B.Y.: The Inherent Flaws of Capitalism and Why it Needs to be Amended

Disclaimer from the editor: the following is an opinion piece written by a contributor, Brandon Yip. As such, it does not necessarily reflect my opinions. All credit goes to the author.

Although my canned disclaimer says that I do not ‘necessarily’ agree with the views expressed in the following piece, I would like to make a clarification for this one: I absolutely disagree with it. In fact, I will consider writing a response to this piece in the coming days.

Furthermore, Brandon Yip does not possess a WordPress account. For this reason, the post seems to be credited to me, although in reality, I am simply posting on his behalf.

The definition of capitalism is a system in which goods, services, and trade are manipulated in the private sector by private individuals and not by the government. We see so many nations around the world adopting this system because it, quite simply, works. I do not contest this fact, nor am I anti-capitalist. We all have seen the historic failures of communism and how it purports to help the people while in reality creates such an unfavourable economic and social system that leads to widespread suffering and death. However, we should all recognize that people tend to label socialism and communism as vile, evil ideologies that are doomed to fail while simultaneously exalting capitalism on a pedestal claiming that it “always works”. The truth is that a capitalist system is not perfect and there are inherent flaws in it that need to be recognized and amended in order to truly call it a perfect system.

The first true flaw of capitalism is that in leaving personal wealth completely untouched by the system, it actually has the potential to destroy equality of opportunity. Proponents of capitalism always preach about how the system encourages a mindset of, “if I work hard, I can be successful”. However, the fact that wealth remains in completely private hands complicates this. Wealthy parents who indeed worked for their money are allowed to pass it on in full to their children. In fact, in Canada, there is no inheritance tax at all. What this means is that the system allows the children and descendants of wealthy individuals to benefit from a gross amount of unequal opportunity compared to everyone else. Their being born into wealth allows for potentially better chances and pathways that actually destroy the sense of equality of opportunity compared to everyone else. This can, however, be easily amended by the imposition of a large inheritance tax on inherited assets. This ensures that everyone, regardless of familial wealth, has exactly the same opportunity and chance as everyone else to succeed on their own in life.

The second flaw is the definition of a purely free market that comes with the definition of pure capitalism. In a free market, there is no government intervention in competition between private individuals and businesses. While this ensures economic freedom, it also has the potential, if unrestricted, to allow dangerous monopolies to take control. Businesses are obviously motivated by a desire to gain as much money and influence as possible. Now, this comes down to fairness. Businesses that happen to be more wealthy would be able to displace smaller businesses and form monopolies, which are unfair to the other businesses in the same industry. Not only is this unfairly depriving the smaller corporations of their chance to succeed, it also eliminates choice for the consumer. One corporation that dominates one essential industry is now able to charge consumers much more money for its goods or services, thus making them essentially economic slaves. As such, a guaranteed win-lose situation is created. Obviously, restrictions and laws are needed to regulate the free market to prevent these events from happening which I think we all agree are necessary. But this fix is a necessary amendment to free-market capitalism to protect consumers. Although the clear-cut definition of free-market capitalism does not allow for regulation, the fact is that we need regulation to protect consumers and as such, it is a necessary amendment.

The next issue is that capitalism just isn’t moral or ethical. Supporters of it will always argue that morals don’t matter in the pursuit of self-interest and that if other people feel offended or betrayed yet you have succeeded, why should you care? Essentially, “as an individual, should I care about how society feels or reacts if I made myself successful?”. Let’s think back to the fundamental consequence of a purely capitalist system, which is the “win-lose” scenario. As stated earlier, in order for me to come out on top, someone else has to fall. Now let’s also think about the concept that hardcore capitalists preach: equality of opportunity. For example, let’s say a company purposefully and surreptitiously sells a consumer a faulty product or service knowing that it will fail and the consumer will come back and have to pay more to fix it. The company obviously has the typical “profit-maximizing” mindset and the consumer has lost out. Obviously this is morally wrong, but frankly, why should we give a damn? The answer comes back to equality of opportunity. In order to truly follow this concept, the company should profit from the initial sale of the product or service and the consumer should be able to fairly and equally benefit from the use of the service to help them. The future for the company and the consumer after the sale of this product is up to their own individual actions, but the initial opportunity needs to be there. As such, the current mindset of “maximizing profits in a free-market” and the concept of equality of opportunity are contradictory and need to be looked at.

Finally, the most commonly bemoaned fault is the encouragement of greed. In a hardcore capitalist society, its very definition is to encourage and reward profit for individuals. People often take that definition and spin it to mean profit by any means, and the system allows for that. Supporters of the system will commonly say that, in this kind of society, an individual should be allowed to do whatever they want with their own money. However, this completely erodes the sense of the word, “society”. A society consists of more than one person and consists of a system where people interact with each other. If a person is able to use the money they make to gain an unfair advantage over others, sure, they are acting as an individual. But, this begs the question, can we still call this a society if everyone is acting on their individual drive?

At the end of the day, capitalism is proven to be a very successful system, clearly more than its failed alternative. It usually slots perfectly well with human nature. However, the point I am trying to make is that we cannot ignore or look past the faults in capitalism while beating socialism and communism down. There will be people who staunchly support everything capitalism has to offer, and that is perfectly fine. However, all I want us to do is to just realize that capitalism is not by any means a perfect system, and by recognizing those socially unfair imperfections, we will be able to amend it so it becomes a system that works for everyone.