The false myths of capitalism

The idea of the invisible hand of the free market being the most effective mechanism to determine demand and supply, and the principle of competition being the best way to ensure the welfare of consumers, sound like divine truths to many. However, the way capitalism has evolved is not terribly efficient, nor does it ensure optimal outcomes for consumers, or for the hapless workers involved in the ever-increasing process of production.

The dominance of capitalism seems a natural outcome of ingenuity and entrepreneurship. The capitalist system incessantly cultivates such impressions. Yet, the capitalist economy would quickly find itself unravelling were it not for active government support, be it in the form of subsidies, tax breaks, or other forms of protection enjoyed by owners of capital around the world.

Capitalism is certainly not a natural process. It has been cultivated and protected by vested interests. The very emergence from the so-called ‘industrial revolution’ which saw the rise of capitalism, was made possible due to the forced labour extracted from slavery and the ruthless extraction of resources from colonies which have now become the ‘developing world’.

The historian, William Dalrymple, rightly described the East India Company as a proto-multinational corporation. Today multinationals may operate more subtly, but their modus operandi can still be quite exploitative and damaging to the environment.

Capitalism needs to exploit the labour of multitudes whose lives have been systematically rendered cheaper than those who own or supervise production. There are also inbuilt racial and gender biases plaguing the process, whereby we see people doing the cheapest labour to often be racial or ethnic minorities, or women and even children.

Besides exploiting the already vulnerable, capitalism exploits natural resources. Capitalists do not only try to make a profit from natural resources. In doing so, they have depleted these resources with reckless abandon, often without adequate government regulation.

Today, capitalism is not only dominant in rich and powerful Western countries but also in large authoritarian states like China and India, and across many poorer countries, where market-based policies work hand-in-glove with the vested interests of local elites.

Proponents of big business argue that there is no feasible alternative to organising the process of global production. They point to the excesses of Stalin, Mao, or Pol Pot, who rose to power on the back of the downtrodden but quickly became ruthless dictators. However, authoritarian rule is not the only available alternative to capitalist excess.

Socialism and Keynesian-styled economic management have also been experimented with in many Western countries. In England, the Labour Party used to be quite leftist in the past. Roosevelt’s New Deal provided workers enough power to negotiate with employers, and created a powerful state administering to the needs of its citizens. These regulatory mechanisms began being taken away by the likes of Reagan and Thatcher, who began relying on unrestrained capitalism to achieve growth.

Since the 1980s, neoliberalism has risen in influence not only in the West, but in many developing countries too due to entities like the World Bank and the IMF.

Unfortunately, as capitalist systems began collapsing in countries, including Greece, Egypt and India, we have seen a corresponding rise of populism, authoritarianism and xenophobia.

While the democratic socialism of Scandinavian countries may be overrated, there are some encouraging instances of ordinary citizens defying their populist leaders. In India, for instance, the widespread agitation against a discriminatory citizenship bill is one encouraging example. In the US, there is growing talk of the ‘Green New Deal’, which Biden has now also embraced.

One hopes that we will begin seeing more people shun the divisive rhetoric of populist leaders, and realise they have more in common with the marginalised ‘others’, than they do with rulers who rise to power by pitting the poor against the poor on the basis of nationality, race, religion, gender, or ethnicity.

Published in The Express Tribune, May 22^nd, 2020.

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