The basic problem with capitalism is that it veered away from its understanding that subsistence needs (food, clothing and shelter, to put at its basic definition, though that list increases as society requires more sophisticated basic needs for survival, such as education, health care and transportation) must be easily available and at its most basic level, extremely affordable. This is because genuine capitalism never provided the subsistence part of what humanity needs. Genuine capitalism is the way to generate income from surplus. (Be sure to read my previous tutorials for explanation of subsistence and surplus). Capitalism never was the provider of subsistence, since for most of human history that was obtained by human day to day activity, where people built their own homes, grew their own food, herded their own animals, used animals for transportation, fed their animals by grazing on free range, and made their own clothes. Capitalism developed on top of that subsistence foundation; capitalism never provided it. Yet now capitalism MUST provide subsistence because as the population increased and society progressed, obviously people no longer live as individual subsistence level providers in most of the world. So true capitalism must provide a service and capacity that was not part of its origination. Thus, to implement true capitalism and provide for the greater good, one has to continually remind one's self that capitalism should not assume that people have a capacity for self sufficiency that is not in truth provided. For example, even the most earnest independent person could not live outside of capitalism and provide their subsistence needs. They could not build a house with their own hands, grow their own food, hitch up their horse to go to town, barter for education or health care for their children, and essentially live as our ancestors have, yet at the modern standard of living. People would rapidly fall afoul of every bureaucratic and monetary nightmare if they tried (zoning boards? documentation requirements? how to afford the building materials? inability to raise their own food?). I mean, it's silly, but I have to walk you through that to realize that capitalism was build "on top of" a society that was already providing subsistence (as rudimentary and unsatisfactory as it was) to the population. Capitalism became the way that the subsistence person, the corn farmer I use throughout these tutorials, take the surplus of their corn and by selling it on the free market, gain cash to purchase what they cannot provide for themselves.
So how did we get here from the birth of capitalism? We've already discussed the birth of capitalism itself, being the farmer who raises enough for his family plus surplus to take to market and sell for cash. The second step in social and economic progress was called "specialization." That meant that instead of every family making their own clothes, a person or family might "specialize" in making more clothes than they need for their own family, thus selling the rest for cash. Instead of every man knowing how to repair his plow, for example, trades developed such as blacksmiths, where, for cash, they provide specialized service to those who used to need to have the "know how" individually or within family. Trades and guilds developed (both in the west and in the middle east areas, by the way), where specialists, such as gold smiths or tanners, organized to protect their knowledge, ensure a quality of service, and also train the next generation of apprentices. And then the next stage was the industrial revolution, where the development of machinery freed humans from incredibly labor intensive work that subsistence products required. This, then, transformed much of the economy from basic subsistence of individual and family self providers to having a "job" with a paycheck, where the paycheck at first supplemented but eventually became the only means to obtain subsistence needs.
Do you begin to see the problem? Capitalism came into spontaneous being as surplus was developed by individuals, as a way to raise cash. It's not like someone thought up the idea of capitalism and invented it. The "free market" used to be, quite literally, the food market, where farmers took their surplus to obtain cash. So capitalism came about "in motion," just like jumping on a moving train. People were "getting by" without jobs, cash or free markets by providing their own housing, clothes and food, as poverty stricken and inadequate as it was for most of humanity through most of history. Capitalism is "what do you do with the surplus in order to obtain cash?" But what does a modernizing society do to provide for basic needs, the subsistence products? This was the final new development called "mass production."
The theory is that as humans progress in technology and efficiency, spurred by the industrial revolution (and then later by the science revolution, including development of tools such as computers), and there is a growing number of consumers, things that used to be created laboriously by hand one at a time became "mass produced" and hence cheap to obtain. And indeed, much of modern prosperity came from exactly this theory, which kind of retrofitted capitalism from the front end where it emerged (surplus crops in the free market for cash) to the back end, which is how to obtain subsistence needs. But it was only a partial success, and that is why we have a financial crisis today, and why the capitalism success story is uneven and fickle.
We do not have true capitalism anywhere in the world today because we have deviated from the natural development of capitalism provided subsistence product. One problem is that capitalism began to be defined as the effort by individuals and the companies they control to "make as much money as possible." It did not used to be this way. Sure, there were always incredibly wealthy plutocrats. But for much of the "youth" of capitalism, small businesses developed where all the capitalist entrepreneur wanted to do was "earn a good living." He or she did not think of themselves as defining their success as "making as much money as they can." It is simple mathematics. A population cannot increase its prosperity if every person is striving to make as much money as possible. While there is a moral tone to what I'm saying, I'm sticking to just arguing the mathematics. With the same amount of profit one can have either one person who makes a million dollars a year, or ten who make one hundred thousand a year, or twenty who make fifty thousand a year. I'm NOT talking about Communism or income redistribution. I'm explaining how capitalism used to work, right up until the past few decades. People used to not try to be "a millionaire" or to "make a killing." Thus there was a golden age of small businesses and the growing middle class, people who wanted to "do well," but did not compete to suck and isolate the most wealth as possible out of the system.
The second problem was the warping of the notion of "standard of living." Again, I'm not arguing for diminishing one's standard of living; I'm all in favor of increased standard of living and increased prosperity. But here's the problem. True capitalism brings better and better standard of living at the SAME or LOWER price, not higher. Capitalism became warped so that instead of a wider base of affordable and higher quality subsistence (for example housing) product being constantly on the market at the same or lower price, a forced march was imposed on society, one where one must earn more and more in order to pay for more and more "must haves," where one income is certainly not enough, and where prices only increase while quality diminishes. Again, this is not how it was in the beginning. There is nothing in capitalism itself that requires that wealth be increasingly concentrated among "winners" in the market, while prices for subsistence "must have" products only increase (and now we see the quality going down as prices go up as "corners are cut.")
Simply put, true capitalism does not exist without moderation and "good will." Because capitalism came about on top of the existing base of self sufficient subsistence, which no longer exists in modern society, capitalism cannot succeed without a market ethics of good will, moderation and benevolent intention that supplies the free market subsistence sector of the economy. The market can accommodate (and would indeed adjust to and deal with) a small number of capitalists who seek only to "make a killing." But if everyone shares that ethos, then capitalism must, by definition, fail. Again, I'm not arguing for lower standards of living and certainly not for price fixing or "income redistribution." Heavens no! That only adds gasoline to the fire. The basic problems are that people have become capitalist rogue warriors, who have taken their eyes off the road, using tunnel vision to drain and concentrate wealth rather than focus on keeping high quality product and high quality jobs available from decade to decade without price increases. We don't have enough people who want to create a genuine commodity business (such as building homes) whose objective is to give say twenty people a full time job and to earn a reasonable "good" living for themselves. Even if people still feel that way, everyone is on the treadmill now and they quickly find they can't follow their vision. The treadmill is the siphoning of both jobs and wealth from the economy as a whole by increasing prices for the "essentials" while decreasing jobs. If capitalism was allowed to work the way it really should, someone should be able to go anywhere in this country and find a good quality $40,000 home to purchase, and find employment or other means of entrepreneurial cash raising to afford all that is now required for subsistence. Trust me, if I had been building homes the past thirty five years of my working life, things would be a lot different than they are now. The house I sold for $40,000 thirty years ago would still be available for $40,000 today, but with more features and safety, not less. I sure would not be charging $160,000 for a house that would have sold for $40,000 thirty years ago, and I'd not be building houses that force people into onerous debt and unending job/unemployment stress. This is just one example. Somehow people have convinced themselves that capitalism means to jack up needs, jack up prices, jack up profit, all in a kind of market warfare where people chase after money just to grab as much of it as they can for themselves. Capitalism, true capitalism, cannot survive and work properly when everyone has that mindset. I've seen this coming for thirty years now and it is a very big shame, because it certainly is not the fault of capitalism, but its been warped beyond recognition.
I hope you find this helpful, if not cheerful, ha. That's a "ha" of sympathy, not of genuine mirth. I've not felt mirth for a long, long time. I'm even more stressed, in some ways, than everyone else, because I've seen all the horrible mistakes as they are first occurring, knowing the dire outcomes in advance, and dreading them. It's not the fault of capitalism itself, or of Democrats, or Republicans, of conservatives or of liberals. It is the fault of the triumph of greed and immaturity, combined with a darkening attitude toward life, community and family, which then renders many people to not feel emotionally invested in a shared optimistic future, which genuine capitalism requires.
