Capitalism: The Untold Story

Posted: April 20, 2011 by snoussik0 in Naomi Klein

Capitalism Vs. Socialism (source: http://www.theworkzine.com)

By: Karim Snoussi

Today we live in a world of crises. We are witnessing economic meltdowns, disproportionate wars, surging food and oil prices, extreme poverty, and rising unemployment, which has sparked uprisings all around the globe. With the recent protests in North Africa threatening to spill over to the Middle East, economists are predicting skyrocketing oil prices that could contribute to a much deeper depression of world economies. Some people blame the current economic crisis on the Bush administration’s mishandling of wars and budget mismanagement, others blame it on wall street’s Ponzi schemes that were fueled by greed. Other people think that this is just another cycle that the world economy, “based on capitalism,” is going through and, with time, the market is going to correct itself and everything is going to go back to “normal.” A number of other people are using this crisis to lay down the foundation for the argument that capitalism is a flawed system that is doomed to fail. Naomi Klein is a well-known social democrat activist and writer; most famous for her criticism of the Iraq war, Israeli policies, and big corporations.

Naomi Klein Book (source: http://www.tomsito.com)

In her book, The Shock Doctrine: The Rise of Disaster Capitalism, Klein describes the horrific events she witnessed during her visit to Iraq after the invasion. She is very critical of the privatization of Iraq’s economy as facilitated by multinational corporations. She affirms that capitalism is the cause of this corruption and unjust war, and she suggests that democratic socialism is the solution. In p. 569 of her book, she states, “Democratic socialism, meaning not only socialist parties brought to power through elections but also democratically run workplaces and land holdings, has worked in many regions, from Scandinavia to the thriving and historic cooperative economy in Italy’s Emilia Romagna region. It was a version of this combination of democracy and socialism that Allende was attempting to bring to Chile between 19870 and 1973.” In chapter 16, p. 328 of her book, Klein goes on to describe the US as a free-market capitalistic democracy, but is it? I argue that the United States is neither capitalistic nor a free-market. But first let’s define the two political systems, Socialism and Capitalism.

Bernie Madoff (source: http://www.politicolnews.com)

According to the encyclopedia of Britannica, Socialism is “a system of social organization in which private property and the distribution of income are subject to social control, rather than to determination by individuals pursuing their own interests or by the market forces of capitalism. The term is also applied to to political movements whose aim is to put such a system into practice (Socialism).” I would also quote from Britannica that “Capitalism, also called free market economy, or free enterprise economy, is an economic system in which most of the means of production are privately owned and production is guided and income distributed largely through the operation of markets (Capitalism).” Accordingly, socialism relies upon an organized power structure where the distribution of wealth and individual income is controlled. This control goes against the free-market and social individual freedoms. Therefore, we provide an environment for this social organization to breed corruption, greed, power, and control. On the other hand, capitalism strips the power away from the government and gives it back to people. It is a pure free-market system that allows the market to regulate the prices and production through supply and demand. According to the definition, if the economy is not a free market, it can’t be called capitalism. If the government proclaims capitalism or a different form of capitalism, it doesn’t mean it is the case. Stating the United States is a regulated capitalist system, it does not abide with the definition and putting ‘regulated’ next to ‘capitalism’ is like putting ‘dictatorial’ next to ‘freedom’. I don’t believe a dictatorial free society can exist. Moreover, In a country that is free of corruption and its citizens are treated equally, capitalism does not allow for big corporations to emerge because there will be equal opportunity for companies to compete. Still, any system that goes unchecked will breed corruption. People have to always be politically active and make sure no one is above the law. Because capitalism calls for a small government, it is easier to control. In the case of socialism that calls for a central organization, it is much more likely for corruption to occur.

Klein is trying to make the argument for socialism while comparing it to our current economic and social system, which she calls “capitalism.” In fact, I believe the United States’ current economy is neither based on capitalism nor socialism nor a free-market. Although our leaders are suggesting that the economy is a free-market capitalism, they are not allowing it to function as a real free-market capitalistic system, due to regulations and wide spread corruption that enable the rich to get richer and the poor to get poorer. Now that we have all these regulations and the American government is bigger than ever, the top 1% of Americans own 34.6% of the wealth and the top 20% own a shocking 85% of the wealth, leaving 15% of the population with only 15% of the wealth (Domhoff). They have created a system that only benefits them and gave it the name, “free-market capitalism.”

There are multiple reasons why the United States economy is not a free-market capitalism:

The government regulates interest rates.

The government uses bailouts by taking the tax payer’s money and distributes it to private companies.

The federal reserve keeps printing money, inflating the dollar and driving commodity prices up (Brouwer).

The Federal Reserve dictates to the other banks what to do.

The government decides for the people what countries they should make business with.

The government signs free trade agreements such as NAFTA and CAFTA.

The government uses subsidies and tariffs.

— The Federal Government collects income tax, which was introduced until 1861 in order to fund the Civil War with a rate of 3% and has been rising since then. None of that money collected today fund any function of the government. It is collected by the IRS and directly transferred to the Federal Reserve Banking System to pay off the debt that was accumulated over the years (Terrell).

The list can go on and on. I believe that these interventions affect the cost of goods and services, and result in artificial prices. When people give the government power to control prices they cannot proclaim a free-market democracy, as Klein is claiming in chapter 16, p. 328 of her book.

Corruption Vs. Dictatorial (source: http://www.2politicaljunkies.blogspot.com)

In her book, Klein should not compare socialism as an ideology with the current system that she calls, “Capitalism.” She should either compare the United States, a self-proclaimed capitalist, with China, a self-proclaimed socialist; or compare capitalism with socialism as ideologies. As we can’t blame socialism for the genocide committed in the past century in countries such as Russia and China, we cannot blame capitalism for the wars and the financial crisis where the United States is responsible. Instead, I suggest we should stop pointing fingers at at different social systems because our societies function with neither of them and turn our focus on our corrupt leaders and elites. The divide and conquer tactic has long served them to the point where we live in a society divided on so many issues including race, class, gender, politics, economy, welfare etc… People should unite on one cause, which is to end corruption and make sure that no one is above the law. Perhaps Klein should have focused on the corruption that led to the war and not criticize any political system because our societies function with neither of them.

To show the extent of impunity that some politicians enjoy, here is one of multiple corruption cases in the government. If it wasn’t for corruption, Dick Cheney, former CEO of the world’s second largest oil services corporation, Halliburton, would have never become Vice President of the US. In turn, he would have never provided falsified intelligence information to Collin Powel that was used as a pretext to invade Iraq. According to Bloomberg Business Week, Nigerian government filed corruption charges against Cheney and Halliburton in early December, 2010 (Bala-Gbogbo). Later on, after pressure from the U.S. government, Nigeria agreed to drop the corruption charges in exchange for a $250 million settlement. It is important to point out that Iraq sits on the world’s second largest oil reserves. If there was true capitalism under just law, Dick Cheney would have never reached office in the first place.

Social Class (source: http://www.anti-capitalism.org)

In an interview with A.V. Club Klein suggested that the U.S. should nationalize its oil companies just like Saudi Arabia and Iraq. I believe further nationalizing the U.S. economy is going to lead to a catastrophe. If our government officials can’t run the government how can we trust them to fully run and manage companies? Aren’t the same people who head these multinational companies also running the government? Dick Cheney is one example, but there are multiple examples of deep ties between the government and big corporations. If these companies work under the law, they would have never reached the power and the excess of wealth that they enjoy today. Not only they enjoy impunity but also the full support of the government with policies such as ‘too big to fail.’ Nationalizing companies and handing them to a corrupt government is submitting to this organized power structure that has been leading the country into bankruptcy. Klein’s solution only facilitates more grip for the rulers on America’s wealth. The opposite should be done, more power to the people and less for the elite. No to the concentration of power in fewer hands.

Pointing fingers (source: http://www.artfire.com)

I believe we need to stop pointing fingers at different social systems because our societies function with neither of them. People are divided and while we are pointing fingers at each other our corrupt leaders are gaining more control of our institutions and our private lives. We need to stop dividing and start uniting against one goal, which is ending corruption and taking the corrupt ones to trial to set the example. The problem is not Free-market Capitalism since it has never been one in the first place; instead, it’s the anti-free market policies of the Federal Reserve and the Federal Government, along with corporate fascism.

Works Cited

Bala-Gbogbo, Elisha. ”Nigeria Withdraws Charges Against Cheney, Halliburton.” Bloomberg Businessweek. 17 Dec. 2010. 1 May 2011 <http://www.businessweek.com/news/2010-12-17/nigeria-withdraws-charges-against-cheney-halliburton.html&gt;.

Brouwer, Kurt. ”What Causes Higher Prices & Inflation?” Market Watch. 2 Feb. 2011. 1 May 2011 <http://blogs.marketwatch.com/fundmastery/2011/02/02/what-causes-higher-prices-inflation/&gt;.

“Capitalism.” Encyclopedia Britannica. 15th ed. 2nd vol. 1992.

Domhoff, William G. ”Wealth, Income, and Power.” University of California at Santa Cruz. Jan. 2011. 19 Feb. 2011 <http://sociology.ucsc.edu/whorulesamerica/power/wealth.html&gt;.

“Socialism.” Encyclopedia Britannica. 15th ed. 10th vol. 1992.

Terrell Ellen. ”History of the US income Tax.” Business Reference Services. Feb. 2004. 1 May 2011 <http://www.loc.gov/rr/business/hottopic/irs_history.html&gt;.

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