Why I Think Capitalism Has Outlived Its Usefulness

Posted by Prerna Mishra in Society
January 14, 2018

I had a long day at work. I got back home, turned on the TV and heard people talking. They spoke about war, unemployment, naxalism, corruption and poverty – such a sad world.

I don’t have to carry the weight of the world on my shoulders. I possibly don’t have the time to think about 1 billion people who might have to sleep hungry tonight. I deserve a hot delicious meal after a tiring day like this. We have created institutions and governments who promise to fight the battle on our behalf.

One such institution which I adored was the World Bank.  They define ‘extreme poverty’ as “living on less than $1.90 per person per day”.

Don’t worry, they are equipped to fight this battle. This is their millennium development goal. One of the ways to do this – they tell us – is by opening up our markets, believing in free enterprise and welcoming capitalism. They say capitalism is the cure, it pulled millions of people out of the poverty.

Since the very introduction of economics in my life, I have been told how capitalism is the one stop solution to poverty – that this is a fact. You don’t think about facts – you just believe in them. So if you want some capital, you just have to open your door to free enterprise and then the World Bank gives you aid to develop your country. Just the way World Bank helped Bolivia!

In 1998, the IMF made privatization a requirement for Bolivia to receive loans to control inflation and fuel the economy. It became a prerequisite, if Bolivia wished to receive any aid. The western powers were forcing Bolivia to accommodate the wishes of large multinational corporations. These corporations had a great deal of money, influence, and power, and so, they had the funds to invest.

In 1999, the Bolivian government signed a 40-year contract to transfer the operation and distribution of Bolivia’s water supply from the municipal drinking water and sewer services to a multinational company. This was capitalism in action. Water became a commodity and prices rose. Many people could not afford water anymore.

“Relax,” said the World Bank. There had been some glitches in implementation. The free market would correct itself. They call it the ‘invisible hand’ in economics. Of course, until the time of this correction, some people may die – but it is going to be fine.

Violence and protests shook the confidence of the local government and the ‘savior’ company was forced out.  By the way, this savior company was Bechtel Corporation, the largest construction and civil engineering company in the United States.

In 2000, Bechtel made an annual revenue of over $14 billion, whereas Bolivia’s national budget at the time was only $2.7. This is called profit maximization, the governing rule of capitalism.

I recall that my textbook mentioned one of the main causes of poverty as the lack of natural resources. Yet, in the list of poor nations, African countries top the chart. I must confess – back then, I didn’t bother to think. Thoughts never gave you good grades, facts did.

Now that I don’t need grades because I have a job, I think of Guinea – you must have heard of this country during the Ebola outbreak. Guinea, one of the largest producers of bauxite in world, is one the poorest countries. This is an example of modern colonialism. Western governments are not supposed to wield commercial and political power at the same time, and certainly not to use one to benefit the other. In colonial states, the British would develop a relationship with a small group of local people who would fuse political and commercial power to control the economy.

After they left, the giant multinational companies, along with corrupt state officials kept doing the same.  Colonialism was just an extension of capitalism. You conquer lands for cheap labour and natural resources and later on, use the colony to dump your products. By this time, the colony is so dependent on you that you are even selling it needles!

I might not be totally wrong to say that it was the poor countries that made the rich countries rich – through debt repayment and through their resources. Did the rich keep the poor, poor?

The rich will keep getting richer and all the mechanisms are designed in such a way that wealth remains concentrated in the hands of a few. I shall give you some facts and figures. In the US, in 1984, the top 0.1 % had 9.6% of the country’s wealth while bottom 90 % had 35%. In 2012, top 0.1% had 21.6% of wealth distribution and the bottom 90% had 25.6%.

While the super-rich are growing their share of the pie, just about everybody else’s portions are shrinking. Think of your organization. Do you see any difference? Now think of the recession in 2008, which led to many workers being handed a pink slip. The big bankers were bailed out receiving more than $700 billion. The inequality in income is more than we can think and these banks are too big to fail.

At this point, you may think that I am against capitalism and pro-communism.  Of course not! Just like you, I am waiting for my next increment. We all want to make more money – there is nothing wrong with it. But think about this – how many cars do you really need? Capitalism has helped us so far, but now it has outlived its life. It needs a change in definition. How about profit maximization with some conditions applied?  The problem is capitalism has no sense of right or wrong. So a cheap source of labour is a cheap source of labour, even if that source is a teenager working in hazardous conditions in the textile mills of Bangladesh.

Some six years ago, Mr Rangarajan defined poverty for us. He said anyone living under ₹47 per day in urban india and ₹33 per day in rural india is poor. This made three out of ten Indians poor. So, if you are reading this after a good meal you are probably not one of them. But imagine – what if you had to spend a day with just ₹47? May be then, we will think deeper about this.