Sunday, October 25, 2009

Capitalism in secret

Moore, in his latest film, blasts Capitalism, calling it evil, apparently inherently so. He even calls on priests to weigh in in agreement. Here’s the definition from :
capitalism definition
capi•tal•ism (kap′ət 'l iz′əm)
1. an economic system in which all or most of the means of production and distribution, as land, factories, communications, and transportation systems, are privately owned and operated in a relatively competitive environment through the investment of capital to produce profits: it has been characterized by a tendency toward the concentration of wealth, the growth of large corporations, etc. that has led to economic inequality, which has been dealt with usually by increased government action and control
I must admit, I expected a different definition, one that included the concept of the free market economy, the idea of supply and demand. I learned in economics class that a free market was an essential part of a capitalistic economy. Wealth might result from entering into the free market, but only by filling a demand with a product or service that either no one else produced or that you could produce better. The free market would foster healthy competition and innovation. It’s why Bill Gates owns a healthy complement of Apple stock. It’s not just to keep away from anti-trust issues. If you’re the only game in town, there’s no impetus for improvement. Coincidentally, a PC/Apple ad just played on TV.
In the film, Moore spends a significant amount of time showing that it is unlikely that Jesus was a capitalist. He wasn’t very materialistic, pretty much insisted on monopoly and hung out with tax collectors. The deeds of American barons and magnates don’t much resemble his. I don’t agree that an economic system is evil in and of itself. It seems to me that it’s not the profit, even the obscene profit, that makes our society so unbalanced between the rich and poor, but the secrecy. If the CEOs and traders and shady realtors showed openly the kinds of shenanigans they’re pulling, then the free market laws of supply and demand could protect unsuspecting consumers from being taken advantage of. A mortgage document with the increases in interest rate hidden in fine print and written in lofty sounding legalese seems innocuous. If the prospective home-owner saw clearly and could understand the danger, or if the kindly realtor was open, honest and above these financial board about it, fewer of those dangerous sub-prime loans would have been granted, fewer people would have defaulted, fewer low-income people would have been hurt and the ripple effect of the defaults would have been drastically reduced.
I loved the part about derivatives, another culprit in out recent financial troubles. I recently took a refresher course on the calculus, the lofty math some financial geniuses used to gamble on the lending industry. These are the tiny numbers that allowed banks to spread the risk to insurance companies like AIG. If the guys who manipulate them can’t even explain them, what gives them the hubris to base a company’s financial security on them?
Shine some light on these guys and their business practices. If people are informed about what a company’s policies include and if they don’t like those policies, the free market will kick in and they can chose to patronize a competitor. For example, recently, Hall’s has produced an ad for a new cough drop which shows a mother taking with a boy her son’s age. They both suck on cough drops while staring into each others’ eyes, exaggerating their mouth movements as they enjoy the lozenges. It’s quite sensual. I wrote them and complained that I thought it was tasteless and offensive. They did write back, but just to defend it. I did learn from the exchange that Hall’s is part of Cadbury who used to own Snapple and 7-Up but now they don’t, but they still own Schweppes. Giant corporations buy and sell segments of companies to and from each other with alarming frequency. It’s just a game of number to them. Consumers beware! Capitalism isn’t inherently evil, but in the dark and in secret, capitalists do evil things.

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