The New Capitalism

It has been said that Capitalism, as an economic system, is not up to the challenges which face humanity in the 21st Century; that due to the emphasis on delivering a product at minimal costs to maximize profits do not take environmental and other factors into account. There is a cry out for more government interference into the business community to solve the problems of the environment and of ethical matters in general. I argue that government regulation is not only unnecessary but that it is also an impediment to solving the problems facing us today; business being monitored by a free press in an educated society is totally sufficient for solving these problems. This is because government regulation essentially involves forcing someone to comply with the governments edicts rather than using true leadership skills to achieve ones goals.

When I was a boy, my grandfather had given me a book about Abraham Lincoln. I read that book over and over again; I was amazed by how this man who was born in a log cabin became president of the United States. In the end I cried when Lincoln was shot and killed. I also wondered what happened to all of the Abraham Lincolns. I had been told that today if you were born poor, you stayed poor and could possibly even have to become a criminal in order to survive. The friends that I grew up with were all middle class as were there families. What had happened to the American Dream?

Buckminster Fuller (1895 – 1983) was an American architect, inventor and philosopher. When Fuller was a young man, he had experienced a personal tragedy where his young daughter had died of an illness. Fuller blamed himself, became despondent and was about to attempt suicide. Instead, with nothing left to loose, he embarked on a lifelong study to see how much of a difference one man could make for humanity. He then went on to create inventions and philosophies such as the Geophasic Dome, Dymaxian Car and Spaceship Earth. In 1980, Fuller had stated, “For the first time in history it is now possible to take care of everybody at a higher standard of living than any have ever known. Only ten years ago the ‘more with less’ technology reached the point where this could be done. All humanity now has the option of becoming enduringly successful.” (Fuller, 1980) In 1983, The Buckminster Fuller Institute was established to continue his work. “The Buckminster Fuller Institute is dedicated to accelerating the development and deployment of solutions which radically advance human well being and the health of our planet’s ecosystems. We aim to deeply influence the ascendance of a new generation of design-science pioneers who are leading the creation of an abundant and restorative world economy that benefits all humanity.”

The United States of America, in 2003, had begun an undeclared war on Sadam Hussein’s, Iraq. At that time I had begun an inquiry as to how humanity could eliminate was as a solution to its problems; we have used it since the beginning of time and it did not make sense to me. I was wondering what we could do to stop war. One night I woke up in the middle of the night with a thought blaring through my head, “It’s bad business to kill your customers, they can’t buy anything from you if they are dead!” I remembered how Ronald Reagan, on one hand called the Soviet Union an Evil Empire but on the other hand traded with them to the point of having KFC and McDonalds in Red Square. The Soviet Union then collapsed and the cold war ended without a shot being fired between the United States and the Soviet Union. My own conclusion to this is that world trade leads to world peace.

Key to a system of ethics is if it is rights based, utilitarian based or rights based on utilitarian principles. Utilitarianism is doing what works best for the most number of people.

Another point that is very important to me is that people have the freedom of choice rather than being forced into taking a particular action. An example of being forced into a particular action is how our government handles victimless crimes. They do not give someone the choice to do drugs or not, they try to force people to not take drugs by incarcerating people who use them. It doesn’t matter that the act of taking drugs itself hurts no one but the person taking the drugs, The Government would rather bear the costs of throwing them into jail or forcing them to go into rehabilitation then it would to provide the educational materials and let people decide for themselves.

Economics has been defined as, “The study of choice under conditions of scarcity.” (123helpme.com, 2009) This definition limits are thinking to scarcities but what if we took on the viewpoint that Fuller suggests that there is plenty of stuff to go around for everyone; the technology is available to harness the sun and wind for energy. With modern hydroponic technology you don’t even need to grow food. The internet allows us to communicate with someone in Mali just as easily as you can communicate with someone in Montana! In the twenty first century, no one need go hungry! So what part do businesses have in taking advantage of these new technologies so that they are a part of changing the world along with making a difference? That is what I call, The New Capitalism.

To best understand the New Capitalism, it is best to understand the difference between mercantilism, capitalism and socialism. Basically, in Socialism the mantra is “From each according to his ability, to each according to his needs.” This phrase was coined by Karl Marx in his book Das Kapital published in 1867. Das Kapital is the treatise on communism, a philosophy that was followed by mass murderers such as Joseph Stalin, Mao Tze Tung and Pol Pot to enslave millions or kill millions of people in Asia, Russia and Eastern Europe. The problem with communism is that when you don’t reward production there is no reason for anyone to produce anything, so in order to get anything done, you have to use threats and force so people will do their job. If one excels at their job they just get according to their need, if one does lousy at their job they still just get according to their need so someone has to say, “Do your job or I will blow your head off;” something that the Stalin, Mao and Pol Pot regimes said and actually did to millions of people.

Capitalism, on the other hand, is an economic system that was developed by Adam Smith in the late eighteenth century. Until Smith came along, the government licensed all business activities for the good of the government. This system was known as mercantilism, per Smith, mercantilism was a system whereby the economy operated for the good of the government. (LaHaye 2008) I would say that the system could best be described as, “from each according to his ability, to… the Government!” Some would argue that mercantilism went out of vogue in the nineteenth century, I disagree with that. If bailing out financial institutions and car manufacturers and having them owned by the government such as AIG, Chrysler and General Motors. The reason the Government bailed them out was because of the greater good of the country; those businesses were “too big to fail.” That viewpoint is classic mercantilism. Furthermore, since ours is a government run for, by and of the people, our twenty first century mercantilism is in fact, socialism, and if allowed to continue and expand will have the same results as socialism since force and intimidation will need to be used in order to get anything done.

Capitalism is an economic system where those who do the produce items that are of value to others are rewarded for their actions by the unseen hand of the market. The items have to be of value that others will exchange for. Today, you could toil day and night making buggies but the only ones who will buy them are a handful of Amish in Pennsylvania. For the capitalist economic system to work there needs to be numerous buyers and sellers who can freely enter and leave the market, who all knows what, each other are doing. The products in the market must be similar to each other; the buyers cover the sellers costs they all maximize their utility and there is no government regulation. Recently, Capitalism has been getting a bad name; people are blaming the current economic crises on insufficient government regulation; I’ll argue that there was in fact, too much Government Regulation.

Maurice (Hank) Greenberg had been the CEO of insurance company AIG for over 40 years; he had built the company from a small insurance company into an insurance giant. In 2005, New York State Attorney General Elliot Spitzer told the AIG Board that he would be indicting Greenberg and would also indict the board members if they did not fire Greenberg. Greenberg was fired and it was his successor who allowed the company to get involved with the credit default swaps which in 2008 would bring down the company along with the entire finance industry. Spitzer did not ever indict Greenberg nor anyone else from AIG. In 2008, Spitzer was forced to resign as the Government of New York State as the FBI had caught him patronizing high priced call girls.

What some people do not realize is that the United States of America has more of a mercantile economy than a capitalist economy. There are three car manufacturers, that is not numerous sellers. When someone starts a business, they can’t just open shop and start doing business; they have a bunch of legal and government paperwork to do. All buyers and sellers are not utility maximizers since a good percentage of the profits go towards taxes; businesses are even forced to take United States Currency, which isn’t even really money but a promise from the United States Government to pay you money. Capitalism has never actually been tried in the United States as the government has always somehow had regulations regarding business.

The New Capitalism has to do with placing long term profits on par with short term profits. If everyone in New York City were to die from a tidal wave caused by global warming, that is bad for business. If we underpay our workers and they have no money to buy anything that is bad for business. If we make cars that have exploding gas caps, people will buy cars from your competitor, bad for business! It can be argued that Adam Smith, the founder of modern capitalism, had the viewpoint that capitalism could transform the world. James Alvey (1998) argued that Smith did have such a view of the world and that his system would satisfy all the needs of human nature.

A population that is educated, especially in economics and a free press are essential to the success of The New Capitalism. With proper economic education, people would not be surprised when the value of their houses goes down because they would know about the cycles of the economy. With this knowledge they might not take actions like taking Adjustable Rate Mortgages on their homes, even if the chairman of the Federal Reserve Board says it is OK and they wouldn’t be expecting a bailout from the government when their risk failed. With a free and aggressive press, companies engaging in unethical behavior would be found out and the public could buy someplace else. Bernie Madoff was not brought down by any government agency but rather by his sons. Richard Nixon was brought down through the efforts of Woodward and Bernstein and the staff of the Washington Post, Congress then took action on their initiative.

Another criticism of Capitalism is that it concerns itself with profits and taking care of the environment may not be profitable. That is true only when the only thing that matters to people is making money and saving money. If this were true, however a differentiation strategy would not work. A differentiation strategy is when you market a product as to its unique features rather than its low cost.  If customers want products that are good for the environment and do not cause global warming they will pay for them, it is up to the companies selling the products to show people why the feature is important. In this method, you are allowing people a choice and giving them freedom rather than forcing the product on them, which is what essentially is happening with government regulation. Another question one might ask is what about discrimination? Let’s say you have a company that discriminates against a segment of the population. With a free press, this would be reported and that segment of the population, along with like-minded people could always protest and arrange boycotts against those companies that do discriminate.

The basics of The New Capitalism are firstly a paradigm of abundance rather than scarcity; with the technology of the twenty first century there are plenty of resources to go around to everyone. Also, there has not really been a capitalistic economy in the United States of America, at best we have a liberal form of mercantilism and with the economic bailouts, which were begun by former Republican President George W. Bush and continued under current Democratic President Barack Obama, that have been prevalent since October 2008, and we, along with both political parties, are actually moving towards socialism. Capitalism, when you equalize long term and short term gain provides the most freedom and choice to society while allowing the little guy or the big guy to succeed or to fail. A free press and a top notch educational system are the way to ensure ethical businesses in a capitalistic society without the slavery of socialism impinging upon all of our rights. I have shown that by having Free Ethical Enterprises we can have a society that operates on a paradigm of abundance rather than a scarcity can bring us a society where poverty is non-existent and everyone has the opportunity to excel. How can we know whether capitalism is up to the challenges of the twenty first century when we have in fact never actually tried it? Yes, the American Dream is still possible and The New Capitalism is a way to achievement.

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