Posted by: Middleclass Search | February 6, 2017

Limits of Capitalism and the Advantages of Middleclass Capitalism

Capitalism is not an ideology it is a method to produce a product or service by private individuals to be provided to the free market for consumption. Nowhere in the Constitution is the concept of capitalism mentioned. Businesses like to muddle the two arguing that the Constitution assures freedom for everyone and a free market should not have any government controls (laissez-faire). What is often conveniently forgotten is the freedom in the Constitution applies only when you do not impinge on others. When you hear a business arguing against regulations you need to see if by removing the regulation individuals or society would be hurt in the short or long run. Every system social or mechanical needs checks and balances else it will get out of control and eventually destroy itself.

Middleclass Capitalism argues that under the right set of rules capitalism can benefit America’s labor force and can provide businesses with an environment to achieve a reasonable profit. The problem is that in laissez-faire capitalism, the form of capitalism that America has been following for the last 40 years, is all that most people know. In laissez-faire capitalism businesses and corporations have all the power the worker is just a resource in producing the product or service. This is contrary to the 1960s before globalization when labor and business work together to advance the economy and to do this worker needed sufficient wages to buy the products and services produced. Employee compensation was considered in a different light by corporations it was the necessary evil that allowed employees sufficient money to buy the corporations products.

A middle-class wage for the majority of the country’s citizens is essential to make the American Dream work again. Technically the definition of wage and salary differ where wage is tied to an hourly period or a fixed amount of work and salary is tied to a fixed time. But for this discussion the components of a middle-class wage are exactly the same as the components of a middle-class salary.

Wages/salary go back to prehistoric times Babylonian cruciform show that beer was used as payment for services and art in Egyptian tombs indicate that bread and beer was used to pay the workers. The expansion of Europe’s mercantile colonies required skills and pay was in terms of food, clothing, shelter and cash, land or part of profits.  As the industrial revolution gained energy in the 17 and 1800s the need for workers continually grew and compensation became more important.

A way to look at what should be included in the employee compensation is to consider the employee in the same light as an item of equipment needed to produce a product or service. The employee will need maintenance the same as a piece of equipment. The maintenance includes proper pay (power), healthcare (repair), updating (education), and proper disposal (retirement). All such costs are passed to the consumer in the product/service price for a piece of equipment. Why shouldn’t the employee’s “total maintenance cost” also be included the price of the product/service? (See the discussion of living wage in the Nov 6, 2016 blog.)

As globalization expands businesses have been trying to move the cost from the product or service to the general economy to cut production cost. In the end the consumer ends up paying for these shifted costs through higher taxes – like cleaning up businesses environmental problems. When businesses were local and small this did not cause a major problem since it could be addressed locally but with massive global corporations where products are sold worldwide local citizens end up subsidizing a company whose product they might not use.

The concept that all cost of a product/service should be passed to the consumer in the price of that product/service is the key to Middleclass Capitalism. Included in the cost of a product/service is a starting wage based on the living wage concept and a journeyman wage based on a middle-class wage structure.  This is the difference in a Middleclass Capitalistic System and that of our current Corporate Capitalistic System. Today’s concept of management is that all possible cost should be offloaded to the taxpayer. This short range approach hurts not only today’s workers but hurts future generations since the cost of cleanup of current industrial manufacturing is passed to future generations.

Middleclass Capitalism requires corporations to act responsibly.

Background:

Capitalism, as a system, is inherently incapable of pasting all its cost to society (current accounting practices do not quantify all the cost of a product or service). Laissez-faire capitalism attempts to externalize (move cost off corporate accounting sheet to labor or the public) labor cost like healthcare, retirement, to public sector instead of putting the cost in the price of the product or service.

Laissez-faire capitalism or today’s Corporate Capitalism’s does not take into consideration in the products or services cost the following:

The cost of the infrastructure to support the Corporation such as roads, utilities, Internet capability, basic education of the worker and etc.

The cost of pollutants from the production of the product or service.

The using up of nonrenewable natural resources (coal, oil and etc.).

Within capitalism its self-there is no concept of justice or fairness. Laissez-faire capitalism is simply incapable of dealing with world’s poverty rate and destitution. Neither Middleclass nor laissez-faire capitalism measures social well-being. Laissez-faire capitalism depends on constant growth to survive.

Actions:

Review each business that you purchase a product or service and determine if they meet the following criteria.

  1. The Corporation pays a living wage to all employees.
  2. All cost of producing a product or service is in the price of the product or service.

If they do not meet the two criteria determine if you can find the product or service at a corporation that is more responsible.

Capitalism has its limits that are not being addressed currently. If we are to provide an environment where the American Dream will be available to our children and grandchildren every individual needs to take action wherever he or she can to support only corporations that favor Middleclass Capitalism as opposed to Laissez-faire Capitalism (Corporate Capitalism).

This is not government’s job it’s the American citizens’ job.

Additional research:

Three selected web articles list below discuss the limits of the current capitalistic system to accurately price the product or service resulting in society supporting American corporations.

Article 1 – In a February 14, 2014 National Review article Jonah Goldberg.

Article 2 – In 2011/06/02 US News and World Report.

Article 3 – On the website Davidttilfiker.com. This is the most concise list of limits of capitalism I have seen.

 

 

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