The Radical Right believes that all problems can be solved by rigid adherence to capitalist principles. In general capitalism has proven to work very well, but there are several specific ways in which capitalism fails. These are the exceptions to the rule, but they are important exceptions, because they tend to be where most modern economic problems arise.
Capitalism is based on the idea that valued skills and products are rewarded because people who seek these skills and products are willing to pay more for higher quality skills and products. Market prices find their levels based on supply and demand. Difficult and desirable skills are rewarded with higher wages while common and easily mastered skills are rewarded with low wages. Rare and desirable products demand the highest price while common and easily obtained products demand the lowest price or may even be free.
Anyone who studies economics knows that not all markets behave in the same way. For example, if one company has a monopoly on a product or service they can charge a much higher price than if there is competition between two or more suppliers for the product or service. This is because the supplier has total control over the supply and the cost of another competitor to enter the market would be much higher than the possible return on the investment. On the other hand, if there is an unlimited supply of low cost labor companies who need the labor can pay extremely low wages, because a small wage is more desirable than no wage. And, a corollary to this is that fear of unemployment can be used to control the cost of labor because a low paying job is better than no job at all.
The objective of capitalism is to force competitors out of business, create a product that no one can do without, and produce it at the lowest possible price and sell it at the highest possible price. This is accomplished by investing money in order to build an infrastructure to create the product and the market.
There are quite a few questions that need to be asked in order to understand this simple statement. First of all, who can be a capitalist? A capitalist is a person that already has money that can be invested in such a way to create a product that has high demand and low cost to produce. If the capitalist has a small amount of money they can create a small business and build more capital until they acquire more and more capital. However, a weakness in the capitalist philosophy is that sons and daughters of wealth can enter the game without going through this step. And, since wealth can be passed from generation to generation a class of wealthy people is created and the members of this class are members because of the work done by their ancestors. This inherent inequality in class is not based on any benefit to society and actually weakens the social fabric of the society. Members of this wealthy class rarely loose their status or influence even though they do not deserve either the status or the influence.
Why do people desire products? Do consumers desire products that they actually need or do they desire products that they are told to desire?
Capitalism encourages companies to create desire for products that people may not really need, or may even be harmful. Tobacco is the classic example of a product that people don’t need but felt compelled to buy and use. Once people begin to use the product they became addicted and could not easily quit using the product. The benefit to society of tobacco use was solely negative. The cost of health care for people with lung disease was quite high and the cost to society of the early deaths and prolonged illness was staggering. But, tobacco companies followed the tenants of capitalism. Create a product people believe that they can not do without. Produce it as cheaply as possible and sell it for as much as you can. Tobacco, alcohol and even illegal drugs are examples of capitalism fulfilling its philosophical goals. It is quite clear from this example that people do not always desire what is best for society. This problem is repeated in the entertainment industry where people desire entertainment that does not benefit society by encouraging anti-social behaviour, such as violence and disregard for the law. It is repeated in the transportation industry where people desire cars that destroy the environment and feel put out to use more economical transportation like trains or busses.
Capitalism encourages companies to use the cheapest possible labor in order to produce products at the lowest possible price. With unemployment world wide at such high rates and the possibility to outsource production to these low wage countries companies can pay people below the living wage to hire laborers. Only improving ones skills will enable someone to move up from these low wage jobs to higher paying jobs. Of course the highest paying jobs require capital to invest in order to buy a seat on the board of directors, or to own a company. Capitalism requires capital to make the greatest return on investment.
Not all markets behave the same. One market that will never behave like any other market is the health care market. Health care has one aspect that is different from all other markets, failure of a person in health care will render all other markets meaningless. This is because, if you don’t have your health there is no point of having anything else.
Imagine a machine that can make a person 10 years younger. The person needs to spend an entire day in the machine, but every body function, illness and appearance will be returned to its state of ten years ago. There is only one of these machines available, because they are extremely complicated to build and the next one will come on line five years from now. How much is this treatment worth? Who will be able to afford the payment? In order to benefit society who should be the best candidate for the machine? Does capitalism work in this case?
Obviously the wealthiest people will be willing to pay high percentages of their net worth in order to obtain these ten years. However, many scientists and engineers may actually be more valuable to society. Many victims of aging diseases would have had their lives saved by this process, but those with the cash would get the treatment. This is how the current health care system in the US works. Those that have money can get treatments that they need. They get the highest quality doctors and facilities, while those who can afford the least health care are rushed into emergency rooms when their death become immanent.
The solution to these problems comes in the form of “Augmented Capitalism.” Augmented Capitalism is capitalism that addresses the special problems that arise because capitalism is not a perfect system. Augmented Capitalism taxes the wealthy at higher rates in order to provide for the people who find themselves in the bottom of the economy. It doesn’t completely take away the philosophy of capitalism. If you work hard and create skills that people desire you will still be rewarded for those efforts. If you desire health care you can still pay for it, but some of your money was taxed to help low income people who labor to make the goods you also desire. The benefit of these taxes is also used to build roads and schools that make life better for everyone. The roads are paved so that companies can ship their products are the country. People can also use these roads to travel around the country. The taxes are used to pay for risky research that individual companies may not be able to afford, or even see the possible products that could be developed. In this way, the society as a whole becomes the capitalist that invests in society so that society as a whole benefits from that investment.politics