Philosophically speaking, I favor capitalism over other economic systems. The free market is a beautiful thing. When operating as it should, consumers are free to choose the companies and people they want to do business with. Those entities that provide the most value to consumers are rewarded, and those that don’t go out of business.
I also favor smaller government, particularly at the federal level. When the government regulates marketplaces, they alter the playing field. Their actions can significantly disrupt a market and determine the winners, even when not intended. When this happens, consumers are usually the ones who lose.
Unfortunately, my philosophical views don’t always work out for the best. There is a dark side to capitalism. There are times when unchecked capitalism is not in the public interest. In extreme scenarios, it can bring harm to the public. It can concentrate wealth among the rich through the exploitation and transfer of wealth from the public domain.
Allow me to explain.
We are in the midst of an opioid epidemic. Families and communities have been ripped apart by those who have become addicted to these drugs that were prescribed to manage pain by doctors with good intentions. They were led, by the pharmaceutical firms, to believe that these drugs were in the best interest of their patients.
It turns out that addiction to opiates is not a new phenomenon. America’s first battle with opiates occurred in the early 1900’s. It had gotten so bad that then President Theodore Roosevelt appointed the country’s first opium commissioner to get the problem under control. So why are we here again?
The opioids are a significant source of revenue for the drug companies. When doctors began to raise warning signals about their dangers, as pointed out in this article by The Guardian, the large pharmaceuticals used their lobbying power to discredit and shout them down. Hence, the dark side of capitalism.
When the winners become too powerful that they refuse to acknowledge the harm in their actions, then somethings needs to be done. That is when it is up to the government, the elected officials meant to represent to the public’s best interest, to act to protect their citizens. Otherwise, the forces of capitalism, left unchecked, harm our society.
While I’ve chosen to pick on the drug companies, the dark side of capitalism runs across industries. It’s appeared on Wall Street with predatory lending practices that led to the sub-prime mortgage meltdown. Big banks were also willing participants in high frequency trading schemes where unknowing investors were bilked out of hundreds of millions of dollars through secretive and deceptive trading practices. Without oversight, the stakes are too high, the dollar amounts too large, to let the financial institutions run unchecked.
The latest sector to come under public scrutiny is the technology industry. The big players, Amazon, Apple, Facebook, Google, and Microsoft are being examined for anti-competitive practices. Whether their practices are in violation of current law is a matter of debate. One of my favorite bloggers, Michael Mace, wrote a great piece recently about why we need to be careful about the interpretation of law to satisfy pubic opinion rather than to prove guilt.
While I can’t talk to whether the technology companies are guilty of violating anti-trust statutes, I can say that, in at least some cases, they are guilty of violating public trust. They have used their market position and power to stifle competition. It can be argued that consumers have not been harmed, but that may be a short-term effect. Over time reduced competition usually leads to less consumer choice, higher prices, reduced quality, and poor service.
I am not suggesting that we should go grab our pitchforks, round up the posse, and blow up our capitalist economy. What I am suggesting is the following:
- First and foremost, companies need to conduct business ethically and responsibly. They need to be more focused on doing the right thing and recognize that just because they can do it, and it makes lots of money, does not make it right. Or as I like to put it, realizing that what’s bad for the hive is bad for the bee.
- Second, the government does have a place in regulating our capitalist system, but let’s keep the role measured and balanced. As Mace pointed out in his article, we can’t give in to extremes and populism. Society is not meant to be ruled by opinion and emotion. We live in a democracy. If people are not happy about what is happening, a bill should be proposed, its merits debated, and made into law if it is deemed to be in the public’s best interest.
- Third, if companies are not going to police and hold themselves accountable, then we need to hold them responsible when they exhibit bad behavior. We have to avoid forgiving companies that provide short-term benefits to consumers for their actions that can be destructive to society in the long-term.
As I stated at the top of this rant, I favor capitalism and small government, and I still do. I will take it over the alternatives each and every day of the week. On the other hand, I’m a pragmatist. I realize that there is a need and a place for the role of government. Without it, the dark side of capitalism will take over, which is an outcome none of us should want.