Reviewing The Cultural Case For Capitalism Part 8 Of 12

In this week's episode of Jonathan Witt's A Cultural Case For Capitalism, Witt wants to draw a sharp distinction between the Free Market and Crony Capitalism. In addition, he wants to tout the achievements of the global market that, is in large part, a result of Crony Capitalism. It's as if he wants it both ways.

Again, Witt's target is Wendell Berry because of Berry's criticisms of Capitalism. We should note that Witt does appreciate some of what Berry says. However, Witt believes that Berry's writings approaches "land idolatry," something we should keep in mind for later, and it is, as written above, that Witt believes Berry can no longer distinguish between "free economies" and Crony Capitalism. Crony Capitalism is where competitive advantages in business comes from a collusion between those in the private and public sectors. This is why Witt presents as an alternative "the American Experiment of broad economic freedoms and limited government." 

One problem with Witt's solution is that this American Experiment contained neither. We should note that many American based corporations were able to establish themselves because of government provided protectionism and maintain themselves or grow because of State Capitalism--which is where a significant part of the business comes from the state. Another problem with Witt's solution is that his support for "limited government" practically conflates democratic governments with elite centered governments by aiming to limit all of them without distinction. This not only limits the power democracy can have in society, it fails to eliminate elite centered rule because such rule stems from power and power is not limited to those who have authority. Power is equated with having the ability to make changes whether one has the governmental authority or not.

And in fact, Witt seems to be targeting democracy when speaking about limiting government. For when Witt rightly criticizes Crony Capitalism, he neglects to tell us that unfair advantages in the Free Market can be gained through secret deals between businesses and elites in the private sector. His example of the American Tobacco Company, having morphed into the Tobacco Trust, provides such a example of that happening. In Part 7 of A Cultural Case For Capitalism, Witt tells the story of the founder of the American Tobacco Company, James Buchanan Duke, and how he "aggressively expanded" the new technology of a cigarette rolling machine invented by James Bonsack. Hidden behind the phrase "aggressively expanded" is the fact that a secret deal between the two, which included diminishing royalties, gave Duke a price advantage over other companies which made it necessary for other companies to eventually join Duke's group to survive.  ¹ Eventually, his Tobacco Trust was found to be in violation of antitrust laws and was ordered to break up. ²

If anyone wants to claim that the government's use of antitrust laws in principle is an example of government overreach, he/she will have to argue with one of the economic heros of the modern Free Market and of those, like Witt, who write at the Acton blog, Milton Friedman. For it was Friedman who said that there are two threats to the Free Market: government and businesses. And he added that it is government's responsibility to the Free Market to prevent any business from gaining unfair advantages that would reduce competition.

So what we have here with Witt's parts 7 and 8 of A Cultural Case For Capitalism is a double standard where if businesses gain a competition destroying advantage through government favors, it is called Crony Capitalism. But if there is collusion between businesses to gain the same kind of advantage, it is used as a positive example of building a company. Again with the emphasis on limited government regardless of whether it is democratic, this points to Witt favoring elite centered rule with the real power resting with non-elected elites from the private sector. 

Now we must deal with Witt's endorsement of the global economy and large corporations. Here, Witt points to a one factor analysis--that the current economy has reduced abject poverty in the world. Witt does acknowledge corporate abuses in this but praises the result in a way that suggests that the ends justify the means. His one factor analysis also suggests that, like what he accuses Berry of, he has submitted to an idolatry--it is the love of money.

So here, we really need to ask critical questions about this victory which Witt so praises. We need to ask how much misery has actually been reduced by this global economy when some countries are seeing a reduction in the number of people in the middle class because more are approaching poverty and how much misery is being alleviated by the reduction Witt brags about. We might also ask about other costs such as damage to the environment, exploitive working conditions, and a loss of freedom along with a reduction in reliance on democratic procedures.

We might also want to look at the specifics of the numbers themselves. When I have seen these kind of claims, most of the reduction of those living in such poverty are from Asia. And while a substantial number of them come from India where free trade measures have moved tens of thousands of Indian farmers to commit suicide due to debt, another significant number of people being raised out of "extreme poverty" come from China. And the problems with using numbers from China are multiple. 

The first problem with using China is that, because of the global economy, China has suffered severe environment damage such as dramatic increases in air pollution. Second, because of this global economy, some workers are pressured into accepting sweatshop labor conditions for the privilege of working and being raised out of extreme poverty while others lose their jobs. And finally, one cannot attribute China's improved numbers to the Free Market since their market is significantly controlled by the State. So to include China's numbers in with the statistics being used to make claims about the Free Market reducing world poverty is deceptive at best.

What we see with Witt's new global, free economy are inconsistencies along with partial information used to obscure its complete impact on the world. But most of all, this economy is reducing the control people have over their lives by shrinking democracy and shifting that control to elites in the private sector. And I write this as someone who views Wendell Berry's alternatives to Capitalism as being impractical. 

References
1.  Brandt, Alan M.: The Cigarette Century: The Rise, Fall, and Deadly Persistence of the Product that Defined America, p. 29. Basic Books, 2007 cited in http://en.wikipedia.org/wiki/American_Tobacco_Company

and 

https://www.tracy.k12.ca.us/sites/rlee/Shared Documents/History of the Americas II/Industrial America Unit/Industrialist Biographies/Duke Bio 2007.pdf

 

2.   http://en.wikipedia.org/wiki/American_Tobacco_Company  

Reviewing The Cultural Case For Capitalism Part 7 Of 12

In this week's episode of Jonathan Witt's A Cultural Case For Capitalism, Witt wants to answer the question of what Capitalism has done for us. And though he doesn't fully accomplish that task, he uses a sour grapes story to introduce the subject and makes at least one disturbing revelation about why he so favors Capitalism.

The sour grapes story Witt uses comes from Wendell Berry who is a neo-agrarian supporter. Berry is down on capitalism because of how his grandfather with his tobacco farm faired in a time when the American Tobacco Company dominated the scene by eliminating all competitors. Berry blames Capitalism via American Tobacco Company's monopoly for his grandfather's financial hardships because once establishing a monopoly, this company set the prices so low that Berry's grandfather could not make decent money from his tobacco crops. 

Witt wants to set the record straight that it was not Capitalism's fault. And though Witt makes a couple of valid points to contest Berry's claims, the direction Witt takes us is still unsettling. We won't go through his whole argument here, but we should note that Witt faults Berry for not protesting the product, which were cigarettes, being made. Rather Berry focussed on Capitalism. Witt faults Berry's grandfather's choices and the government for the grandfather's economic woes. This is because his grandfather's choice of crop to farm caught up to demand and the government instituted policies that hurt the market price of cigarettes.  

But Witt goes beyond that. Witt defends the monopoly and the profit policies pursued by the tobacco company. Witt wants to answer the question asked at the beginning: What has Capitalism ever done for us. He answers the question by describing how this particular tobacco company contributed to the economy. It contributed by producing an affordable product and by expanding tobacco farming in the region. So with results like that Witt asks, how could one fault either the tobacco company or the kind of capitalism it practiced?

We should note here that Witt has his own Wendell Berry moment of faulting the wrong thing. For while Witt finds fault with how Berry blamed capitalism and not cigarettes, he celebrates the establishment of a monopoly. This wrong, or at least inconsistent, for Witt to do. Why? It is because he believes in the free market and a free market relies on competition. But competition does not exist when a monopoly is in place--even Milton Friedman would acknowledge this. Thus, though a market for making cigarettes existed during Berry's grandfather's farming days, it wasn't a free market for the farmers. 

So it seems that having a free market isn't as important to Witt as he claims (he mentions "free market" in at least parts 1, 2, and 8 of this series). What is important is that business is in control of the market. This takes us back to our opening diagram (pictured below).

American Capitalism Today

By rejecting government, provided that Witt does not believe businesses should be run democratically, his acceptance of a business dominated market means that he is in favor of a business Elite Centered rule--and that rule is not just an economic one. And it appears that Witt recognizes the founder of the American Tobacco Company as having sole ownership rights of the company, since he found it, with no ownership considerations being granted to the farmers though they supplied the raw material for his business. Rather, according to Witt, these farmers are either to be grateful for the tobacco company doing business with them and expanding the number of farms, including the farmers who did not do well, or produce another crop. This, of course, provides further confirmation that Witt's views are in quadrant #3. And we should note that the further down in quadrant #3 one goes, the more tyranny will be practiced. In addition, the further to the left one goes in quadrant #3, the more wealth disparity will be seen (click here for the original explanation). This point about wealth disparity is what Berry is protesting in the first place.

But there is a more important observation to be made here. That observation revolves around the measurements Witt uses to justify a business or even economic system. To Witt, it is all about numbers. If a business or system is lowering the price of a product and expanding the number of employees, as the tobacco company referenced in this blogpost by Witt did, then no further questions are to be asked. We don't consider Berry's concerns about inadequate compensation for his grandfather's crops because Witt has already addressed them by blaming the farmers for their choices and the government for intervening. We simply look at the lower prices the consumers pay as well as the expansion in the number of tobacco farms. And to Witt, this is how Capitalism is to be judged. Capitalism is to be judged by the "prosperity" it brings to a select group of stakeholders.

Is it any wonder then that Martin Luther King made the following assessment about Capitalism while he was comparing it to Marxism and socialism? King said the following (click here for the source):

thus capitalism can lead to a practical materialism that is as pernicious as the materialism taught by communism 

When numbers, especially those related to consumption and wealth for some, are the only measurement used to determine the value of Capitalism, then King's analysis becomes inescapable. This is especially true because negative outcomes for non-select stakeholders are so easily swept away by the favorable numbers. This is when we are told no further questions are to be asked. The "no further questions" would concern themselves with fairness and morality for all stakeholders as well as show concern for the environment. But using just numbers, and carefully selected ones at that, is the standard operating method for many who justify and promote Capitalism. It isn't that numbers themselves which is the problem; it is that they don't tell the whole story.

This is the direction we are heading for with Capitalism. It is first Elite Centered where democracy is shunned in favor of control by the wealthy from the private sector. Then collective ownership rights are also spurned regardless of the inter-dependencies involved in a business or the economic system as a whole. Such a combination promotes both a wide wealth disparity and tyranny. And we will note that tyranny can come from the private sector as well as the public one. This is all done in the name of increased prosperity but for select groups. And as increased prosperity either trumps fairness and morals or makes them moot, materialism, rather than human values, become dominant in assessing systems. With all of that being where Witt is taking us, it is ironic that Witt, and others like him, claim to have the moral high ground over others who disagree. Then again, maybe it isn't ironic, perhaps it is just part of the necessary marketing Capitalism uses to retain customers despite the sounds of suffering and discontent.