HOW CAPITALISM UNDERMINES THE "FREE MARKET"

I noticed a comment today that I had missed, for this post I made last week on Martin Luther King's seething indictment of American capitalism and consumerism, which he believed is directly related to poverty, racism, and aggressive war. It's worth noting the short statement here on the main page if only because it gives me an opportunity to articulate something that's been bothering me for years about our economic system.

So here it is, from reader A.B. Dada who writes the gold-investment blog Dada Says...:

I just wanted to correct a misconception I noticed in some quotes and in the general post.

The definition of capitalism it its true sense is "The voluntary cooperation of two parties for the mutual profit of both."

Capitalism is not being followed in NYC or in the US or in any country that forces mandates, regulations, taxes, tariffs and/or subsidies. I prefer to call those economies "cartel mercantilism" not capitalism.

Capitalism is voluntary without force and offers every party a profit during a trade. Capitalism is not class warfare or the abuse of the poor by the wealthy.

And my response:

Okay, good point, but I think you're describing an ideal conceptualization of the "free market" rather than capitalism, which strikes me as being more about using economic power to squeeze the "free" part of "free market."

Here's a definition of capitalism from Merriam-Webster Online:

an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

Owners of capital are able to use that ownership to create an economic advantage that skews wildly the "competition" part of capitalism in their favor--generally, the only real competition taking place under a capitalistic system is between various owners of capital, and not between capitalists and labor and consumers. Because this unfair advantage is built into capitalism, it really is class warfare--workers and consumers do not meet capitalists on an equal playing field. And big capitalists are able to do the same thing, to a lesser extent, in competition with little capitalists.

Furthermore, the inherent power of capital ownership doesn't simply disrupt the "free market" in terms of rigging competition: the power of capital transmutes itself into political power, as the recent Jack Abramoff scandal has clearly illustrated, which means, especially under the current White House administration, that the "mandates, regulations, taxes, tariffs and/or subsidies" you mention are often written by the capitalists themselves, for their own benefit, further destroying the "free market."

In short, capitalism, as actually practiced, makes free trade problematic at best.

Just as a final note, don't think I'm necessarily suggesting that we totally do away with capitalism: rather, my belief is that government should do what it can in the way of regulation in order to level the playing field as much as possible. Of course, the first step in that direction is acknowledging the problem in the first place. Unfortunately, I don't see that happening anytime soon.

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