Trigger warning: those blindly dedicated to capitalism in its current state will conclude the socialist/communist/Marxist content of this post is offensive to their sensibilities.
Imagine we live in a market that consists of just two goods: apples and oranges. Both goods exist in the same supply and require exactly the same production, but because of the arability of our land, a farmer may produce only one or the other leading to individual households having a surplus of their crop and a need for the other. The exchange in the market would be a simple apple for orange swap as needed to move resources. Suppose that one day an apple farmer discovers how to convert his apples into apple cider. Now in our fictional world, the apple cider requires two apples per glass and a third apple’s worth of effort. Based on the existing exchange, each glass of apple cider is worth three oranges.
However, we live in a capitalist system and this new product has everyone overjoyed. People will actually trade four or five oranges for each glass. Soon, no one trades the apple cider for three oranges because, well, why would anyone? If one can obtain five oranges instead of the required three, then obtain the five. The additional oranges one obtained beyond the actual market value of the apple cider is profit.
Capitalism is a system in which private individuals, rather than the state, control resources and the means of production in the pursuit of profit. “Profit” is what I want to focus on today, particularly as it relates to social inequality.
Profit, for lack of a better word, is good
Let us strip away all of the glitz and glamour of marketing for a moment and look at that apple cider transaction. People in the market valued the apple cider at four or five oranges – that is what people were willing to pay per glass. However, if one told those same people, “This is actually worth three oranges, you can have it for that much”, how many people would willingly hand over an extra orange or two? Remember, this is not some silent auction where only one person will walk away with the product so one feels pressure to increase the bid amount to secure it. Why pay more?
Better yet, let us fast forward a few generations so that we are now learning to manufacture new products with the apples, like smartphones. Each of these apple smartphones consists of several components along with the people needed to research and design it, manufacture it, market it, warehouse it, provide healthcare for those workers, supervise the workers, deliver the goods to market…a process that, start to finish, costs 700 fruitmarks per device. However, the company sells the devices for 1000 fruitmarks so that they earn 300 in profit.
At the other end of that transaction is the consumer: all of the people of the society who waited on line outside the store to be the first to purchase one of the devices. Some of those people use a form of cash while others borrow against a line of credit that later requires a cash repayment. From where did that cash originate?
We tend to think of cash as a commodity in its own right, but cash is nothing more than a promissory note for past goods sold or services rendered. Rather than acquire other goods or services in trade, we receive notes for the value of what we provided, which we redeem in a future transaction. For most people that cash comes in the form of salary – payment for services rendered to an organisation as they deliver their goods or services.
Consider then an apple farmer who wishes to purchase one of the new smartphones. She grew the apple components and provided them to the company, receiving compensation in return equivalent to her efforts. The company then pushed those apples through the process until a final device reached the store with an additional 300 fruitmarks tacked onto the price. The farmer goes into the store, pays 300 fruitmarks more than the device is worth and goes home. The company pockets the profit and makes no additional payment to the farmer, regardless of their performance.
The point is that in capitalism, each transaction benefits the company and hurts the consumer because the transaction is inherently unequal. The transaction, which at its root (pun not intended) is apple for orange, favours the company side with an arbitrary mark-up on the final price. Consumers, as producers in the market, earn a consistent salary for the work they do to have the final price inflated and the profits taken into the pockets of the company ownership.
I warned that this post would be a socialist/communist/Marxist trigger. Say what you will about Karl Marx, he had good points.
But I am not promoting those forms of economics over capitalism. One of the principle beauties of capitalism is class mobility, the ability to climb into a higher economic bracket and earn a better life. If everyone earns the same, if all things are equal, what compels people to work harder other than the crack of a whip or the threat of imprisonment? Anyone can succeed in the United States and become part of that higher income bracket.
That is the economic theory, anyway.
How does this work in practice though?
Those who already have, have more. Those who have less, continue to lose. Pretend, for example, your role is investor. You provide your resources to an organisation, they use it to turn a profit, they return the original investment plus a return for your assistance, and the cycle continues. Did you contribute to the growth of the economy? Absolutely. Did you produce anything? No. You provided money and other people used it to produce things, then you got the profits while they received compensation for their work. That profit piece does not find its way back to those who did the production.
The point of capitalism is to generate profit, and that profit goes only to a select group of citizens. That is not an inherently evil practice, but one must make the distinction that companies do not care about public welfare. Not one of them. They are present to generate a profit – the social welfare programs that we see are calculated measures in their profit-making efforts. If a social welfare program is not cost-effective, if the public relations and marketing do not justify it, they will not do it. Looking out for people is the responsibility of government and all of us together.
Companies will advocate for policies and legislation that benefit them.
When you think that MSNBC and CNN have liberal bends to their reporting – they do. FOX has a conservative one. Because they are evil corporations hell bent on destroying America – no, because they are companies who need to make a profit. They do that through advertising revenues, and the only way to get those is to attract viewers. The only way to attract viewers to a news service, a group that, if done objectively would report the exact same thing as every other news source, is to flavour it with an ideology commentary.
Are renewable energy sources beneficial to society? Not if you are a non-renewable energy company. Should we have the levels of sugar in our food that we do in America? We should if you are a company that produces or provides that sugar.
I think we have a strong bipartisan agreement among the private citizens of this country that lobbyists suck. Unfortunately, they do influence our politicians to make policy that benefit them rather than us.
While all of this is happening, the private citizens, remember, are losing on each transaction. We earn according to our contribution to production and then pay above cost to acquire those same goods and services. If one begins in poverty, digging out from under that hole to have any upward economic mobility is beyond difficult. Blaming those who do not have resources for “not working hard enough” to move upwards is insulting to all of us.
Do people who have resources work hard? Yes – I am not advocating that everyone in the upper classes is lazy and coasting on their nest egg. Without effort, they run the risk of falling into a lower class. They have greater flexibility to make mistakes and overcome obstacles though. Even if those obstacles are what one might consider trivial, like a municipal parking offence. If someone at the poverty line acquires a $150 speeding fine, it hits much harder than it does against someone in the upper class – and do not act like those in poverty are uniquely municipal violators and the upper class got their by avoiding speeding, jaywalking, and parking illegally. But among the violation itself, associated court fees, and predatory lending to cover those things, poorer individuals get grafted by the same system.
This is where things are sure to anger more readers if I have not already, because this is where themes like white privilege and male privilege appear. Economic disparity disproportionately affects women and minorities. Whites and Asians are more likely to “start the game” in a higher economic place than other groups, which stacks the deck against those groups. Concepts like white privilege and male privilege are gross generalisations that ignore the full suite of characteristics that make people individuals, and white people who begin life in a lower economic class will have a harder time than those born into wealth.
That is, logic would not necessarily dictate that a woman earns less than a man for the same job because she is a woman, but statistics will show that a woman will often earn less than a man for the same job. We want to debate the reasons why that is? Fine – that is a discussion for another day. A gender wage gap exists and whether that is a gender-based phenomenon is irrelevant. The same is true for wage gaps based on race or any other quality. The reasons will dictate how we solve the problem, but the problems exist.
This goes back to prior posts about the challenges faced by women and minorities. When we create policies, like determining what a municipal violation is and what the penalty should be, without considering how it will affect these various economic tiers, we create systemic problems that disproportionately affect certain groups as well.
Some have argued that my writing unfairly targets white males in this respect. I generalise people into class-based units rather than treating them as individuals, then unfairly assign blame to one group. That is true, I am absolutely forming people into collective units – because statistically our system forms them into collective units already and that does not work out so hot for many of them.
Are there white males with legitimate complaints? Absolutely. Are there women and minorities who belong to the other classes that have no distinct advantage or disadvantage? Of course. Are certain outcomes statistically more likely based on your membership in one of those groups – that is also a yes. And because the policy decisions occur at one level (and that one level is also statistically most likely to be a particular group), I write to advocate a need to incorporate more of these other perspectives.
We all are born into some aspect of society that determines a lot about who we are based on our apparent characteristics. That is unfair. Life is unfair and we cannot have equal outcomes for everyone. However, we can create equal opportunity for everyone and that means identifying our system for what it is and providing the necessary mechanisms to level the disadvantages that some face from birth. If someone grows and matures and fails of their own accord, they should achieve a commensurate outcome. Having the deck stacked so heavily against people for no reason other than who they appear to be at birth though, that needs to change.