Misaligned incentives: Capitalism
Why accept that capitalism is perfect? There are flaws and identifying them is important.
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Not a single empire exists to this day. Every civilization has to meet a disastrous fate. This is mainly due to small fallacies that compound in the longer timeframe and end up breaking something so massive that no one expected it. Downfalls are like that, no one has a clue of the effects the prevalent conditions are causing and is unaware of the consequences. Then, something out of the blue happens and things start to fall apart. Hence, it is important to question the quotidian beliefs and analyze if the ideologies passed onto us are perfect or have breaking points.
Capitalism, today, is considered to be the gold standard by most affluent individuals primarily because of the doors to progress it opens and allows every person to perform according to his abilities. There is no doubt in the fact that most modern inventions have been possible because of the benefits of capitalism and our horizons have broadened on a large scale. Many amenities that have changed our outlook towards our daily life have been shaped by capitalism. The world we see today and its projected trajectory is a result of the immense efforts put in by our ancestors in the construction of the foundation of progress on which we proudly build our own skyscrapers.
The capitalist economy
The first thing that comes to mind when thinking about capitalism is “private ownership”. It is an economic system where individuals or businesses own capital goods. The governing forces that dictate how much of a particular good or service is produced are supply and demand. They set a price for the said good or service by competing in the free market. In an ideal system, there is no outside interference to these natural forces and each citizen can buy and sell any good without restraints.
Hence, one thing is for sure, efficiency is key. Owning private property gives an incentive to the owners to maximize the value of their property by employing a productive workforce and using new and efficient technology. It rewards those better suited to work without consuming much of resources and reprimands those lazy ones who prefer leisure over work. It all boils down to entitlement and its preservation, taking any means possible.
So, decentralization, competition, and voluntary decisions are parts and parcels of a capitalistic economy.
Marxism: where capitalism went wrong
The other side of capitalism is attributed to the 19th-century German philosopher and economist Karl Marx. He identifies the flaws that capitalism is innately inclined to succumb to. His theories and ideologies, although neglected at first, now form the basis of some modern economic systems such as socialism and communism.
The social and political theory that Marx’s works have led to is called Marxism. It basically argues that the inherent flaws in capitalism and how it is designed are ultimately bound to fail. Marxism identifies the human instinct and how it has been alienated in modern work principles. When efficiency and productivity are craved in the work environment, many of the attributes that allow for prosperity to the individual are undermined. We can see this quite rampant in our society. A 9 to 5 or a long hour shift is encouraged and often craved by a college graduate and he works tirelessly to have private ownership. However, on his journey, he feels alienated and insecure with the constant struggle knocking on his own when he dare chooses leisure over work.
In a capitalistic society where capitalists own a large chunk of property, workers are often paid less and are fettered to work their whole life on a fixed pay scale with improvements and bonuses given as a drug to continue this form of slavery. From time to time, crises are seen which are a result of the abundance of a particular good and lead to an imbalance in the natural economy. At the end of the day, capitalism is bad for capitalists such that economic interest is always a part of their lives. The reason for their marriages, their important decisions, and their spending are all dictated by an urge for economic appraisal in the end.
The prime capitalistic ideas according to Marxism are anxiety, competition, conformism, and being politically complacent.
The communist manifesto is: no private property or inherent wealth, steeply graduated income tax, free public education, and centralized control of banking, communication, and transport systems.
So, in the end, Marxism is all about controlling the production and consumption of goods and services under a centralized authority for them to be equally distributed and allowing everyone to work at their ease.
Is this the final system that rules all and a cure to our present problems? That is not quite correct but let’s explore the different dimensions.
An invidious analogy
You aren’t allowed to ride a motorcycle unless you are 16-18 years old, the limit varying from place to place. Whenever you attempt to do that, the authorities penalize you because they are ordered to do that by the government or any central ruling party. Well, that makes you quite restricted and oppressed if you are a single child of a widowed mother who has gone through the scorching heat in order to feed both of you. A motorcycle is present but this legal restriction is a real thorn in your side.
But let’s say, there is no law that prevents you from riding a motorcycle and no central authority to prevent you from doing so. Well, you will go on to riding it and maybe without a helmet with full ease. If we zoom out and look at the broad picture, more accidents will occur which will lead to a decline in the population of individuals aged 16-17. A crisis will result in an abundance of unproductive individuals which will shift the mindset to the conservation of the youth. This will eventually lead to cautious behavior towards riding a motorcycle and hence the same result i.e. growing up and then getting a license. But what is lost in this? The lives of many teenagers who satisfied their urge for adventure by access to a powerful tool. Responsibility fades and is eventually ingrained after rigorous trial and error.
In addition, a race for profit causes misaligned incentives to gain traction. Like in the 1930-50s smoking has been actually considered good for your health. Isn’t this a complete and utter fallacy? Well for us, not for the people at that time. Only after people start dying and something major breaks, do the masses realize the common practice that is evil at its core. The problem must be nipped in the bud. This is where capitalism might not work. Identifying human behavior and the social interactions we have, capitalism eliminates that and concentrates on natural forces. They are beneficial most of the time but not perfect, that is for sure.
The ultimate system
Writing this post on a laptop, posting it on the internet, and researching through the means all developed through capitalism, doesn’t this sound like hypocrisy? Well, there is no outright negation of the benefits that capitalism and the free market have provided. Many innovations, ideas, and breakthroughs have gained traction because of the capitalistic system they have been fueled with.
But the problem is, these systems are designed for an ideal environment. Human beings are imperfect and many things are intertwined in the economic system which requires recognition and nuance-based decisions. Marx is not wrong to point out the flaws in the capitalistic system. But the solution might also not be the most suitable one. Present-day regimes such as the People’s Republic of China where communism rules not a place where everyone is content with the living conditions. people feel more trapped under the government and transparency seems to lose its true essence. Surveillance and censorship are also rampant.
Hence, it is important to recognize that not a single system has all the answers and societies are inherently flawed and bound to fail. It’s just a game of survival and applying a mixed system where contributions from each individual system must be collected. People should have their inner potential recognized and their work commemorated. Also, each individual has a right to his share of resources. Wealth distribution and its effective usage is what to strive for.
Hope you liked the fresh perspective.