The Problem with Capitalism

I love this country. Before you fly off the handle and label me a commie or a socialist, hear me out. Then, you can make an informed opinion about me. However, if you call me unAmerican, I might drag you out into the back alley and teach you a lesson in manners. Hell, you might even teach me a lesson; that USED to be the great thing about being a man - take an ass-whipping, learn from it, move along. Tragically, that same action will result in a felony assault charge and hence a nasty downward spiral into "the system". Here me out.

The "system" we know is a multi-headed beast akin to Ladon - atrociously complex and inefficient. My personal values include a desire for bureaucratic reduction through increased efficiency. We have fostered a system that takes YEARS for patent approval hindering small businesses and entrepreneurs. We have an immigration system that is staggeringly complex. Dare I say that we need more regulation of our markets for we already have a huge government. The actual solution is we need a far more efficient government in all levels.

Take the individual case of my friend Jane. Jane came from the United Kingdom. Jane is a college-educated, exceptionally smart woman whom English is her first language. She married an American. Her citizenship took over 2 years and was incredibly difficult and frustrating. Can you imagine, if it was that hard for an English-speaking, college educated person, how difficult the path for citizenship must be for a poor, non-English speaking, often illiterate person must be? Last I checked, we used to say "bring us your poor, your huddled masses", right?

Next, take the examples of smaller economies like construction. States' rights usually manage regulation of construction. Some require licensing, some require insurance, and some require nothing. This leaves the burden of regulation upon the individual to know what the state requires and that the consumer should look for. This is a problem when older people (such as the elderly) need to contract work. Several people come bid the job and capitalist theory states the lowest bid should get the job. But remember, you usually get what you pay for! Never mind dime-store advice, time and time again we hear about unscrupulous contractors taking the money and never finishing the job. This is becoming an epidemic across America. Consider the Northeast and the aftermath of Hurricane Sandy. Who is going to protect those who are already vulnerable and desperate? The government is already badly taxed from the hurricane as millions are without power and have lost their homes. If there were a federal mandate of contractors being licensed, insured, bonded, and registered with a national database, consumers could educate themselves on contractor documentation and have a consumer-rights liaison.

Democracy and capitalism have become the cornerstone of our society and I get a chuckle when I meet people that would fight to the death to defend it's perfection. Please understand this point very clearly - I would stand by their side and fight to the death to defend the fundamental reasons for having them; but they are not without their flaws. Capitalism, free trade, and supply/demand side economics have made our country into a global superpower. Our American spirit has influenced so many things. Our society has been infected and influenced by so many things uniquely American, from the Space Race (NASA), the Internet (Dell, Apple, Stanford U & the Internet, Facebook), fashion/retail (Levi's), engineering (highway infrastructure, roads, bridges) and our military (weapons design, Lockheed-Martin, Boeing). The USA has evolved into a multi-trillion dollar economy. The problem is that when dealing with numbers that big, the things that fall through the cracks are usually pretty big.

We can debate economics and point fingers all damn day long about why we are in a economic depression until the cows come home. While there is value in knowing history so one does not repeat it, the problem is that we need to control the hemorrhage now. We can deal with the why later. Currently we have to mitigate the threats that will kill our society and when we are spilling our economic life blood onto the floor, we need a surgeon. We cannot leave our economic exsanguination to being left alone like a capitalist model dictates - we need experienced intervention to manage the shock and impeding death.

Consider this: theory states that a non-regulated economy will create competition, therefore lowering prices to benefit the consumer. What has happened is that companies have been able to undercut most "mom n pop" providers and obtained market majority. From market majority has come market domination and establishment, or dare I say monopoly (even though monopolies were make illegal in the Gramm-Leach Bill 1999). This market dominance has thwarted any smaller competition as they simply cannot compete. Remember that these major players also possess large legal teams. Even if small companies wanted to compete, they know they are up against a legal and financial giant. Once market dominance is firmly rooted, the problems of capitalism take shape: downsizing, layoffs, unemployment and pension eradication. Remember, I allude to major market players, therefore layoffs affect thousands.

Take the example of Enron. 20,000 people lost their livelihood, homes, and futures on account of book-cooking. The accounting fraud on this energy company resulted in the Sarbanes-Oxley Act of 2002. The deceptive practices of a large company caused thousands in layoffs, hundreds of millions of dollars in legal costs, and legislation to make sure it never happens again. If this were an isolated event, it would not be such an issue. However, recent history is littered with other examples such as Solyndra.

Both of the above cases are examples of accounting fraud which overinflated stock values. Keep in mind there is legislation and governmental regulatory agencies which are supposed to keep this sort of thing from happening. The Securities Exchange Commission is in charge of watching over the stock markets but the problem with the numbers game is it is a numbers game. There is one government agency to oversee tens of thousands of small, medium, and large public companies. That is a losing battle. 

The United States banking economy is an easy scapegoat to blame for the current state of our economy. Let's examine why a more efficient government regulation would be helpful. Historically our banks have been in the business of finance. Banks were originally barred from being affiliated with securities companies. In 1999, the Gramm-Leach Act removed the laws preventing banks from being merged with securities companies. This also allows banks to expand their holdings from an 11:1 ratio to a 33:1 ratio. When the real estate market began overvaluing commodities, banks holdings increased both from the overvaluation and the increased holding ratio allowance. When the global financial crisis hit, the banks had more holdings than they could cover financially. The expanded holdings ratio was unable to be covered by federally-backed securities due to two wars and other impeding domestic financial economies teetering on implosion.

My point is this: capitalism works in theory. Capitalism's architecture requires that business and industry moguls operate with integrity and ethics. The problem is that money and power breed greed. Economic tycoons have bastardized "the system" by lobbying, legislation, and sometimes lying in the name of profit and are calling it capitalism. If only a few were affected it would be an anomaly and we could move on. But, Tom Brokaw began a weekly segment called "The Fleecing of America" as the problem was becoming so rampant. One could make anecdotal statements about the current state of our economy as being the government's fault, Bush's fault, Obama's fault, Wall Street's fault or the bank's fault. It is actually kind of everybody's fault.

The solution is this: not an increase in blanket regulation. We have a large enough government. What we need is a more effective governmental regulation. We also need the leaders of economies to be less greedy, less deceptive, more honest, and more stand-up. Cooperation is what is needed to save not just our economy, but our society. We need a government to protect not only the corporation but to protect the individual from the corporation. We can even deduce that sometimes the government out to protect the corporation from itself.