6 Reasons Capitalism is Inefficient
Copyright 2000 by Brian
Oliver Sheppard
"Efficiency" is a term that acquires meaning only
through context. Divorced from anything it is vacuous and cannot
be said to be good or bad. A company may find a way to more
efficiently rip people off, mislead them, defraud them, etc., and
in such a case "efficiency" is not a good thing.
Slavery was seen as an efficient economic system by many, and
corporations like Bayer, Krupp, Daimler Benz, and IG Farben found
it efficient to use Nazi slave labor to make their products (the
labor was cheap if not free, and the workers had no rights). We
say that an economic system is more efficient the more it meets
all human need in exchange for using less manpower and resources
to do so. Our economy now fulfills the desires of business owners
most efficiently and if it meets human need beyond this it is
only incidentally that it is so. We have a profit-driven, and not
a need-driven, economy. If "efficiency" is to be judged
in terms of profit generation, our current economy is extremely
efficient. But when judged in terms of meeting basic human need
and realizing human potential, it is very inefficient.
Here's why:
1. Product Duplication. Different companies who make myriad
versions of what are basically the same product waste labor,
time, resources, and money. An economy that provides 367
different types of breakfast cereal is obviously wasting a lot of
resources and time somewhere. The fetish for variety-at-all costs
leads people to be able to choose between dozens of expensive
clothes or other high priced items they can ill-afford, all so
that people end up basically dressing the same, looking the same,
and eating the same types of foods anyway. Each company producing
one of, say, 45 different types of dental floss hopes to drive
its competitors out of business, so we consumers are left with
only one product to choose from in the end regardless, as per the
company's plans.
2. Reserve army of the unemployed. A stable pool of unemployed
workers ensures the wage increases of those employed will be held
in check. People will be willing to accept less pay, just to keep
a job, if they know there are others outside hungry for
employment. As David R. Simon writes in Elite Deviance,
"Sustained full employment is a threat to corporations. For
when there is full employment, the labor market tightens up,
unions become more combative, and wages tend to rise at the
expense of profits." When unemployment gets too low, it's
said to be "inflationary," which is a bad thing to
economists and the people at the Federal Reserve. So, perversely,
having some unemployment is "efficient" by current
standards. But is it really efficient to those unemployed?
3. Production based on fads. Karl Marx wrote "Supply knows
nothing of the demand, and demand knows nothing of the supply.
You produce on the strength of a taste or fashion which appears
in the consuming public, but when you are ready to supply the
goods, taste has already changed and has become attached to some
other kind of product." This leads to many goods being
produced that no longer have many buyers by the time shelves are
actually stocked. Thus the producing company loses money, and in
retrospect it is realized that labor, time, etc., have been
wasted in a futile pursuit.
4. Unsold goods are thrown away. If a company has goods left
over, they are destroyed. This includes perishable items such as
food. It is not profitable to give things away. Some restaurants,
when disposing of food in dumpsters, pour bleach on the food or
lock down the trash canisters to keep people from getting it.
This is based on the idea that if restaurants were to freely give
away their left over food at the end of each day, people would
cease to patronize the business and instead show up at the end of
the day for the hand out. It is more profitable to leave food to
rot in a warehouse than it is to give it away to the malnourished
or homeless.
5. Law of Supply and Demand? Author William Blum writes,
"Following the 1994 earthquake in Los Angeles came the cry
from many quarters: Stores should not be raising prices so much
for basic necessities like water, batteries, and diapers. Stores
should not be raising their prices at all at such a time, it was
insisted. It's not the California way and it's not the American
way, said Senator Dianne Feinstein. More grievances arose because
landlords were raising rents on vacant apartments after many
dwellings in the city had been rendered uninhabitable. 'How dare
they do that?' people wailed. The California Assembly then
proceeded to make it a crime for merchants to increase prices for
vital goods and services by more than ten percent after a natural
disaster. In the face of all this, one must wonder: Hadn't any of
these people taken even a high-school course in economics? Hadn't
they learned at all about the Law of Supply and Demand? Did they
think the law had been repealed? Did they think it should
be?"
6. Creating false desires. Entire PR industries exist to convince
you to buy things you don't need. The whole Madison Avenue system
of ad agencies employs legions of people who hope to seduce you
with images of sex, fitting in, personal fulfillment, so that you
will be induced to buy all sorts of products. Hype is built
around products to make them trendy. Ad campaigns try to get you
to purchase on command. People specialize in what it takes to get
others to purchase according to the dictates of corporations, and
develop commercials employing these sorts of mind control
techniques. Soon, cable TV becomes a "necessity," as
does anything else anyone of respectable social standing is
"supposed" to have. Culture becomes sterilized,, slick,
and mass produced. Hi tech gadgets that are supposed to save you
time and streamline your life become "must haves" while
you end up with less time than ever to do things you really want
to do. The labor, time, and resources invested in this cultural
garbage create a society that is unpleasant to live in.
"In the search for profit, private corporations have
withheld supplies to contrive shortages, colluded with
competitors to keep prices abnormally high, encouraged
extraordinary and wasteful military expenditures, polluted the
environment, and encouraged wasteful consumptive patterns.
"Instead of a commitment to a more equitable distribution of
resources, capitalism promotes competition, with the victors
widening the gap between themselves and the losers. Tax reforms
are instituted to encourage profits rather than solve problems of
unemployment and low wages. Inflation, rather than unemployment,
is viewed as the culprit."
-from David R. Simon's Elite Deviance
