Capitalism and its markets are unquestionably the world’s best systems for producing wealth. Let’s agree to that.
The problems are that despite all of this production power, there’s nothing in Capitalism that guarantees that real incomes and real social advances will rise alongside the increases in overall wealth. That’s one problem. There’s also nothing in Capitalism that guarantees that the negative real costs of production are included in the cost of production. Instead, our current version of Capitalism ignores these real costs and most often pushes them off onto the taxpayer.
Currently the only proven effective technique that guarantees widely raising real incomes is the crude imposition of progressive taxation of income and, by inference, wealth after the fact. But it needs addressing in some fashion, otherwise Capitalism funnels productivity gains upwards, not downwards. It naturally concentrates incomes and wealth instead of distributing it widely. Many of the ills in our present circumstances can be laid at the doorstep of failing to have the majority of the public gain real income advances for more than the past 30 years: Leverage, speculation, deficits, debt, crumbling infrastructures, high unemployment–even the housing bubble. And this isn’t the first time this has happened. Wide income inequality preceded the Great Depression too.
It’s not just a problem in the US either. Consider China’s situation. China’s overall economic growth has been export driven. China depends upon sales to economies who’s populations are dwarfed by China’s 1.3 billion citizens. With the single largest market in its front yard why would China need to export it’s production at all? China needs to do this because it has not figured out a way to raise the real incomes of its own population widely and quickly. If it did this it’s economy could expand smartly without relying so much on exports. China, all by itself, could generate the world’s largest domestic boom in durable goods without exporting anything!
While China has raised real incomes in much of the economy, it suffers from even wider income inequalities than those in the US. Like the US, China has been producing billionaires instead while millions of its workers toil a minimum of 60 hours per week, live in cramped dormitories near the factory but distant from their homes and families, and get paid a pittance in real incomes. China has discovered the power of Capitalism and markets, but struggles to spread the benefits widely amongst its population.
Most of the other ill effects from Capitalism come from it’s second failure. Capitalism isn’t at all efficient in pricing the negative consequences of production into the cost of production. The truth is Capitalism simply ignores these very real costs of production. Instead Capitalism leaves it up to governments and taxpayers to fund these costs of production.
The list of these real costs are many, most of them a direct result of damage to the environment and public health caused by production. The overuse of pesticides and fertilizers in farming, for just two examples, endanger public health and create huge ‘dead seas’ in the Gulf of Mexico and accelerate losses of precious topsoil. As for animal farming, the overuse of hormones and antibiotics creates very real health problems within the public at large, and very large costs in health care treating chronic diseases like diabetes and fighting new, lethal ‘super bugs’ that evolved in response to hormones and heavy antibiotic use.
Air pollution is another cost of production. As with the other costs, air pollution costs are large, showing up in the public health care system as treatment for asthma caused or aggravated by the pollution, or in treatment of other ill health such as that caused by mercury, a particularly problematic and sometimes lethal pollutant from coal fired electric generation. Energy production can, and too frequently does, foul water aquifers and salt water seas too–damage that can cause hundreds of billions of taxpayer dollars being spent to restore environmental health.
The important concept to keep in mind with all of this is that mitigating these negative aspects of Capitalism reduces the cost of production and strengthens real incomes widely among the population. Just as it’s much less expensive to avoid diabetes instead of treating it forever as a chronic disease later, so too preventing the negative environmental and health costs of production is cheaper than addressing them afterwards. Addressing upfront the problem of inefficient income distribution also reduces the cost of solving the problems that wide income inequality creates afterwards.
This doesn’t mean you get rid of income inequality entirely or pollution from production. A certain amount of inequality is necessary–it’s one of the ways (although not the only one) Capitalism rewards it’s most productive workers, inventors and entrepreneurs. Almost all production creates some disruption to the environment, much of it not readily understood. But any environmental damage that’s avoided is always much less expensive than the damage that isn’t avoided.
In brief, there’s no need to throw out the baby with the bathwater. There’s almost no chance, with our current level of understanding and science, that we can entirely avoid the negative consequences of human behavior. But if the will and determination to decrease our real costs is applied, we can create a Capitalist society that is more healthy and efficient than the one we now have.