Monday, October 31, 2011

Marx in the Market

I hardly ever watch television, but this weekend I happened to catch a 30 minute lecture titled Capitalism Hits the Fan on the the Free Speech Channel by Richard Wollfe. His lecture was on the recent financial collapse and how it was -- and is -- a crisis of capitalism. For this reason, he doesn't believe -- with most of the mainstream left -- that we can just return to the pre-Reagan, post-FDR era of regulation, when everything was hunky-dory. No, the problem is deeper than that.

Clearly I disagreed with the vast majority of Wollfe's presentation. Though much of his recounting of the events that led to the financial collapse was, more or less, correct, the conclusions that he drew from these facts were often non-sequiturs. Especially the conclusion that capitalism is the problem since most of the events described either had little to do with capitalism, or were examples of markets being significantly disrupted and intruded upon by government.

For this reason, when he attempted to venture a "solution" to the problem it was utterly nonsensical. He makes the same mistake that Michael Moore made in his film Capitalism: A Love Story. Specifically, he told the identical story about the more democratic and egalitarian internal organization of certain successful start-ups in silicon valley (I assume he's talking about things like Apple, Google and Facebook, but I don't really know) that rejected the typical hierarchical structures of corporate American businesses. Having held positions at firms such as IBM and Sysco, these start-ups consisting of computer-savvy friends had a distaste for the culture of corporate America and wished to offer an alternative way to do business, internally. So, according to this speaker, they did. Just like the bread company in Capitalism: A Love Story, the founders of these companies wanted a more equal, democratic and lively culture where everyone is involved in business decisions -- and therefore more equitably distributing the profits -- rather than the small number inhabiting the board of directors making all the decisions. In so doing, the story goes, these companies had explosive creativity and productivity and made tons of money. Therefore, these companies and their products are not triumphs of capitalism, as they are usually heralded, but really the triumph of quasi-Marxist business principles!

Not being a techie, I don't really know how true this story is, though I doubt the reality closely matches how he presents it. Still, even if we grant the complete truth of this story, it omits one hugely significant fact: these firms are making their money by competing in a free market. Their different ways of organizing themselves internally competes against the way in which other capitalist firms organize themselves. The profits that they bring into their companies are being made within a capitalist system, and without the system, it wouldn't matter how you decided to internally organize. Whatever internal incentives their employees have that typical corporations don't, they would be irrelevant if all of society was organized according to Marxist principles because the wealth generated in the marketplace would not exist.

This is no solution to our current financial situation. If it's a superior way to organize a business, then it's a way for certain capitalist firms to get an upper hand on other capitalist firms who adapt less quickly and efficiently. Even if implementation of this business model across the board resulted in greater productivity for corporate America, and is therefore a good thing, the financial crisis wasn't caused because of a lack of productivity. There were fundamental instabilities in our markets that would manifest in a more efficient and productive America -- perhaps slightly less quickly -- all the same, if the institutions and policies that led to them remain unchanged. But there's a difference between organizing a business on certain principles, and organizing a society, economy or government on certain principles. What works for the former doesn't necessarily work for the latter. Among other reasons, because employment is a relationship one enters into voluntarily; citizenship is one that one is born into. 

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