If capitalism is an efficient allocation of resources, explain this…
Capitalism doesn’t clean our beaches. Hardly a day goes by that somewhere in social media, I’m not flashed with a scene of a beach filled with garbage. You can easily find collections of the most polluted beaches around the world. You can also find articles about the Great Garbage Patch in the Pacific Ocean. Google will be glad to facilitate your searches.
But it’s clear that capitalism isn’t smart enough to clean our beaches. Capitalism doesn’t have built-in incentives for people to put their trash in the trash can. The tourism office has figured this part out, but the visitors? They’re pretty sure that someone else will pick up their trash.
There is another little thing I’ve learned about in the last few weeks. Most of our clothes have synthetic fibers. These fibers break off in our washer machines as tiny little fibers that are eaten by small animals in the water. Those small animals are eaten by bigger animals until you get to fish that have the same fibers in them.
Capitalism made the plastic fibers that get into our food but gave no thought to how to prevent them from getting into our food chain. And capitalism won’t clean that up. It’s just not worth the money. Ask any hedge fund manager about it and they will just shrug their shoulders and give you a bewildered look like, “I didn’t do this.”
I can see how capitalism has brought many people out of poverty. That hasn’t been lost on me at all. It has helped me stay out of poverty. But if you ask me, capitalism is making a lot of extra work for all the other people it doesn’t directly benefit.
I have heard it said that capitalism is the most efficient system for allocating resources for the people working under it. Those plastic covered beaches don’t speak well to this method of distribution. I bet if someone were paying $25 an hour with benefits, our beaches would be cleaned in a hurry. What would happen if there was some sort of way to pay people to put their trash in the can rather than on the beach? I think we’d have pretty clean beaches. Apparently, capitalism hasn’t figured that out yet.
There is another blindspot for capitalism: CEO compensation. The average CEO makes something like 300–400x the lowest paid employee in the corporate kingdom. Nobody is even remotely 400 times smarter, efficient or valuable than a front line employee. Nobody. That kind of compensation has more to do with a board of directors happy to rubber stamp a pay raise for their CEO friend than with efficiency. Many of those boards of directors have a compensation consultant working for them. Even Warren Buffet says, “I don’t think comp committees should have consultants. If you don’t know enough about the game to work out a fair compensation arrangement get off the committee and put somebody on there who does know.”
Capitalism doesn’t know how to pay people. That is to say, that management can be very selfish and when they are, you get a country with a very low minimum wage. You get a country where the median wage is $30,000 a year. I live in Utah and it was tough making just $38,000 a year. I know what that’s like. I can’t imagine how any capitalist can be proud of a $30,000 a year median wage. What are they smoking?
Capitalism tends to lead to monopoly power. Just ask Boeing. Boeing has an effective monopoly on aircraft manufacturing in America. And with monopoly power comes the confidence to sell and fly a product that had serious issues. Long before the release of the 737 MAX, warnings were made that automation could not be shut off. Yet, Boeing was allowed to perform many of their own evaluations of their own aircraft. Two fatal crashes suggest that capitalism has a hard time regulating itself.’
The best estimates available say that 44 million people in America have no health insurance, and another 38 million have inadequate health insurance. That means that those people will more than likely show up in the ER before they see a doctor. They will wait until what was a routine and small expense becomes a catastrophic event. What kind of a capitalist is proud of those numbers?
How does a large corporation lose hundreds of millions of dollars and still remain in business? How can a company like that go public? Just look at Uber and Lyft. Both companies have drivers who struggle to make a living, and yet, they are deeply in the red. It seems like their only purpose is to undercut the traditional taxi service, but the reality is, there is no viable long term business plan for them. Well, they might squeak by with autonomous vehicles. The only thing keeping them going is venture capital, money that could be used to give raises to employees or even build something more useful.
The last and most important blind spot in capitalism is the work of all of the stay at home moms and dads who care for the next generation of children. A blind spot in capitalism is that they aren’t being paid what they’re worth. Salary.com estimates that a fair wage for a stay at home mom or dad is about $141,000 a year. I had read a lower estimate of $70,000 a year by Scott Santens, famed Basic Income advocate, but I could not find that article at the time of this writing. Now that I think about it, I think Salary.com has a more reasonable number.
Of course, this “listicle” is not exhaustive, but it is intended to give us some pause to think about where we can better allocate our resources for a more sustainable future. Any fan of capitalism would do well to reconsider how we can allocate what we call “wealth” for our children and their heirs. It’s only fair.