How dangerous is extreme capitalism?

Thoughts on the risks of unfettered Capitalism.
Last update: 20 December 2020

If we accept that global warming springs from failures of Capitalism (externalised cost of fossil fuels) then, in the unlikely event that a runaway greenhouse effect leads to something like the Venus Scenario, Capitalism will have played a role in the premature end of life on Earth.

Less alarmingly, recent analysis suggests that near-term collapse of society is inevitable, catastrophe probable and extinction only possible. The extinction is not of all life, merely humanity and many other species. That's much better.

Capitalism is a collection of mechanisms. Danger lies in allowing those mechanisms to run free. One oft-quoted advocate of uncontrolled Capitalism is Friedrich Hayek. Hayek's book, The Road to Serfdom is practically the gospel of neoliberal extreme Capitalism.

Karl Polanyi was a contemporary of Hayek. In the year that The Road to Serfdom was published, Polanyi published The Great Transformation. Among other things Polanyi blames failures of Capitalism for the rise of authoritarian regimes, of both the Left and the Right, in the lead-up to World War II. Today, Capitalism is again failing the bulk of the population. Authoritarianism is again on the rise. Whether Democracy can survive is in doubt.

Unfettered Capitalism tends to concentrate wealth. Fewer and fewer people control more and more resources. Eventually, there are too few who can afford to participate in markets. The economy collapses. Capitalism, it seems, doesn't do economics very well.

One impact of extreme wealth inequality is that wages are depressed, potentially below the cost of living. The true Road to Serfdom evidently runs via extreme Capitalism.

At the other end of the scale, those in whom extreme Capitalism concentrates wealth tend to become plutocrats. Democracy might continue in name, but the rich assume effective control, to the detriment of the majority.

Unsound foundations

The great strength of Capitalism lies in its ability to harness greed and self-interest. The great weakness of Capitalism is that it harnesses greed & self-interest. In greed & self-interest, Capitalism has practically unlimited sustenance, but it's a vicious beast. As Polanyi pointed out, in the absence of adequate control, Capitalism will do great harm.

Another contemporary of Hayek was John Maynard Keynes. Though often thought adversaries, they were actually colleagues. Keynes reviewed The Road to Serfdom for Hayek. In part, he wrote to Hayek:
"You admit here and there that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere, and that the logical extreme [total laissez-faire policies] is not possible. But you give us no guidance as to where to draw soon as you admit that the extreme is not possible and that a line has to be drawn, you are, on your own argument, done for, since you are trying to persuade us that as soon as one moves an inch in the planned direction you are necessarily launched on the slippery slope which will lead you in due course over the precipice."
Though he might not have admitted them to himself, even the prophet of Totalitarian Capitalism evidently had doubts.

Faith in Capitalist purity is not built on solid ground.

Flawed characters

Capitalism's shortcomings can be attributed to the characters that dominate it.

I long ago came to the conclusion that business attracts criminal minds. Not that everyone in business is a criminal, but personalities that are attracted to business too often resort to behaviour that’s criminal in character if not in law.

One stand-out example is Nestlé. In August 2019, it was reported that Nestlé exploited premature babies in India for clinical trials on breast milk substitutes. In the 1980s, Nestlé was found to be aggressively marketing breast milk substitutes in the third world. The product is distributed in the form of powder, which must be mixed with water. Western adults travelling to the third world are typically cautioned not to drink the water, yet Nestlé were promoting a mix of powder and that same water for infants with undeveloped immune systems. The outcome was a global boycott of the company.

In a 2005 documentary, Nestlé CEO Peter Brabeck-Letmathe implied that the company's right to sell water for profit outweighs any right that a community might have to clean drinking water.

Nestlé is just one example suggesting that business is generally incompatible with morality. The history also suggests that business is substantially incapable of learning to behave decently (and may in fact learn over time that it can get away with the opposite).

Is it rational to entrust our welfare to such deficient personalities?

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