Thursday, February 02, 2012

The Myth of Free Market Capitalism

Criticize supposed "free market" capitalism these days and that makes you a flag-burning, god-hating, Socialist to some.   There are some very wealthy capitalists who spread a bit of their wealth around to fund organizations, like the Tea Party, to get that very message out.  It just sounds so much better when it comes from some old granny sitting on a cheap lawn chair.

What's curious is how these same wealthy capitalists actually work to destroy truly free markets so that they can make even more money.   For them, it's "do as I say, not as I do."   If anything, their corporate ethic is eerily reminiscent of the way business once got done in the Soviet Union.

The Soviet Union was known for narrowly held control of broad sectors of the Soviet economy.   The state decided how collective farms would be organized, what they would produce and in what quantities.  The state decided most aspects of production and consumption including how resources would be allocated.  We knew this as an incident of Communism.

Barry Lynn explores this in a fascinating essay in this month's Harper's , "Killing the Competition, How the New Monopolies are Destroying Open Markets."  Lynn traces the powerful narrowing of control of American market sectors, transforming small producers into serfs to an insidious form of feudal capitalism.

"...every day, there are fewer buyers; fewer of them.  Hence they enjoy more and more liberty to dictate terms - or simply to dictate.

"...monopolization of our public markets is first and foremost a political crisis, amounting to nothing less than the re-establishment of private government.   What is at stake is the survival of our democratic republic.

One sector Lynn examines is the high tech world of Silicon Valley.

"'s lords of the Valley ..enjoy the power to choreograph competition among the latest generation of upstarts and then buy whom they please, when they please.   ...the Justice Department complained in 2010 that senior executives at Apple, Google, Intel, Pixar and two other corporations had 'formed and actively managed' an agreement that 'deprived' the engineers and scientists who work for them of 'access to better job opportunistic.'" 

It's the sort of thing we recall from movies about Hollywood.  "Do that and you'll never work in this business again."   Employees live in fear.   If they lose their jobs their employer can see to it they're blackballed.  It creates an inequality between the provider of services and the few buyers that can lead to perverse outcomes.  Lynn interviewed the worker who stood up, leading the class action suit against the Tech Barons.

"Sure the pace was grinding, the hours crazy.  One team, he recounts, worked for 110-hours per week for nine months straight.  But 'everyone believed they were making something important.'

"...his attitude began to sour after Lucasfilm completed a particularly ambitious project.  The very next day, he says, shaking his head, executives came in and 'fired almost everyone.'   These were employees who hadn't had a day off in months. 'People were running around crying.  It was a bad sight.'" 

You can only treat faithful employees that brutally if your other employees live in abject fear of losing their own jobs and have no decent prospects if they bolt.

Another sector Lynn looks at is America's poultry industry where giant megacompanies harness small, independent producers, their suppliers, into a form of servitude that often pits one against the other.

"The concept of such competitions - or 'tournaments,' as the industry calls them - is generally credited to the economist Edward Lazear, who served as one of George w. Bush's top advisers.  ...The idea, first laid out in a 1981 paper titled 'Rank-Order Tournaments as Optimim Labor contracts,' is straightforward.   Rather than pay all workers the same rate for any particular task, Lazerar wrote, why not set up a 'labor market contest,' in which those who produce more also get paid more per task or per piece?  Such a system of reward (ad, for those at the bottom, punishment would, he claimed, increase the incentive to work harder."

This distortion of capitalism institutionalizes inequality between seller and buyer.   There is no open market.   No producer is allowed to know the price his neighbour gets on market day.  He can't judge what the market will bear.   All he knows is what he's told he will get and, if he gets out of line, he may find his once perfect chickens will be graded as inferior.

Lynn's essay is well worth a read.    Check out the latest Harper's.


thwap said...

And the best way to combat such appalling behaviour isn't to get the government to break up oligopolies and enforce some sort of free-market utopia that never existed in the first place.

(One reason is that anti-trust legislation and other progressive regulations were often written by the very same oligarchs to entrench their control. It was either pure theatre or a way to limit access to the market by raising entry costs.

Another reason is that sometimes a few large entities is the most efficient form of organizing production and distribution and research and development.)

The thing to do is to constitutionally guarantee the human rights of human beings within their workplaces.

If people want to work 110 hour weeks because they think they're doing something important, they should be allowed to. But no sending in the scum in suits to fire everybody once the immediate goal has been obtained.

Anyong said...

A friend of mine sent this to me from Australia and I am not able to provide a link. The following is written by a 65 year old woman from South Australia who scolds her government including both parties. Her letter is extremely relevant and for the most part applies to Canada including all parties in Canada. She could have entitled her letter "Willful Blindness". The letter will need to be posted a number of times....sorry about that.

Anyong said...

To Julia Gillard (Prime Minister) & Tony Abbott (Leader of the Opposition) ...

You BOTH Worry me ! ( In fact both of your Political parties worry the hell out of me !!!)

Over the last three years, I find myself becoming more and more fearful of the pair of you, and between you, you are turning this country into a place that I no longer feel at home in, or feel a part of! I watch you in parliament, and no, not just the two of you, but every politician that I see, stand up in parliament sneering at each other, and acting like children !!! (..and if you were my children, I would be ashamed of you all ... What an example to set!)

Although you would like us all to believe that you are putting the needs of this country at the forefront, NEITHER of you are doing that, you seem more interested in "one-up-manship ", in scoring off each other, & denigrating each other, to the detriment of this country & its people !!!
It seems to be all about YOU as individuals, and not about what you can DO for this country !
It is fast becoming a place that I do not recognize, as the place I always thought, was the best place in the world to be !!!

But no longer !!!

You are not listening to the people of this country !!!
And here in South Australia , your counterparts are afflicted with the same disease - is it endemic in all politicians ?

I am watching the deterioration of living standards in this country, (and according to you, on a world stage we are doing better than most countries ... REALLY ???) ... And yet the gap is widening between the "haves" and the "have-nots" . I see our homeless on the streets, our hospitals under-funded, and understaffed, our health system is an absolute mess and a disgrace .. And yet I see multi-millions of dollars being sent off shore, in aid to other countries, before attending to this country's needs !

I see the "selling off of the farm", in large amounts, to foreign interests, (In Every State ) including water rights to foreign interests too .... And WHY...?
Especially when you go to great lengths to tell us that water is a finite resource, & supposedly, we must ALL be careful with how we use it, so that we ensure we have it for the future ?

Foreign interests "Fracking" for coal seam gas, and riding rough shod over farmers' rights to their own land, AND USING QUESTIONABLE CHEMICALS. (You don't even KNOW what chemicals they use), and possibly causing damage to the water table in the process !!!
And those foreign interests I believe, do NOT have to pay anything in royalties back to this country, for the first five years of their tenure ... IS THIS CORRECT ???

A Carbon Tax,( which you KNOW is just another tax with a "Starting Point dollar value") which will make NO appreciable difference, to carbon emissions, AT ALL!

Anyong said...

A tax, which in spite of all your arguments FOR it, you are doing alone, when other major countries will NOT & DO NOT embrace it, or believe in it !
All that it will do for this country is put working families and small businesses behind the eight ball, .....what planet are you on, if you think that your few hundred dollars a year, will make even a scrap of difference to the effect of the carbon tax on people ?Blind Freddy can see the holes in that argument !!! Do you really think we are that dumb ???

The CONVOY OF NO CONFIDENCE was real !!! ..and I haven't spoken to even ONE person, who would not have liked to be there if they could, but the tyranny of distance and /or work was the only thing that kept them away, ( myself included ), .. and you KNOW that only a part of the convoy was actually allowed to be in front of Parliament house and ON VIEW ... the rest were streets away, unreported by the media !

For Mr Albanese to stand up in parliament, and call it "THE CONVOY OF NO CONSEQUENCE ", in his sneering tone, shows just how out of touch with the people of Australia , you really are !!!! WE WOULD HAVE ALL LIKED TO BE THERE !!!

DEFENCE ........ Because Americans are our Allies, and we support them in Wars, ......... Korea , Vietnam , Iraq , Afghanistan , .... and you have sent our soldiers to those places, and our soldiers fought for you, and for Australia ........ some coming home with terrible physical injuries, and some with devastating Mental Injuries as well ..... BUT WHERE ARE YOU, WHEN THEY NEED YOU ?????

Veteran's Indexation to CPI only is a disgrace ... and is something YOUR Labor party Julia, used as an election sweetener, to get the Veteran's Vote ... BUT YOU LIED (Again) ! You never had any intention of honouring your election promise to them ... and it WILL come back to bite you at the next election !!!! (And Tony, Liberals were NO BETTER, Howard had more than 10 years to "fix it " and didn't !)

Veterans are not alone, they have families, friends and supporters, who are heartily sick of the deception your party perpetrated on them .....AND THEY ALL VOTE !!!!

THEY are your obligation, first and foremost ..... and it is not your first obligation to give aid to every man and his dog overseas first !!! Look after your own FIRST !!!! Is this what you call SALUTING THEIR SERVICE ???

Have you any idea , how sickening it is for our Vets to see you both, ( Labor or Liberal ) turn up to the funerals of our current young vets for a photo opportunity, to be seen to be "caring " in the public eye, but only to turn your backs on them all, when they need you ??? (Just ask Breanna Till an Afghanistan Soldier's wife, how CARING this government is !!!)

And in light of what you DON'T do for our Vets .......Let's talk about Multiculturalism ......People have come here from other countries, for a better life, for more years than I have been alive ( I am 65 years old !) ... my own family migrated here in 1883, from Germany , and did find a better life ....

Anyong said...

Pre & Post war immigrants have came for a better life, and settled in and became wonderful contributors to this country, as did those who came here after the Vietnam War, ... all have contributed to the rich diversity of this country, and some descendants have even fought FOR this country, and they have become Australians and were glad to be ..and they had NO handouts from our Government either, ....they worked hard for everything!

I have never before had a problem with all, or any, race of immigrants coming here ...

.......However , I DO NOW !!!

Please tell me why we have areas like Lakemba, where police do NOT, & will NOT go, for fear of their life ?
Please tell me why we can no longer have religion in schools, for fear of "OFFENDING" someone ? (The latest little gem is that they are not having, or being funded, for "chaplains " any more , but "Counsellors "?)
Please tell me why religious Christmas observances are no longer allowed in some schools for fear of OFFENDING someone ?
Please tell me HOW Christmas decorations in some stores might OFFEND someone ?
Please tell me why we have to have segregated days in some swimming centres, for fear of "OFFENDING" someone ?
Please tell me why we have some RADICAL clerics demanding Sharia Law in this country ... when if we were in THEIR country, this would NEVER be allowed ?
Please tell me why our laws need to be changed, so as not to OFFEND someone ?
Please tell me why we are fast becoming a MINORITY voice, in our own country, because of POLITICAL CORRECTNESS ?
Please tell me WHY Australians cannot legally wear a face covering bike helmet into a bank ..and yet it is ok to wear a Burqa which covers the whole face ?
And please tell me WHY, when those people who want asylum here, can wreck our detention centres, as in Villawood , and STILL be accepted here ?

SO , in light of the above, WILL BOTH OF YOU .......Please tell me WHY, when some of our Vietnam Veterans FINALLY received (in the last 6 months) the recognition that they should have had after the Vietnam War, (and which they received from the USA & South Vietnam, during and immediately after the Vietnam War), that the families of those Veterans, were refused assistance by this Government, to attend that award ceremony, and yet this Government ....flew , accommodated ,and even took on bus tours , to the the families of asylum seekers, after the funerals of those who were killed in the boat which sunk off Christmas Island ?

What does that say, about just who are this government's priorities ?

The Australian people that I speak to have genuine concerns about becoming a second class minority in our own country, and the reasons for it, are some of the above, ..... Are you so blind that you cannot see this ?

And no , I am NOT racist !!!..(if I did not like Catholics or Protestants would I be considered racist ?) Of course not !

Anyong said...

Why is it, that if we object to what is happening in our country ... we are immediately labelled RACIST, in an attempt to shut us up ?

We are fighting Radical Muslims, in Afghanistan & Iraq , are we not ?I hear you say, yes but the Muslims we have here are "Not like that " .. well how would we know ? we hear ANY of them coming out & speaking AGAINST radicals ?? I haven't ...have you ???

Islam is not compatible with ANY of the values that we hold here in Australia ! .....Are not the experiences of Britain , France , and the Netherlands an example of that? Why do you think it would be any different here ? We even have an Australian born "radical ", whose message is that Australia WILL become a Muslim country, under Sharia Law, & that we had "better get used to it ".

Will both of you grow some "Balls ", and start sticking up for this country and its people ???

We are the people who put you where you are, and PAY you to look after our interests ! ... And you are NOT doing that, by any stretch of the imagination !!!

I would appreciate an answer, from both of you, if only to convince me that once again, I am not talking to a brick wall !!!!!

Mrs Jenny Bell
20 Helene St

I am beginning to think Mr. Harper is taking notes from other countries and using their brillant there's fresh ideas for Canada!!

The Mound of Sound said...

I get your point, Thwap. As signatories to the International Declaration of Human Rights we are supposed to protect workers from these abuses but that's not to say governments have no role in thwarting monopolistic abuses. All manner of laws have been flawed at one time or another only to be superceded by new, corrected legislation. That's part of the process of government responding to changing needs and circumstances.

@Anyong - an interesting and obviously heartfelt letter but there are elements in it I can't agree with. The writer's frustration with unresponsive government, however, definitely resonates with me.

Anyong said...

MOS...that is what I meant when I said..."for the most part it applies to Canada".

saskboy said...

The letter lost me part way through too, but started out sounding like it could have been written in Canada or the USA.

Anyong said...

Do these people eat their chemically raised chickens?

Anonymous said...

The laws of capitalism are accumulation and concentration this is all a part of how capitalism works it's inner dynamics-unnerstan?