Why I hate capitalism
I have always struggled with the idea of capitalism even from an early age. I guess I took my teachers seriously when I was told we should share our things. It never seemed fair that some should have so much while other have so little.
But where did my deep seated disgust with the whole system develop? I have traced it back to my first year of college at WKU. I took a Micro Economics class as part of my Gen-ed requirements. Overall I liked the class, and enjoyed the teacher (we are even friends), but there was one day that I found particularly disturbing.
We were learning about oligopolies and collusion; to demonstrate the effects, we performed a class exercise. We were divided into two teams, each of which were responsible for selling similar widgets. Each “day” one representative from each team would meet together and determine the cost of widgets for that day. The first day we could either sell them for $10 or $12. If we both decided to sell for $10 we would get $100 each, if we both decided to sell for $12, we would get $120 each. However, if one of us sold for $10 and the other for $12, then the lower priced seller would earn $150 and the higher priced seller would earn $50. This was intended to mimic the increased sales that would occur due to lower prices.
Of course there is a catch. After the “representatives” met they would go back their teams and then determine what their prices would be. It was at this point that teams could decide if they wanted to be honest or if they wanted to scheme and undercut their competitor. We did this for five “days” and each day the prices would increase so by the end of experiment the widgets could sell for either $50 or $60 and the profits would be $500|$500 or $600|$600 or $750|$250. Oh, and at the end of the game, the teams would be rewarded with bonus points on their next test.
If you follow the game it makes sense that at every meeting between teams you would both agree to set the higher cost. If both teams are trustworthy you can earn 20% more that if both teams are dishonest. However, if you can get the other team to trust you and you undercut them you earn 50% more (and the other team only earns 50% of what they would have). The game ended up being so disturbing to me I still remember exactly how it played out:
- Round 1 – The stakes were low and both teams trusted each other. Both teams charged the higher price and everyone profits
- Round 2 – Both teams continued to trust each other, but my team thought that the only way to get ahead would be to strike early so we chose to undercut them and made the big profits.
- Round 3 – (This was the round I was the negotiator for my team) – I was able to convinced the other team that the reason we went low was because we thought they were going to undercut us. They believed me that our motives were defensive and not offensive (lies!). We both agreed to trust each other and go with the higher price, Then my team saw another opportunity to maximize their profits and intentionally uncut them again.
- Round 4 – No one trust each other after being burned two rounds in a row and both teams charged the lower price
- Round 5 – Again, both teams had no trust for each other and charged the lower price.
Here were the scores:
- Round 1: $120 | $120
- Round 2: $300 | $100
- Round 3: $450 | $150
- Round 4: $400 | $400
- Round 5: $500 | $500
If we had all been honest all the time, everyone in the class would have received 14.4 bonus points (Both teams would have earned $1440). If we had all be dishonest/untrusting we would have all earned 12 bonus points ($1200 each). As it played out, my team won 17.7 bonus points and our competitors only got 12.7.
The experience still makes me uneasy when I think about. It was the dishonesty and selfishness built into the system that really bothered me. I was able to be better off because someone else wasn’t as fortunate. On the other hand, the losing team received less because they were trusting and desired the best for everyone.
Obviously this is not how the system practically works in the real world, but the principles are right. Everyone has to look out for their best interests and the only way you can do that is by hurting others. If you are a buyer you are trying to get something for the lowest price possible, regardless of how much time, effort, or money the seller might have invested in the widgets; if you are the seller, you are going to try and extract the most money out of your product regardless of how much you have invested and what the buyers circumstances may be.
The system works and everyone benefits if people are honest, but once that trust is lost, everyone is worse off.
So… if you boil it down… the real reason I hate capitalism is because of a game I played once in a class where I was lucky enough to get extra bonus points because I was shrewd and dishonest.
So really, you could make the arguement that you don’t have a problem with the game, but with the players.
This post leads me to think of the Churchill quote on democracy. Sure, capitalism can and does lead to greedy excess. It’s the worst! Except, of course, for all the other systems.
@David – I think my problem is that the game tends to being out the worst in the players.
@Justin – Capitalism can accomplish a lot of good, but I feel like on a long enough time line, the potential for evil overcomes. It is deceptive. It is easy to look at the potential and hope for the best, but just like in the game we played, eventually people realize it is “kill or be killed” so to speak.
My parents have owned and operated two small businesses since I was a child. They have been generally shrewd and unfailingly honest. They never scheme or search for ways to deceive or manipulate anyone. They simply serve their customers well, and in doing so, they enjoy good success in our community (in dollars, in good will, and in respect). That’s the real world I grew up in. That is capitalism as I know it, and it works.
I now help lead a small business. We also enjoy good success in this region. We do it by providing outstanding service to our clients–not by scheming, and not by attacking other companies that provide our services. (In fact, if our company isn’t a good fit for a potential client, we refer that client to another provider of our services. Likewise, we enjoy referrals from other companies. True, there is competition–which benefits the clients–but it is friendly competition, which benefits the competitors.)
Granted, there is a glitch. The glitch is with government agencies that provide our services. Those agencies use our tax dollars to do a number of things that are hard to swallow. With our tax dollars, they offer our employees compensation packages (pay, benefits, pensions, etc.) that we cannot compete with. And so, periodically, we lose a good employee to them.
It’s a credit to our work environment and family atmosphere that most of our employees are happy to stay and work with us.
As far as “undercutting prices,” the government agencies are the guilty parties in that regard as well. Why can they afford to do it? Because they are heavily–nay, primarily–subsidized by the government. In other words, our tax dollars make up the difference for them.
It’s a credit to the quality of our services that so many clients choose to do business with us.
What I am now describing isn’t quite capitalism, and words like “honest” and “fair” aren’t quite the words I would use to describe it.
Three thoughts about a good man:
1. A good man with a good product will excel in a free marketplace.
2. A good man with a good product will also excel in a free marketplace where some people are dishonest.
3. A good man with a good product will, hopefully, excel in a government-burdened marketplace where some people are certain to be dishonest. But it’s going to be a lot harder… to excel… and to stay honest.
Three thoughts about dishonesty:
1. Dishonesty is always an option, but never a good one.
2. Dishonesty is not required to excel in business.
3. Dishonesty, while possible in capitalism, is not unique to capitalism. Justin’s Churchill quote is right on the money.
Thanks for your thoughts Mark,
Hopefully you picked up that a lot of the original post was written tongue in cheek. I am describing a game I played in college that made me feel guilty (The same could be said about truth or dare in high school).
I rarely have issue with small scale capitalism… I generally prefer to support the local guy… and I see in many cases how capitalism is the only solution for generating sustainable development in a community. It is large scale capitalism that gives me the heebee-geebees. The mom and pops rarely have the incentive or desire to look only at the bottom line. But once you get large enough, decisions are made by bean-counters who will never see the impact of their decisions.
If I am wal-mart (the easy target) and I open up in a small town, I know that my profits will improve if the small guys go under. Now, because of my size, I am afford to operate at a loss until that happens. That makes good business sense, but it sucks.
I don’t fear small businesses… in fact I celebrate them. I do fear large corporations.
Now… as for being competitive with government entities… If we had universal health care then your benefit packages would be a lot more competative when compared with the government provider… just something to think about.