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What is Wrong with Capitalism?

Since at least the first half of the nineteenth century one of the main causes of strife in our civilization has been our capitalist economic system.  Capitalism has had many bitter opponents, socialists of all kinds, to be sure, but many also who while they disdained any affinity with socialism, nevertheless rejected capitalism or at least called for major reforms in its workings.  Supporters of capitalism seem not to understand such criticism, sometimes even resorting to psychological explanations for hostility to capitalism, as if by positing a subjective reason for their hostility they could somehow dismiss their opponents’ arguments without refuting them.  But why is capitalism so hated?  What, if anything, is wrong with it that evokes such animosity?

Since it is important that disputes about ideas be separated from mere verbal quarrels, it is necessary to state exactly what capitalism is before a serious discussion of its merits or demerits can take place.  I realize that there is no generally accepted definition of capitalism.  Although most people would agree that our present economic system is capitalistic, few would agree about why this was so.  Is it because of private property, because most economic decisions are made by non-state actors, because there is relative freedom of legal competition?  Although all of these are likely to characterize a capitalist economy, I do not think that any of them gets to the essential note of capitalism.  This essential note I put in the separation of capital from labor, the fact that in a capitalist economy the most usual situation is for those with capital to hire others to work for them, making use of the means of production owned by the employers.[1]  Thus what I mean by capitalism is an economy whose distinguishing mark is the employer/employee divide, where the majority of economic activity is carried on not by owners of small property working for themselves, but by capitalists who employ others to work for them for wages.

Although such an economic arrangement is not in itself unjust, nevertheless it is nearly always productive of great mischief, injustices, evils whose consequences extend far beyond the economy itself.  Why is this so?  The shortest answer is one given by the English historian, social theorist, poet and novelist, Hilaire Belloc.

But wealth obtained indirectly as profit out of other men’s work, or by process of exchange, becomes a thing abstracted from the process of production.  As the interest of a man in things diminishes, his interest in abstract wealth – money – increases.  The man who makes a table or grows a crop makes the success of the crop or the table a test of excellence. The intermediary who buys and sells the crop or the table is not concerned with the goodness of table or crop, but with the profit he makes between their purchase and sale.  In a productive society the superiority of the things produced is the measure of success:  in a Commercial society the amount of wealth accumulated by the dealer is the measure of success.[2]

Let us look at this further.  All proper human activity exists for an end.  Eating, for example, has the primary end of sustaining human life and health, although it has several secondary ends, such as fostering fellowship.  Now the production and use of all external goods also has its purpose, the sustaining of human life so that we can pursue what is most characteristic and most important for mankind, our family and social life, our intellectual life, our spiritual life.  Economic activity of its nature is subordinated to those higher ends and when it forgets or rejects those ends, it begins to dominate and distort human society.  This natural subordination is most easily perceived when economic activity is directly tied to production for use.  In the past when craftsmen usually worked only because a customer had put in an order for an item, it was difficult to forget the essential orientation of economic activity to its end.  The separation of ownership from work, however, meant that the owners of capital, in some degree at least, became removed from actual production for meeting mankind’s needs.  As a result these capitalists tended to become preoccupied not in serving man’s needs for goods, but in simply amassing wealth itself.  “As the interest of a man in things diminishes, his interest in abstract wealth – money – increases.”  And when goods began to be produced in mass, goods which then needed to be sold, buyers had to be found – or an artificial demand had to be created by advertising.  Owners cared little if their products were well-made or useful, so long as they could be sold, often by making consumers think they needed the product to be happy.

But although this was evil enough, the logic of capitalism did not stop here.  For if one’s interest is in wealth, why produce a product at all?  Why not spend one’s time manipulating surrogates for real wealth, such as currencies, stocks and bonds, peddling junk securities, engineering mergers and buyouts?  This was often an easier way to make money, and although it bore almost no relation to supplying mankind’s need for goods and services, it certainly served to make some people very rich.  Nor did these capitalists hesitate to gain and use political power, when they could, to further their ends, using their money to buy politicians in order to make the legal system more favorable to their aims and remove whatever restraints on their activities existed in the law.

Capitalism, however, has done more than pervert the purpose of economic activity.  It has turned our society into a commercial society, a society inclined to measure everything by a money standard.  Thus education is valued chiefly as the ticket to a better job, the number of those studying the liberal arts declines, and business professors generally command much higher salaries than philosophy professors.[3]

Moreover, since under capitalism the economy is no longer tied to a fulfillment of man’s real needs, but rather to what can be sold, it no longer has any natural limit.  As St. Thomas Aquinas wrote, “…the appetite of natural riches is not infinite, because according to a set measure they satisfy nature; but the appetite of artificial riches [i.e. money] is infinite, because it serves inordinate concupiscence….”[4]  Under capitalism the economy has become unhinged, as it were, disconnected from its purpose, a purpose which both limits it and gives it direction.  As a result, a corporation is not satisfied if its sales remain stable, they must increase from quarter to quarter.  This attitude has infected society as a whole, so that few are happy unless they acquire newer and better gadgets, regardless of whether these serve human life as a whole.  Although we are not determined by our economic relations, as Marx erroneously believed, society can be influenced by how it conducts economic activity, and when such activity is disoriented from any rational goal, it tends to disorient all of society.

Probably all religions and all serious philosophies have recognized that human life is not about the mere acquisition of wealth.  Indeed, they have often warned of the dangers that riches pose to cultivation of human virtue.  Our modern world, and especially the United States, has elevated the acquisition of wealth to such a point that it tends to distort almost all social relations.  Capitalism, the separation of ownership from work, of economic activity from serving man’s needs, is at the root of this.  It is true that not all critics of capitalism have a vision of man that corresponds to truth in all respects.  But nearly all of them, even those most confused, sense something fundamentally wrong with a system in which “the appetite of artificial riches” and “inordinate concupiscence” reign supreme and almost unhindered.

There is a better way.  Our ancestors understood the need for curbing and guiding our powerful appetite for gain, just as we must curb and guide our appetite for sexual pleasure.  Opposition to capitalism does not equate with socialism.  We need to recover the approaches to economics represented by distributism, by solidarism, by the whole tradition of Catholic social thought as well as that of many other religious traditions.  Otherwise we will continue to destroy our social order, deform our environment, both within and outside us, and spend our time on earth in pursuit of things unworthy of human persons who are destined to live forever.


[1].  This definition comes from Pope Pius XI’s 1931 encyclical letter, Quadragesimo Anno.  I do not have space here to justify this definition.  I refer interested readers to my essay, “Capitalism and Distributism:  Definitions and Contrasts,” Faith & Reason, vol. 27, 2002, pp. 157-194.  This was reprinted in shortened form as “Capitalism and Distributism: Two Systems at War” in Tobias Lanz, ed., Beyond Capitalism and Socialism: a New Statement of an Old Ideal, Norfolk : IHS Press, 2008, pp. 67-81.

[2].  An Essay on the Nature of Contemporary England (New York : Sheed & Ward, 1937) p. 67.

[3].  I do not deny that the takeover of the liberal arts on many campuses by feminists, postmodernists, and a host of other strange theoreticians has also discouraged students from studying those subjects.  The decline has not been solely because of the commercialization of our society.

[4].  Summa Theologiae, I-II, q. 2, a. 1 ad 3.

 

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  • LeAnn R

    What is Wrong With Capitalism?

    (from “Greenspan’s Anguish — Thoreau As Economic Prophet and other Essays”; by James Eggert; copyright 2013; Green Dragon Books; ISBN (paperback) 978-1-62386-000-4)

    Despite its materialistic virtues, something’s amiss in the Land of Capitalism. In addition to equity and justice issues, there is also a destructive quality in capitalism that often violates the ecological laws that can and should ensure life’s beauty, balance, its health and long-term continuity.

    To search for that undermining quality, let us pretend for a moment that you could literally pick up market capitalism as if it were a flawed gemstone. Now place that stone in the palm of your hand and, turning it over and over, inspect the gem for defects, fissures and possible flaws. First, what would be the economist’s perspective? Now angle it slightly differently. What would be the viewpoint of the ecologist? And finally, is it possible to look at capitalism from a prairie’s perspective, or say that of an old-growth forest?

    (LeAnn R. Ralph is the publicist for Professor Eggert)