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    Posted November 28, 2008 by
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    Issue #1: Questions on the economy

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    Capitalism: a Blessing or a Curse?


    Capitalism: a Blessing or a Curse? It is undeniable that the world we live in presents numerous inequalities from a financial standpoint, when we consider the different means and the opportunities available to the citizens of the various nations. I often try to understand the reasons of such inequalities, and in my simple-minded approach, I attribute the causes of this situation to a myriad of factors that eventually converge back to the flaws and the assets of any societal model. In fact, whether conditioned by a geographic location or the historical events that originated the birth of a nation, these models mightily influence the fate and the quality of life of every citizen of this planet.

    Among the various models, the one that seems to be more in vogue in these last decades is without any doubt Capitalism. Capitalism as an economic system, originated in Europe on the ashes of the 13th century's Feudalism, even if it is believed to have started its diffusion in Great Britain between the 18th and 19th century. However, its basic and fundamental theories are attributed to the Scottish Adam Smith, who in 1776, published "An Inquiry into the Nature and Causes of the Wealth of Nations". In his publication which become in fact a classic text on Economics, he stated that single individuals who pursue strenuously own interests, promote the wellness and prosperity of the society in which they live and work, because of the co-existence of factors such as competition, free market, and the limited presence of the State. Later, Capitalism would make a more widespread appearance in the United States, whose practical model undoubtedly drives the world's economy.But is Capitalism a "good thing" or a "bad thing"? Has it (always) actually existed in some form in any civilization, is it intended to stay, or is it only an evolutionary phase of our specie? And more importantly: is it the best solution for the survival of our societies or will it be the cause for their obliteration? In other words, will our societies continue to flourish in the years to come, or will they eventually implode, defeated by the by-products of the same unstoppable pursuit of richness that they commit to achieve?


    I will try to analyze this issue from different perspectives, and consider that whenever we discuss any topic of any nature, there is rarely a correct answer, because the interpretation of an issue is catalyzed by the diverse and individual values, cultural background, life experiences, and morals. With this in mind, I will attempt to examine a list of key components that in my opinion strongly characterize the model of Capitalism, driving its outcomes, and consequently impinging on the dynamics of people's lives.


    When I think about Capitalism, I am fascinated by observing that its image evokes an endless list of words and their opposites, which paradoxically, co-exist in the same spatial location and with the same intensity: Richness as well as Poverty, Health and Illness, Immigration and Emigration, Education and Ignorance, Opulence and Starvation, Abundance and Penury of jobs, Modernity and Anachronism. No other model, in my opinion, proliferates on such a "perfect balance" of extreme poles. The profiles of these poles are so evident, that ironically the absence of one, could cause the other one to cease its existence too. This theory was especially vivid in past centuries of human history, and it was emphasized by both Greek and Chinese philosophers, whose concepts are still representing an invaluable heritage in our present days. In other words, there wouldn't be a "plus without a minus", or a "loss without a gain", let alone Richness without Poverty. This notion appears almost to justify that the reality of these extremes is the fundamental, predictable, and predominant characteristic on which the whole universal equilibrium is based. Yet, they represent a constant and peculiar element of any societal model, if not for the principles on which they are supposedly founded, at least for the outcomes of their application.


    Let's take the ideal of Socialism or Communism, for example; Socialism is a product of recent history, and is (or was) considered the antidote that would have evened out those extremes. In a society where equal assets are distributed among the members of the community and a minimum level of subsistence is granted to all, the polarization of richness and poverty seems to be disappearing or at least to be more controlled, so that everyone may benefit from each other's contribution. One would say that this is a fair and just model, because everybody has the chance to guarantee the fulfillment of the basic needs of every individual, as at least, food, housing, a job and healthcare; on the other hand, history has shown that unfortunately the application of this model cannot overcome the weaknesses of the human nature, such as the desire to wield power over the others, and the pursuit of personal happiness through the unscrupulous accumulation of the assets of the very same community. We witnessed an entire empire tumble down less than twenty years ago, and have remained astonished to learn that the ideals that had animatedly and passionately involved the lives of millions around the planet, were only what they were meant to be: truthful, powerful, pure and simple theories, whose practical implementation in this world - at least for these generations - wouldn't have been successful. The Soviet Union, Romania, Hungary, Albania, and many other states of the so-called Eastern Block, by many considered a political reference model, have seen their whole dream of an equal world becoming a unjust one, where hundreds of thousands of dissidents were tortured, killed or deported, and the wealth was shared only among those in power, and those orbiting around it; enormous amounts of gold and other valuables stashed in the secret underground rooms of government palaces, and a nation deprived of their freedom to improve their quality of life, to think, act and worship, sitting in line for the daily ration of bread, or weekly tank of gasoline.


    So Capitalism and Socialism lay on the opposite poles of the spectrum, but their application has one important factor in common: the "Who". Who interprets it and applies it makes a huge difference; in both cases is a single man, or a restricted group of individuals, who eventually would come to the same conclusion that ideals and their application to real life are two separate things. Those aligned with the ruling power enrich themselves, and the general population is inevitably and constantly deceived, translating the theory of Socialism, in a practice of Oligarchy. Couldn't it be that, whatever the societal model and every positive intent, the True Nature of the Man is crooked? After all, Darwin himself stated that only the fittest shall survive, and logically, the constant quest for social and economic development might have forced human beings to become more selfish and egotistical.



    Ellen M. Wood, author of "The Origin of Capitalism: A Longer View" does not agree with this position. According to her, Capitalism is a fairly modern and recent concept, and the specific and endemic product of historical human evolution. It is not tied in anyway to the peculiarities of human natural behavior and its inclination for continuously improving the quality of life; rather to the consequences of the victory of the United States over the Cold War, that pushed the natural human instinct for trading and conducting business, towards the next predictable phase: "the need for accumulation".



    When I read her interpretation however, I can not avoid to wonder if the obsessive accumulation of benefits instead, originates from the need to exorcise the unconscious and ancient "fear to face a state of penury of resources"; in fact, lack of resources - starting even from the first communitarian settlements - could be easily interpreted as the clear prologue to the plagues of poverty, disease and death, and as a consequence, to the obliteration of the same community.



    Incidentally, Pope John Paul II just published his last book, whose original title in Italian is "Memoria e Identita' " (Eng. "Memory and Identity" - at this time I am not sure of what the English translation will be); in this book, among the great religious, theological, and sociological themes included, he has a surprising stance on the role that Communism played in our modern history, declaring that "Communism was a necessary evil". The pontiff paraphrases the concept already illustrated by Goethe in his Faust, and states that "in certain situations of human existence, Evil turns out to be somewhat useful, because it creates opportunity for Good to succeed". I would be extremely curious to ask him what he thinks of the millions of lives that have been sacrificed fighting for the ideals of freedom and equality during the Russian Revolution that eventually toppled the Czar's regime in 1917, or the Chinese Revolution that after centuries of oppression returned the power to the people (or at least that was its initial intent!); according to him, these lives were worthless because they were not fighting for what they believed to be a just cause, but rather in the name of Evil.



    In essence, what is a fair societal model? Socialism, whose democratic variation is vivid and in vogue in many European Countries, seems overall to be quite fair: healthcare is granted to all, no instances of extreme economic polarization, taxes are high, but housing and a modest savings account are at times still a privilege, along with the opportunity of a gratifying and career-based employment, being that the "cast-system" is still pervasive relatively everywhere. Democracy, still seems to be the perfect model since its institutionalization in Ancient Greece, because it attests the superiority of the people, and is an equalitarian integrative part of modern societies, whose freedom is the paramount of Capitalism. Can we say that Capitalism could not exist without Democracy then? Probably yes, but it does not seem to accredit any superiority to the people after all, at least, not to the majority. Another case of a theory that is not reflected in its practical application? Maybe.



    Let's take a look at the main components of this model, along with its main outcomes. The first result that appears evident is a general improvement of the quality of life; movements of capitals generate jobs, ergo richness and opportunity to spend, consume, and invest. It is undeniable that when the economy is healthy, money circulates in all directions, and sooner or later all citizens seem to benefit from this opportunity. In fact, both entrepreneurs - who risk their capitals but collect the revenues - and workers- who provide labor and collect their salary - are compensated, proportionally to their assets and capabilities. This result is visible basically everywhere in the world; investors/entrepreneurs create jobs, and the locals who get those jobs, immediately reintroduce their salaries in the local economy, thus favoring its development.



    However, theory and practice once again do not walk hand in hand; we can observe an endless list of cases, almost everywhere in the world, where the salaries of the workforce are not sufficient to match the local cost of living. Workers do not appear to be paid enough to confront with the expenses of their basic needs, such as housing, clothing, and more importantly food. A good reading example was offered in our Sociology of Work class, with the book "Nickel and Dimed", by Barbara Ehrenreich. In a nutshell, this book sagaciously describes the underworld of low-waged American workers, and portrays them as mistreated, humbles, and humiliated, at times unaware of their natural cravings for recovering the dignity they have lost. The book is furthermore shocking, because its protagonists are Americans, those whose existence is not acknowledged by the rest of the world that still feverishly believe in the American Dream; in fact, the American model is by far the most imitated one, stunning like the moon shining in the chill-winter night, whose dark side of unemployment, alienation, and misery, is often and superficially neglected.



    From a more global perspective however, I feel compelled to argue that the above mentioned negative connotations are not truly awful after all, especially if we compare the condition of a lower-class or poor citizen of the United States, to that of a citizen of the same category in any country still under development; the second is not even comparable to the first, because it belongs to a completely different league. He/she does not have food to put on the table, or even shoes to wear, so that an absolute ideal comparison, makes the American one looking like a king living large. People in those countries are forced to do the unthinkable, like murdering their neighbor for a loaf of bread, selling their children, or even prostitute themselves. According to a report on Human Rights published in 1997 by the US Department of State, it is estimated that in some countries - such as Thailand - there are more than 200,000 individuals actively engaged in prostitution, children included, and considering that the report is dated 1997, these figures are surely higher. Ironically, the monetary gains associated with these numbers, represent up to 18% of the country's GNP.



    In addition, and without getting into too much detail, it is enough to emphasize that more than 3 billion people among the world's population do not avail themselves of adequate sanitation; quite a number I would say. Therefore, we have to admit that the current economic situation in the United States, albeit not florid, is still much healthier than that of other countries.



    Could it be that our nation is just slowly aligning to the standard of the other nations? Could it be that the situation was absolutely idyllic for the middle-class in the past decades, so that this economic harshness is negatively interpreted as a devastating state of crisis? Could it be that this sense of standard economic hardship is emphasized solely because there is so much exudation of opulence that driving a 15-year old car, or not being able to afford an extra pair of shoes makes you feel poor? If that's the case, then I was born and reared in conditions of extreme poverty. We were literally counting the coins to get to the end of the month, but we did not consider ourselves as poor; maybe because we did not see an overflowing display of richness around us, and this did not make us feel as inferior, or maybe simply because honesty, integrity, and morality were the foundation of our family values, and we were focused solely on maintaining these values consistent.



    Nonetheless, statistics suggest that extremes of richness and poverty are galloping tirelessly towards a point of no-return. But why does a "dark side" exist in the first place? Is it truly a by-product or a main fundamental complement of it? Do we really need to have people living in poverty to allow others to have a decent life-style, or to allow the "natural perfect equilibrium" to take place? Why is this polarization pervasive - not only in the United States, but also - in the whole world?



    If we focus solely on the United States, there are a few factors that gain visibility in our discussion. Free Market, Competition, and the Limited Presence of the State, as per the Adam Smith's model. Without any preambles, Free Market generates - as a start- uncontrolled pursuit of the maximization of profits. Being profits the arithmetical result of revenues minus expenses, one can easily come to conclusion that the costs must be minimized, to maximize those profits. In true business lingo, costs equal procurement of raw materials and production, but more evidently, labor; by paying the workforce less, the costs can be contained, thus generating more profits. Alas, this simple equation is the paramount of this modern Capitalism, whose hunt for limiting the costs, producing more and defeat the competition, has convinced the Corporations to introduce the concept of temporary workers who are not entitled to health care benefits, or move their manufacturing operations elsewhere, where cheaper labor can be provided. As a result, the maximization of the profits is ensured. This condition is absolutely negative for the American workers, whose hourly minimum wage is incredibly stuck to the frowning five dollars.



    However, as stated at the beginning of this paper, there is rarely a correct answer, because the interpretation of an issue is catalyzed by the diverse and individual values, cultural background, life experiences and morals. In this case, we cannot neglect to acknowledge that outsourcing to a poorer country is not always totally negative; new jobs are created for the locals, and as a consequence the economy of those countries would flourish. The condition though, is not to take advantage of their necessity to work, and offer ethical and fair wages. Fortunately, some Corporations (still not many though) have finally understood (or have been forced to understand by the public opinion) that a fair trade is not only the right thing to do for the workers and their families, but ironically also for the revenues, because an ethical business approach boosts the image of their brand producing more revenues.



    On the other hand, if we had to comment on the consequences of outsourcing jobs from the United States, we would come to a truly challenging conclusion: if costs are limited or contained, then that enterprise with better connections or more capable to outsource jobs, would succeed in spite of the others. This is exactly what happened in our country, with a major corporation such as Wal-Mart. This company, has surely offered new (low-waged) jobs to the Americans by opening hundreds of new superstores, but it also put out of business hundreds of competitors dismembering their organizations, and forced to cease activities all those suppliers (and their employees) that were not able to meet Wal-Mart's "low-purchase-price policy". For the first time, to paraphrase an Economics Professor at Iowa University interviewed in a documentary on Wal-Mart aired by the channel CNBC, the manufacturers of goods do not dictate the final prices of the merchandise anymore, but it's rather a giant retailer to define rules and conditions. Quite a revolution we might say!



    Overall, "outsourcing" does not always favor the majority of the people; on the contrary, it brings a lot of wealth to the Corporations, some relief to the average consumers who pay an average of 10-20% less of the original price, and ultimately provides an opportunity for work in economically depressed areas of other nations.



    How to ensure a fair approach that satisfies all these parties and guarantees a "win-win situation"? National and International regulations may be the answer: a correct, consistent, just, and worldwide application of norms aiming to ensure a reasonable distribution of equal resources and a guaranteed fair salary, could definitely favor a more harmonious environment where basic universal human rights are respected, and as a consequence, negative outcomes such as violence, abuse, and criminality are virtually absent. A good example is currently observable in a few countries in the world, Sweden, Denmark, Norway, Finland, and Japan, who represent the best societal models insofar. I visited all of them multiple times, had the chance to talk with the locals, and have personally noticed that all the abovementioned negative aspects, are truly minimal and statistically fairly irrelevant.



    Nevertheless, a common denominator among these countries is the "sense of isolation" that their citizens lament, that at times can lead to an increase in the depression and suicide rates; although negative though, these factors are only relatively affecting the profile of a country where living is not a struggle, but a true advantage. Moreover, if we consider more social indicators for example, we would realize that as far as infant mortality, life expectancy, unemployment, poverty, home ownership and incarceration rates, these nations are in a far better shape than that of the current United States, according to the American Bureau of Labor Statistics. This is also possibly due to the fact that health care and social welfare are provided by their governments, and are embraced enthusiastically by the population. There - as also in most of the European states - the public institutions are truly present, and are seen as protective of the citizens, not "invasive" of their lives, as I sense them to be perceived in the United States. Those who argue that the Economy (or its societal models) "should not be hampered by the state because the Market should decide everything", seems to forget that the Market acts impetuously, is not rational, nor it is "humane", and as a consequence it does not think, analyze, or make the right decision. If we let the Market decide for us, then we are enslaved by it, and are set ourselves for catastrophe. In actuality, the Governments in Europe play a topical role in everybody's life, and this does not seem to impinge on the local economies. Instead, it appears that the United Europe - whose concepts and regulations are alas still in the embryo phase - may become the model for the rest of the world's next generation, where the economy is alive and kicking, human rights and diversity are respected, health care and a decent retirement plan are guaranteed, and the dignity of all of the citizens is paramount.



    By contrast, in the United States, we are witnessing a decline of the Economy in the last few years; I do not believe that this might be due to wrong legislative approaches, but rather to the possible exhaustion of the American Dream. Contrary to the most florid expectations - and to quote Prof. Seybold - "the dream that glued for decades the highly polarized society, has turned into a nightmare". When jobs are lacking and "living is equal to surviving", there are some unexpected effects waiting to surface. Racism is one of them. Although Immigration has historically represented the basic principle on which this country was founded, communities find themselves fighting for jobs, and wind up blaming the immigrants for the lack of them. Curiously, those immigrants are not blamed or singled out if they can vaunt a high education or an impressive resume, and are not seen as competitors in the work market. This may lead to think that Immigration is not the issue then, but rather the very same unconscious ancient fear of penury of resources - as aforementioned in the previous pages - the clear prologue to the plagues of poverty, diseases and death.



    Is thus the term "fear" the key? Probably. Fear could be as well interpreted as insecurity, or the inability to secure the means of survival for oneself or for own family, and this is definitely a common thread in every society, independently on the historical era, the upbringing, or the geographical location. In other words, Capitalism may generate a better lifestyle for many, but it could also trigger strong Social Issues. Those issues will not be possibly addressed by the great corporations which are obviously not in business for sociological purposes, thus, it is necessary for an intervention on behalf of the Governments, whose initiatives should be concurrently oriented towards the stimulation and preservation of the free market and enterprising, as well as the wellness of their main assets: their citizens. If this does not happen, this model may risk a powerful implosion, and tumble down on its own feet, defeated by a "new enemy", or better, its by-products.



    As an example, we might cite the recent decade's wild pursuit of maximization of profits on behalf of Wall Street-quoted Companies. Wall Street seems to be dictating rules and regulations, because the investments of the stockholders are based on the projected dividends by share. In this way companies and stockholders are not proactive anymore, but they become slaves of the same outcome they commit to achieve. In other words, profit - and the plans undertaken to achieve its top - seems to decide the fate of each enterprise. As a result, economy is not based on a long-term strategy aimed at providing benefit to the society anymore, but rather on a hasten and dangerous chase for effortless and immediate gains, that cut the oxygen supply to the arteries of the economy itself.



    Al Dunlap, the so-called "Slash ‘n' Burn Executive", can be described as the dream of the stockholders as well as the nightmares of the workers. He took over the company "Sunbeam", moved their production to other states, cut wages, and fired people after forcing them to train their own replacements. In this way, he maximized the values of Sunbeam's shares, (along with employing improper accounting techniques) but has eventually undermined and dismembered the organization which, as many other companies in the same situation, cannot sustain operations in the long-term anymore. This eventually causes the destruction of the company, and puts at risk the very same desired outcome of the Capitalistic model. In other words, we are not witnessing the beneficial evolution and development of Capitalism, but rather the implosion and consequent annihilation of the economies that had initially benefited from it, just like a virulent bacteria that operating from within, spreads its carcinogenic power towards healthy cells.



    Nonetheless, when the work market is uncertain, there are also other issues that make their appearance on stage; the workers live in a constant state of fear of being laid off, and are compelled to renounce to utilizing personal and family time, rendering vain the sacrifices on behalf of the Unions to create a safe, secure, and fair environment. As a consequence, we notice now a form of regression of the loyal relationship between the entrepreneur and the workforce. This rapport that took decades to consolidate, now manifests a fracture that will be hardly recomposed in brief time.



    In conclusion, is Capitalism a "good or a bad thing"? From the perspective of the development of technology and the implementation of trade, it surely is good, for it improved the quality of life of millions around the world, and overall, it brought an opportunity for work in areas whose economy was for centuries based on agriculture alone. Will it last in the years to come and be still considered as the main modern model for the development of our Nations? I would not know. What I perceive though, is that - as history has shown - principles and their application are two separate things; Capitalism - the way it was conceived, or better, the "good one"- does not exist anymore, and went inevitably awry. What does exist in my opinion, is the fact that Capitalism is based on the equilibrium of two major components such as its social structure, and the human desire to accumulate capitals. These components acting in concert, generate a sort of institutional dynamics tending to "frame" the individuals and transform them into a product of pure greed, in which only the fittest will survive. As a result, we now can observe the ultimate variation of Capitalism, a surrogate whose purpose is not to benefit both the entrepreneurs and their societies as initially envisioned and intended, but solely and exclusively a limited number of individuals and corporations, giving birth to what is, in other words, an "Oligarchic version" of the Capitalistic model of the 21st century.



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