The Left Fails to Understand Capitalism

The liberal blog Hullabaloo, founded by Heather “Digby” Parton, is an excellent place to find adroit analysis on a variety of relevant political, economic, or social topics. With several regular contributors there is no dearth of heterogeneous perspectives on any number of issues of concern to the political left. Tom Sullivan is one of those contributors. His command of a wide ranging number of political issues is impressive, but a recent article he wrote, entitled “Capitalism is Overdue for an Upgrade” is indicative of a prevalent sentiment on the Left today, particularly in America. Sullivan quotes from, and responds to, an article by Mike Lux entitled “A Bold New Agenda Bubbling Up From the Grassroots,

Contrary to the current trickle-down economic orthodoxy, our economy will only grow and strengthen over the long run if we focus on helping more poor people climb the ladder into an expanding and more prosperous middle class. That is not happening today. It has not been happening much since the Reagan era introduced us to trickle-down. Capitalism is overdue for an upgrade. “Rules are not the enemy of markets,” Sen. Elizabeth Warren observes. ‘Rules are the necessary ingredient for healthy markets”.

That is why my business law textbook is 2-1/2 inches thick. It is chapter after chapter of real-world examples of who did what to whom, who gets paid, and who gets left holding the bag, demonstrating precisely why rules exist in business. It only works if everyone understands and plays by them. Rules need to be enforced again.

All this government focus — or is it myopia? — on protecting the incentives of the investor class, on their rewards. Yet unless the carrots are sticks, no similar care for the incentives of the working class, and on designing an economy that rewards the people who actually do the work that adds the value that creates the wealth. What’s wrong with this picture?

“Anything we can create we can reinvent,” says Gabriella Lemus, president of Progressive Caucus.e The economy is not a product of nature. People designed it. People built it. People crafted the rules that govern it. If it no longer serves We the People as it should, we can and should improve the design. That is the American way, isn’t it?

American Family Voices holds a conference in Washington, D.C. on Friday on building a new economy. Lux concludes, “We need to make our economy grow from the bottom up and middle out, rather than from the top down.”

Building a factory from the top down? Now that would be a neat trick.

Essentially, this critique of capitalism is arguing that the basic logic and underlying assumptions of the capitalist system are right and good. The only problem is that the wealth generated by the system is being distributed to the wrong people. So, this “critic” of capitalism is essentially arguing that the lion is a perfect animal, except that when the lion eats the antelope the calories distributed in the process should go to the antelope instead of the lion. If only we could institute a perfect set of rules to redistribute the expropriated value created by the wage laborer for the sake of the capitalist’s profits then we would really solve this inequality thing.

This only makes sense when if we ignore the very exploitative nature of capitalism, and really all class societies, itself. The very logic of the system itself necessitates the existence of poverty alongside wealth. For it is poverty that creates wealth in class societies. So, tell me, how exactly does the capitalist, or the system overall, benefit by helping poor people in the western world, with our high living standards and thus high cost of living, climb out of poverty? It is not a coincidence that as millions in the western world are falling from the middle class down into the working class and into poverty while at the same time hundreds of millions of Chinese poor and working class people are rising into the middle class.

A return to the golden age of western welfare state capitalism is a utopian fantasy. Capitalism does not need the millions of Americans living in poverty to escape poverty, which is precisely why they live in poverty. There is no means by which to expropriate sufficient surplus value from their labor while at the same time providing them with high wages and excellent public services. Should their plight really concern you let us not forget about the hundreds of millions, or even billions, of people on this planet who live on a mere two or three dollars a day. Ultimately this economic system is dependent on the existence of sweatshop slavery, wage slavery, migrant slavery, etc. Therefore, to argue that we can somehow convince, through statutory regulation, the capitalist system to work against the tendency and logic of it’s own nature is equivalent to trying to convince a lion to not eat antelope.