Motivational Shades of Capitalism

So just because you run a business, does this mean you are a “CAPITALIST?” If I operate a consulting business out of my basement, am I a capitalist? What about a local bakeshop or an independent family farm, or a medical doctor or a dentist? Now if I asked you if the owner of the Walmart chain is a capitalist, you would be likely to say yes — and you would be correct. But what about the small bookshop with funny little owner-guy who knows every book in the shop?

Capitalism (the word dates from the mid-19th century) is an economic system where investment and ownership controls production and distribution to make possible exchange of wealth among private individuals or corporations. A different system by comparison might be a co-op or state-owned wealth. The underlying strategic goal of control of production and distribution is to dominate the market and capture all the potential wealth to a single corporation or conglomerate. That competitive strategy is devoid of any value structure except as it applies all tactics to increasing profit by gaining greater control of production and distribution. Huge corporations develop at the expense of smaller independent corporations and businesses. Employees within this logic are packages of energy and skill. Thus, one tactic is to replace current employees by machines or less expensive employees if that is possible because it leads to higher profits.

Not everyone who enters the business world intends to dominate the market and capture all the potential wealth. Many, perhaps even most small businesses of any stripe just want to provide good products and services in which they can take pride and bring home a reasonable living. So while they live and operate within a basically capitalistic society, they are not really competitive in the same sense that “capitalism” would be described. Furthermore, while employee costs (if they have employees) are important factors, in general the local business owner wants a competent employee and is willing to train them if they perform well. In fact, many small business owners have profit-sharing either implicit or sometimes explicit in their pay for employees.

Modern cooperatives such as groups of fishers or farmers who want to operate together in a non-competitive system so that they can defeat the “capitalist” competitive strategies of assimilation and domination in the market are using a strategy that recognizes and competes against capitalist style corporations, but the cooperative itself is not capitalistic because it does not intend to dominate the market by controlling all the production and distribution, instead the cooperative just wants a small share of the whole. Talking to local farmers and local fishers reveals a different attitude to the industrial fishing fleet owner or the mega farm owners. Industrial farm owners and fishing fleet owners must be concerned primarily with the rate of return and profit-lines to be returned to investment partners. Local farmers and fishers don’t have investment partners (other than family), and their interest is primarily focussed on the crops or animals in their care or the health of the fish stocks. Of course they must pay attention to their costs and earnings, but very few are interested in domination of a market. They just want to participate in the market and make a decent living. The prime motivation is often nothing to do with money, but instead to get out of or avoid ever getting into a salaried or contract position where they have to do what their boss tells them to do.

Thinking about our basically mixed economy this way is more likely to provide a better prediction of what happens in real life than attempting theoretically to force all business ventures into a “capitalist” concept wherein everything is “survival of the fittest,” “competition,” “ROI,” “market domination” and similar descriptors that just do not fit the majority of business motivations.

A walk down the streets of any town or small city, or along the streets of a big city, but away from the mega-buildings housing mega-corporations, shows lots of diverse little businesses doing just fine, but not making lots of money, where the shades of motivation of the owners are just as diverse as the products and services they offer, often with a personal flair. It is much like walking through an old field or an old forest or a virgin jungle, or swimming over a coral reef. What you see is a very diverse mix of animals and plants all of which have very different “shades” of strategies for survival. For sure some are highly competitive, but more are cooperative, or dependent, or parasitic, or some mix of those. The ones that take over the environment, such as large trees in a jungle, or massive corals on a reef, do run roughshod over smaller organisms, but in turn they provide many habitats for smaller organisms, some of which are cooperative, some dependent, some parasitic (like criminals in an econosystem), some symbiotic forming intimate cooperatives. So while the strategy of capitalism is to control the production and distribution to dominate the market, it is not the main strategy of most small businesses and indeed many large single-owner businesses. In fact, one could suggest that there are many motivations and strategies that produce successful businesses without attempting to control the production or distribution, but only to be able to share in a reasonable portion of one or both so the owner can enjoy a full life while focussing on the creativity and pleasure of providing good products and services in a social network of customers who are well known to the owners.

The tactic that makes control of production and distribution possible in a capitalist system is to acquire as much of the ownership or control of the assets that make or control the production and distribution. Inviting investors to add their financial resources to the purchasing power of a corporation markedly changes the outlook of the owners. Once there are shareholders, especially in a publicly traded company, the emphasis is on profit. Thus, the emphasis shifts to cost control, often sacrificing many good attributes of the product or service.

Milton Friedman (Capitalism and Freedom 1962) stated: “History suggests only that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition.” By “political freedom” Friedman meant democracy. That ideology is fiercely and usually blindly defended by many people. Richard Nixon incorrectly equated the economic system of capitalism to a social system which it certainly is not. There is not a whit of social responsibility in capitalism, it is entirely economic. Nonetheless his famous statement (Beyond Peace, 1994) that “Capitalism works better than it sounds, while socialism sounds better than it works” resonates with many people today. Unfortunately it also contains the seeds of social destruction. Equating a purely economic system with no intrinsic moral values or sense of responsibility for the consequences of its actions to a social system gives those in power ever increasing reason to excuse themselves for widening gaps between the haves and have-nots, for excusing treatment of employees as expendable resource packages of energy and skills, to be tossed or replaced for cheaper versions, and even in the extreme, to hold slaves.

In an ecological system, which has a similar short-term selective approach, the cost of failure is death. In an econosystem based on capitalist concepts, the cost failure for the business is also death. Unfortunately neither system cares about individuals — in both systems individuals have to care for themselves and their perceived kin or favoured associates. By comparison many small businesses, owners, kin, and favoured associates work to save the businesses, not to bankrupt them or to sell them in favour of moving onto something that has a higher ROI.

In ecosystems, many species of animals adhere to strict intra-species sets of rules of conduct. While individuals may vary in the obedience to these rules (animals cheat and lie too), the rules enable the observed degree of social interactions that we observe for any given species. Often the cheaters are punished, just as in human societies. Empathy for other individuals in animals varies markedly as well, but most mammals at least demonstrate a degree of empathy towards their own species. A few animals actually demonstrate a sense of empathy for other species as well. But the overriding ecological force on an individual level is to survive by ensuring that enough food, water, and shelter is available. Because people are animals in these same fundamental ways, people also strive to survive by ensuring enough food, water, and shelter is available. I could use precisely the same language to describe econosystems, substituting corporations for species. The individuals in both species and corporations are driven by identical biological forces.

Thus, while the look and feel of a biological system is different from an economic system, the strategies are the same. They both have a range of diversity (although species have been evolving for a lot longer than businesses so are more diverse). To characterize either as only based on competition alone is naive in the extreme. To attempt to remove the role of individuals in an economic system is equally naive. Finally to imagine that an unfettered economic system would be any less implacable with the fate of individuals than a biological system is not only naive, but it is unnecessarily inhumane and cruel. A “free market” would treat individuals exactly as a biological system would and literally leave them to die on the streets if they could not support themselves or became too much of a burden on the kin and associates. As in biological systems, rules would exist, but enforcement would be by the individuals or cooperatives of individuals — just as in the wild. And they would be deadly.

A free market is usually defined as a market where prices are determined by supply and demand, with little or no government control. This contrasts sharply with controlled markets in which prices, supply, and demand are directly controlled. Free-markets can exist outside of capitalism for example where enterprises are self-managed or in employee-owned cooperatives. Needless to say a completely free market with no controls would be coercive (think Somalia or Mad Max), so mechanisms to prevent coercion and to enforce contracts must be in place for a free-market to operate successfully. Smith, Hyak, and Friedman essentially argue that market economies are all driven by self-interest and not any sense of the common good. This fits nicely with the pure strategy of capitalism to control production and distribution so as to dominate the market and sequester the maximum profit to the owners. It is also is a good fit with the ecological model that is proposed in this article. It is not a good fit with the underlying assumption of an evolutionary model that Friedman proposes. For example, Adam Smith in his “Wealth of Nations” states: “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 self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” That statement is a good fit with ecological principles of competition but ignores the existence of all the other cooperative and alliance strategies found in both ecosystems and econosystems and which develop in evolution.

In their concept of free market, individuals or corporations must be free to make their own choices of what to produce, what to buy, what to sell, and at what prices. Central planning they argue is never sensitive enough to be efficient and will result in less efficient production and distribution of goods and services. It is of course difficult to dig into the mind of a dead person let alone a living person, but it is completely disingenuous to think a totally free market would work. Even the originator of the idea (Locke) recognized that government would be a necessary part of the control mechanisms. However, none of these economists displayed what one might think of as empathy for their fellow being. They all felt that persons should be able to take care of themselves and if not they don’t deserve any central help. The most a helpless person could expect would be assistance from volunteers or donors. Even Benjamin Franklin espoused these ideas. So today many of the governing planners in society wrestle with the push and pull of empathy versus theoretical capitalism. In practice, of course, a mixed market seems to be the only successful system in which certain services ranging from military services to roads, and health care are centrally provided and controlled. The bulk of the debate in modern society is about how much centrality is appropriate.

In cases where the disparity between rich and poor is allowed to reach the stage where people literally starve to death or cannot afford health care, instability of the state is threatened by revolution. Today in the US, the growing disparity between rich and poor is excused by using the economic theory of capitalism. When employees are dismissed or a company is declared bankrupt, it is the economic creditors (banks, taxes, secured loans, etc.) that have first priority on the assets, not the severance agreements or pension funds or any system to soften the blow of being without a job for the employees. In a biological system, there is also no central safety net for individuals. In an political system, the safety net can be as large or small as the policies of governance are constructed on the basis of either economy or by contrast the feelings of empathy and caring for people who will need help at some time in their lives. Pushing the human envelope further, it is also possible to have a governance philosophy that spans an entire nation, arguing that much of the intent of economy should be directed to supporting the health, education, well-being, and safety of its citizens.

It will be very difficult to have a strong empathetic governance policy in a nation that is driven by capitalism mistakenly or deviously equated to a social system.

On the other hand, if capitalism is recognized for what it is: a narrow band of investment-based corporations or businesses that intend to dominate the market by controlling production and distribution, then we can better understand the rest of the economy, that is a softer, more human/biological approach to finding a comfortable way to live. The bulk of the owners of small businesses are not based on implacable competition, instead they are based in finding a niche in the broad spectrum of the economic horizon where a local business can settle down and contribute to society while making a creative living for the owner. Often the association of businesses is cooperative and build on each others activities and strengths to improve the community. And no one is fabulously wealthy monetarily. Their wealth is in a sense of well-being.

In an ecosystem, there are always the huge organisms or the species that are eusocial and build defensive or aggressive armies. The key for the success of the other species is to develop ways and means to live in the cracks on top of, underneath, dependent on, or independently supply needed goods to the monsters as part but not all of their living strategies.

You would think people could develop such strategies to an even greater extent than the rest of the animal world. Why has this been difficult? It is difficult in the natural world as well because it takes extra effort that could otherwise be used for making a living for yourself. In an ecosystem, most organisms that fail to find those comfortable niches simply die. In a few species, other members of the group will try to take care of another that is injured or sick. Usually these groups are family groups. So the situation for these animals is similar to that for people. Families work hard to care for other members of the family. But because we are human, one might expect us to be able to care for a wider group than just our own family. To do so requires that a larger group (community, region, nation) collectively feels empathetic to the plight of someone other than a family member. Again in the animal world, a helping hand can also result in a reciprocal gift not necessarily to the one that helped, but just a recognition that another animal needed help. People do this as well.

Group actions can only take place if the group agrees to the governing principle or rule that allows it to happen. In human politics and economy, if the governing leaders feel that sense of empathy for others, they will put in place rules that allow a helping hand from a group action. If the leaders do not feel that way, even if the followers do feel empathy, group action is not likely to happen. This is why when “capitalism” (in the narrow meaning of the word) is seen as a social system that imposes rules on society, the leaders use the rule that businesses live or die by competition and the consequences to individuals are not part of the system’s responsibility. It takes exceptions to the idea of free wheeling competition to rein in the Somalia and Mad Max scenarios. Just how far those can be reined in depends on the leaders. Police, military, financial systems, health, education, and many more similar systems are the most commonly centralized services that rein in the free wheeling coercive forces. To provide a reasonable support system to everyone requires that the leaders rein in the forces that tend to spread the differences in resource levels between the rich and the poor. In a capitalist society, that means recognizing that a full economy is more than survival of the fittest through competition. Just as in an ecosystem, it is the ability to adapt to the conditions that often implies cooperative and dependent relationships rather than just competition.

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