I was once one of those people who hated capitalism. I understood it as this societal system where the rich won and everyone else lost. That was reductionist, but I do empathise with those who still maintain that view. Life is bloody hard. It’s easy to rail against the system under which you live. This piece aims to explore capitalism from the perspective of a supporter of capitalism. I will argue that it is a more democratic way of existence. Bear with me.
That last sentence brought me back to a time, about two years ago, when I wrote a piece about how capitalism was intrinsically anti-democratic. Here was my rough logic: capitalism rewards those who have more capital, who then have better access to capital, who then gain more capital. It is a positive feedback loop, or an exponential function. Those who have more capital have more influence in politics, therefore capitalism is not compatible with democracy. This is a comment on the role of lobby groups and thinktanks more than capitalism itself. In this piece, I will talk less about broad capitalism and more about grassroots capitalism, i.e., people and businesses buying and selling goods. At this level, its democratic nature becomes clearer.
Capitalism is based on the seller providing value to the buyer. The buyer determines the value of the product. In a commodity setting, the collective buyers determine the value of the product. I urge you to read those three sentences once more, and allow it to sink in.
Value is determined by the customer. This means that if there is no market for the product, there would be no one selling the product. This is as much the case for an iPhone as it is for a toilet as it is for a song. If you cater to your customer, they buy your product, and you win the game. Artists can get confused by this very easily, believing that they are trying to climb some hierarchy of competence so that people will listen to their music. But it’s not necessarily the songs which are the most competently written that succeed in selling records. That is the wrong hierarchy, as I’m sure many musical artists understand. In capitalism, there is only one hierarchy, and it is determined by the customer.
This fact is why customer-focused business are so successful. Amazon is a prime example. Looking through their annual reports since 1999, the strongest theme throughout is their focus on customer experience. Instead of a focus on Bezos’ egotistical idea of the perfect product, they focused on the market’s perfect product. That is key. Mark Zuckerberg is another example. He wasn’t trying to build his own fantasy of the ideal Facebook. He was building what he saw the users attracted to, and what he saw did best for the advertisers, who were his other customers. He didn’t invent advertising, he just utilised it to build a better product for his users.
This idea of supply and demand, supplier adding value for demander, brings us to a startling conclusion, at least for someone who demonises capitalism. This form of capitalism that we see today, with advertising based on triggering our emotions, with lobby groups and thinktanks influencing politics, with financial institutions ripping off consumers without consequence. This is all a result not of capitalism itself, but of the interaction between capitalism and our specific society. As big as these problems I’ve just outlined are, they aren’t created by little capitalist demons behaving badly inside the system. They are created by humans, doing things that they are incentivised to do, because our specific society collectively decided that they were creating value. It then begs the question, are all these problems a result of capitalism, or the result of a society which has strayed from its moral grounding?
The success of customer-focused businesses ought to be seen as a good thing for democracy. Isn’t this precisely what true democracy dictates? A system by which the collective decides what has value and what does not. No other system does this. From this perspective, I can empathise with the arguments of hardcore libertarians. Any government regulation means a disruption of this theoretically perfect system. Those who act more democratically, i.e., provide value as defined by their peers, will become successful. This is a system of true beauty. Although there are some exceptions to this, which is why I believe we do require some government intervention. Democratic government, after all, is a collective decision by people.
There are some cruel laws of nature. I call them cruel because they are far from compassionate. One of these is explored in a well-known Bible verse:
For to every one who has will more be given, and he will have abundance; but from him who has not, even what he has will be taken away. — Matthew 25:29, RSV.
The reality is, without intervention, there will be many who end up with very little. This fact, taken to its inevitable conclusion, will destroy capitalism. Wealth inequality to this extent means that businesses start to fail because there are no longer customers with enough money to spend. Government is required to reduce this wealth inequality to keep the economy moving. So long as that government is democratic, then that government will find the balance between what the people believe is justified intervention, and what the people believe is just hard luck. Our society today, with our government programs and our major corporations, is a result of the people’s decision of what to allow and what not to allow.
There are some major caveats to this, for example the interactions between government and certain corporations which conspire to keep those corporations in power. But even these interactions, as behind the scenes as they may be, have been allowed by people over the years. People have continued to buy the things that made those corporations thrive, thereby assigning them value. People have continued to elect governments which allowed the current wealth inequality situation, thereby assigning them power. Whether or not you believe that our current situation is good, bad or otherwise, there is no denying that humans created this. There is also no denying that humans are the only way out.
Build better things for people. That’s all there is.