Talk about giving fair prices to farmers, or free drinking water to citizens, or making workplaces comfortable for women, specially-abled people, minorities, and oppressed groups, or basic economic security for the poorest sections of society, and you would have chorus go up from the very top of the pyramid. “That’s not capitalism!” they would remind you and walk off in a huff. It is supposed to be a self-evident argument. How can you demand, expect, hope, or do something that isn’t in line with the “capitalism” they espouse? What blasphemy!
But the question is this. Where does this “capitalism” get such moral authority from that the human society must conform to its rules? Why can’t we do something that this “capitalism” doesn’t agree to? “Capitalism” is not a natural law, not a constraint of physics. It isn’t even a religion. No prophet or messiah has ever preached capitalism to humankind. No “avatar” has descended on earth to defend it. Why then is “capitalism” supposed to be the answer to Life, the Universe, and Everything?
Because Adam Smith said so. Apparently. He said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.” He made a case that when people – producers and consumers – act in their self-interest, it ends up in a situation where we produce what the society wants, in the amount the society wants to consume, and at a price that is fair and natural. Everyone is better off. So, the government should not try to direct what should be produced or consumed, and by whom. Society will figure it out and do it in a way that works for everyone.
That is such an attractive idea. Society can take care of itself. Through the “Invisible Hand”. Everyone will act only in their own interest because that’s what individuals are programmed to do. And everyone will still be happy.
Very attractive idea indeed. Except it doesn’t work. Two questions:
- Do the market forces really behave in such a benign way that an equilibrium is achieved where things are produced in the right quantity and sold at the right price?
- Even if production-price-demand equilibrium could be achieved, does it really ensure justice in the society and well-being of people?
The first question is almost tautological. Who even knows what the right equilibrium is. You can say that whatever market forces produce is the equilibrium. If Apple and Google make an insane amount of money, if Amazon destroys small businesses, if deep discounting by companies with tonnes of money distorts the market and drives the not-so-deep-pocketed competitors out, if companies that are earning very well fire employees in their moment of need, or others treat them poorly, it is all towards that equilibrium. You can say that and win an argument, but it would be ridiculous. This is no fair equilibrium. It can’t be. Because the conditions in which the “Invisible Hand” could ever work are simply impractical. The neat world of “Invisible Hand” assumes a uniform mass of producers, uniform needs of consumers, commoditized products that are not at all differentiated, infinite mobility for producers to start producing something else if the market demands, infinite ease and flexibility for the consumers to switch the producers they procure from, everybody having perfect information about market and prices, and very importantly nobody other than the government having the power to disrupt or hijack the mechanism.
None of this is true. And I particularly want to draw attention to the last assumption. That government is the only entity with power that can disrupt a system. That all producers and consumers are benign players in this game governed by the Invisible Hand.
A bigger lie couldn’t be envisaged.
Companies are not nice participants in this game. Nor is any individual with any power. They can break the “Invisible Hand”, if it ever existed, a million times over each day. The economy is not a simple one-on-one relationship between individual producers and consumers. Whosoever has power, whether they are the producer or a consumer in a transaction, uses it for their benefit. And if they keep getting away with it (they do!), we don’t reach a place where the entire society is better off. Nope! There are many who lose. Some figure out potentially nefarious ways of getting power.
There is no nice equilibrium that the market automatically produces. But even if you insist that whatever is there is the equilibrium, the next question is why should that equilibrium be considered sacrosanct? The only reason is that it was supposed to work for everyone. And that’s not the case. Most of you reading this are not living in a centrally planned economy. You are a part of an economy that allows producers and consumers to do exactly that, act in their self-interest. And it doesn’t make everyone happy. It creates extreme inequality, dire poverty, strife-ridden society.
So, whatever you decide on the first question, the answer to the second is a resounding “no”.
If you haven’t already done so, and are now preparing to dismiss this as a “communist” rant, let me tell you this. I have read enough history that I don’t want to live in a centrally-planned economy or a communist dictatorship, thank you. I don’t idolize China – though surprisingly many modern defenders of “capitalism” do. The point I am trying to make is not that the government should be in the middle of everything. The point is that the government is not the only possible entity with power that needs to be restrained and controlled. There are others too.
Also, the point is that when Adam Smith said the “Invisible Hand” takes care of the society, even apart from the impracticality of assumptions, he definitely didn’t mean that the rich and powerful individuals and corporations should be allowed to get away with whatever they want just because “market mechanisms” allows it
The point is also this. Adam Smith is considered the father of Economics and Capitalism. Neither of which he would have recognized. He was a scholar of moral philosophy. The book that birthed the field of economics was over 900+ pages. It wasn’t an Economics textbook though. Its extent was much broader. And it didn’t mean to claim that what we know as “economics” today is the only thing that should matter in the society. He wasn’t a defender of “capitalists” of his days, or of today. He was trying to explain how society works. And “capitalism is the best” argument has turned those explanations into inviolable rules that must govern how society works. That too, the cherry-picked ones. It’s messed up.
The point is that “If the market can’t correct it, then it must be right” is wrong!
Yes. Government not unduly interfering in the working of society, including economics, is good. No individual or institution – including the government – always knows the best. Market mechanisms give innovation and new ideas an opportunity. It’s great.
But! Taking a leaf from Faiz – “aur bhi dukh hain zamane mein mohabbet ke siwa”, innovation and new ideas in the market are not the only things the society has to cater to. The well-being of the entire society is most important. More important than innovation. If innovation caters to this well-being, it’s a win-win. But if not, tough luck. And remember, the well-being of society doesn’t mean people’s well-being just as a consumer. It also means their well-being as employees, as people who may not fit in or cannot cater to the restrictive machines market-mechanisms produce in the name of workplaces, as small business owners, as farmers, as just people!
Recently, when a company publicly announced “period leave” for women, it created an uproar among certain people – both men and women. Women will get a couple of extra leaves every month. How unfair is it to men? Companies won’t hire women. Teammates won’t hire women. Why would companies and teammates doing such things be okay? Because that’s how “capitalism” works. But turn the question around. Why is “capitalism” supposed to be obeyed? Presumably, because it leads to the betterment of all. But a system that can’t cater to the health needs of half the humanity does not lead to the betterment of all. So, how does it get to say that it is the system that must be obeyed?
So, no! “Capitalism” is not a self-evident answer to all the issues raised in the first paragraph of this post. They need solutions, they deserve solutions, and they can demand solutions from the system. Capitalism needs to change to really make things better for everyone. If it can’t figure out a way of not punishing women for a day or two of period pains, well – it better pull its socks up and find the answer. To this. And to everything else that it is doing wrong.