this prism, but there are a great many more who view themselves as part of society and utilize the power of the capitalist system to give back to society by providing goods and services that benefit society. The beauty of the capitalist system is that it rewards those who give much to society. The best and most prominent capitalists understand that great rewards can only be achieved through giving much back. Clearly, this is not always the case, but let’s be careful about sweeping generalizations here….
- Dependence on growth – capitalism relies on limitless growth, but the natural resources essential to wealth production are finite. Super-exploitation is exhausting those resources and destroying the ecosystems of which they are a part, jeopardizing human survival as well as that of other species.
CR: Growth is not merely an inherent component of capitalism. It is inherent in human life. We are evolving creatures who are always striving to become superior. It is misleading to claim that capitalism is dependent on growth. The human being in inherently dependent on growth. Capitalism is merely one system through which we achieve this. The French philosopher Volney wrote about this in his classic Empire of Ruins. He called man’s innate desire to improve and make progress “natural law”. He said:
“And what is the natural law?” replied the simple men. “If that law is sufficient, why has he given any other? If it is not sufficient, why did he make it imperfect?”
“His judgments are mysteries,” said the doctors, “and his justice is not like that of men.”
“If his justice,” replied the simple men, “is not like ours, by what rule are we to judge of it? And, moreover, why all these laws, and what is the object proposed by them?”
“To render you more happy,” replied a doctor, “by rendering you better and more virtuous. It is to teach man to enjoy his benefits, and not injure his fellows, that God has manifested himself by so many oracles and prodigies.”
- Propensity to war – since the only goal is to accumulate rather than distribute wealth, resources that produce wealth must be controlled; therefore war is inevitable.
CR: This confuses the term “wealth”. As I have previously explained, the ultimate form of wealth is time. With more time we can consume, produce (or not consume or not produce) to our heart’s content. It is primarily time that constrains what we can achieve, how we live, where we live, etc. Capitalists are the ultimate time creators through greater efficiency in our lives. See here for a fuller explanation.
Lastly, control is not synonymous with war. Any system that is corrupted by control will have a propensity towards conflict. That is not a flaw in the system. It is a flaw in the way the users allow the system to be regulated.
- Intrinsic inequity – without any constraining outside force or internalized principle of social equity, capital accumulation leads almost exclusively to more accumulation, and capital is concentrated in fewer and fewer hands.
CR: Capitalism works best when it is regulated. Money is a social construct and one of the primary tools used in the capitalist system. Money is organized through the institution of government. If it is unregulated it will inevitably become corrupted by its users. This is not a flaw of capitalism. It is a flaw of its users. Capitalism works best when there is a healthy (though not excessive) level of oversight to ensure the integrity of the system.
- Anti-democratic – democracies are corruptible: wealth can purchase most of the representation it needs to get the laws necessary for further accumulation and concentration of wealth. This means that as the concentration of wealth increases, democracy is degraded and ultimately destroyed.
CR: Capitalism does not destroy democracy. The users of democracy allow capitalism to destroy democracy. There should be no such thing as the majority being controlled by the few in a system in which the majority can always vote out public representatives. If the system is being controlled by a minority then the majority need to wake up to this corruption. Again, this is not a flaw of the system. It is a flaw of the users in understanding the system.
- Unproductive of real happiness – human happiness and wellbeing are demonstrably tied to other factors besides capital accumulation. Extreme poverty is clearly unproductive of happiness, but so is wealth, past a relatively modest level. Happiness is most widespread where there are guarantees that basic needs will be met for all, wealth is more equitably distributed, and bonds between people and the natural environment are still stronger than the desire to accumulate wealth.
CR: Money is a tool that is utilized by society in an attempt to advance prosperity. But money is not synonymous with wealth or happiness. Money is merely a tool which may or may not help one achieve happiness and true wealth. If the capitalist believes money will automatically generate happiness then he is misinterpreting this tool. The wealthiest capitalists are those who give much to their society through goods, services and philanthropy. They use the tool of money not only for their own personal gain, but understand that money is a social construct that offers the greatest rewards when one is able to give much to those around him/her. Capitalism, in fact, can be totally consistent with real happiness. However, if its users are corrupted into misunderstanding this powerful institution then they will inevitably corrupt the entire system.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.