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Is Poverty a feature or a bug?

Ted Rall
© Ted Rall

As I’ve mentioned in the past, I firmly believe in capitalism. So why am I posting this comic by Ted Rall that condemns capitalism as a system where income inequality is a core feature? Because I agree with Rall that capitalism, at least as currently practiced, has lost its way and has serious problems. It has become corrupt and overly greedy. But I disagree that this is a core feature. Democracies have become corrupt too, but that does not mean that democracies are bad.

The father of capitalism, Adam Smith, was deeply concerned about social justice, where everyone had equal worth and was entitled to equal opportunity. Indeed, Smith believed that a balance existed between self interest and sympathy, but that the latter had greater importance. His view was that “mercantilism” (which in his era drove colonial expansion and resulted in frequent European wars) was wrong and he worked to improve the living conditions of the poor.

What we call “capitalism” today is more like corporate mercantilism and has things in common with fascism (where corporate rights are more important than individual rights).

Want evidence? Banks that are “too big to fail” is not capitalism. Capitalism is where you take risks and you are rewarded if your efforts succeed, but also where you pay the price if your efforts fail.

Large corporations hiring lobbyists to write bills that become laws by thinly veiled bribes to politicians is not capitalism. Capitalism is where you have a level playing field, so that the smallest company has the opportunity to compete with the largest. Capitalism is where monopolies are strictly prohibited, and power is not based on how much money you have, but on how well you use that money.

Capitalism is where trademarks and copyrights are limited to the minimum time necessary to encourage innovation, and where patents are only allowed on things that are provably novel and non-obvious. In true capitalism, the copyright on Micky Mouse should have run out a long time ago, and “one click” would never have been awarded a patent.

I believe that people are entitled to reap the rewards of their success, but are not entitled to use those rewards to tilt the playing field in their own favor. That destroys capitalism.

I also believe that progress requires death. The charters of corporations should have a limited time frame and scope, and inheritance should be severely taxed and limited.

I believe that in true capitalism, people would have a guaranteed right to have the opportunity to achieve their greatest potential. This means that full education and health care should be guaranteed to all.

Ironically, these beliefs would prompt some people to call me a socialist. But that’s because they have somehow perverted the idea of capitalism into something that is based purely on greed and where social goals have been sadly eliminated. And that’s too bad, because repeated studies have shown that as inequality increases, everybody (including the rich) suffer. When a corporation spends more time and money on legal fees to destroy competition than it does on innovating, that is not capitalism.

Capitalism may be based on self interest, but it must be about enlightened self interest. Money and power have never been a zero-sum game.

As anyone who has started a company knows, you do much better when you have competition. Heck, as anyone who enjoys sports know, you do far better when you have good competition. How much fun is a sporting event where the “field” is tilted to give one team an unfair advantage? Not much.

We do best when everyone has the right and the ability to compete. That’s capitalism. Or at least what it should be.

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15 Comments

  1. ebdoug wrote:

    Ironically in the very rich families, the husband would earn the massive amounts of money, the wife would then redistribute the money to give the poor a better opportunity. Warren Buffet just loves earning money. Then he allowed his wife to give it away to the needy. Not necessary food and clothing, but scholarships that didn’t need to be repaid. That system worked well and was a twist on the cartoon.

    Sunday, February 9, 2014 at 4:32 am | Permalink
  2. David Freeman wrote:

    Although I appreciate altruism; the poor need jobs, opportunity, fair play, justice and respect. The social safety net on which we all may sometime rely needs to be a government function not relying on the whim of the wealthy. As IK implies, capitalism needs to work with society to the benefit of owners, investors and workers and community rather than narrowly for owners and investors alone. We’re all interdependent.

    Sunday, February 9, 2014 at 8:15 am | Permalink
  3. il-08 wrote:

    I think what really needs to be explored is the influence of democracy on our form of capitalism. I think the founding fathers probably thought that an informed electorate would hold the rampant capitalism at bay and work as a counterweight to the wealthy few. What we’ve seen, especially recently, is the ability of the few to collect the tea-bag rhetoric braying into large enough herds to dominate the electorate. The one thing that has amazed me in all my years is the ability of a very few to convince a large number of people to work directly against their own self interest, and for the interest of the few, and completely convince them that they are doing the opposite. Perhaps it isn’t our form of capitalism that is the problem, it is our form of democracy.

    Sunday, February 9, 2014 at 9:39 am | Permalink
  4. Gord Martin wrote:

    Wow. Comments that are actually worth reading!
    The old saws about democracy … Or capitalism … Comes to mind: the worst possible system, except for all the others.
    I think I lean toward the cartoon on what pure capitalism is, but IK nails what we want. Getting that result requires a delicate and difficult balance of democracy and capitalism with an appropriate dose of regulation to keep the capitalism from heading toward survival-of-the-richest and revolt. We seem to be losing sight of the fact that all the systems have flaws and need to be carefully nurtured.

    Sunday, February 9, 2014 at 10:28 am | Permalink
  5. Don wrote:

    Hey, IK, I knew there was a reason I loved you. Very spot on analysis except I’d probably lean a bit further in the fascist direction than you do relative to our current state of affairs. The knot at the top between the corporate world and the Congress (secondarily the Executive) is quite strong and your point about the role of corporations and their associations in drafting legislation is one everyone watching Washington should keep in the back of their minds.

    Sunday, February 9, 2014 at 1:51 pm | Permalink
  6. Ted Rall wrote:

    Interesting discussion, and I really like a lot of the analysis here, but I thought I would weigh in with the observation that the tendency toward monopolization is irresistible in capitalism.

    Once a company or an individual accrues economic advantage and/or power, he will align himself with other members of the same ruling classes because they have certain common shared interests. Those interests include the protection of what they have accrued and leveraging it to accrue more. With all the respect, I think that this essay relies on magical thinking: if only the government would guarantee a fair shot at opportunity to everybody, if only it would regulate business more, then capitalism’s rough edges could be smoothed out.

    But that cannot ever happen. Not within the existing system, not through reform. Because the ruling classes will never let it happen. It’s not in their interest, and they have enough power to make sure that it doesn’t happen.

    Consider what happens in the political arena. In the 1980s, for example, the rich convinced Ronald Reagan and the Republicans to deregulate Wall Street and other businesses. For the most part, deregulation remains the norm. Even though it has pretty much been proven to be mostly negative.

    Despite the fact that most economists and in fact many capitalists believe that deregulation is bad for America and for the economy, it continues. Why? Because the ruling classes want it that way. The only way that the system can change is with a violent upheaval that terrorizes the ruling classes into giving up some of their perks. But even then, unless the system is completely overthrown and replaced with something else, the process of monopolization will resume and the cycle will recur.

    Sunday, February 9, 2014 at 4:11 pm | Permalink
  7. westomoon wrote:

    Now, see? Only on PI can you find this level of discourse — a pungent cartoon and a fine rant from IK to refine its point. Oh, I am glad you were able to keep this site going after all!

    As for capitalism, it is a mechanism that requires some pretty elaborate flywheels and counterbalances to keep it from tearing itself apart. From the inception of this country, we have relied on government to provide those. The periods where government has failed to provide the other half of the machine have been disastrous.

    But at least the previous periods of imbalance left behind them a useful infrastructure — the settlement of the West, industrial capability, the electrical grid, and so on. This current burst, which deals mostly in greed and electrons, not only leaves nothing behind, but destroys our previous infrastructure (e.g., property records) and our future capabilities (soil, drinking water) as it goes.

    Sunday, February 9, 2014 at 4:56 pm | Permalink
  8. PATRIOTSGT wrote:

    Great thoughts and comments. I agree with almost all the comments, but have my own tweak to add. IK on your “full education and health care should be guaranteed to all.” I am with you on the health care and somewhat on the education. I agree we owe our children an education and we do provide for all the grade school. However, I differ on college. I believe that should be earned and the student would need to dedicate themselves to improving and preparing and ultimately earning that college opportunity. I think giving it to all would eventually lower and diminish the value to what some of our public schools display as appropriate knowledge for a 12 year HS graduate.
    For those who say college education isn’t affordable there is some truth to that, however it isn’t the whole truth. Virtually every college has scholarships and financial aid available for deserving students. Deserving is the key word and I believe there should be a competitive piece to higher education. I think it equally wrong to value athletic prowess greater then a goo mind, but that’s our capitalist system, they make more money on sports then academics, which also speaks volumes about our society.

    Sunday, February 9, 2014 at 8:43 pm | Permalink
  9. Iron Knee wrote:

    Ted Rall, I am humbled to have you comment here. Thank you. Perhaps surprisingly, I completely agree with what you say — there will always be a (strong, if not irresistible) tendency toward monopolization, corruption, and concentration of wealth in capitalism. But I would go one step further and say that is true in any economic system. What is your proposed alternative and how would you prevent the same problems from occurring in that system?

    It is like what Gord Martin said about democracy. Personally, I think this country has done amazingly well in fighting this downward trend (although not good enough). We overcame the robber barons and other massive monopolies without (much) bloodshed. We overcame slavery. Indeed, the fact that people like you and me can speak out about this (I almost said “rail”), is better than in most countries with other systems. And I am grateful that I have been able to start a number of companies (some of which succeeded, and some of which failed) even though I started with almost no money or power.

    I think the argument for regulation (against deregulation) is pretty simple, actually. The fact that when people talk about deregulation they are only talking about companies is the problem. As I’ve said in other posts, there are good regulations and bad regulations. Eliminating all business regulations (as some people seem to want) is just idiotic. That would be like proposing that we eliminate all criminal laws — if I want some money I should be able to just steal it from someone with no consequences. We we have laws that apply to individuals for a good reason, and likewise we need laws for businesses — to eliminate monopolies, fraudulent business practices, corruption, etc.

    In Portland, we eliminated regulations that made it next to impossible to have a food cart, and as a result we created a fantastic food culture here, so I will never say that deregulation is always bad. But deregulation that allows concentration of power is always bad (just like absolute power corrupts absolutely). We once had laws and regulations against media concentration. They need to be restored. We also need to restore laws against corporations influencing politics.

    Will we succeed? I don’t know, but I’m willing to fight to make it so. After all, even the founding fathers thought that their “grand experiment” (USA) would only last 100 years or so before it became corrupt like everywhere else. We have exceeded their expectation once. Can we do it again? I think we can. But it will be hard work.

    PatriotSgt, we also agree. I should clarify that my belief that everyone deserves the opportunity to a college education doesn’t mean they won’t have to work hard (academically) to get it. Just like saying that everyone should have the opportunity to make lots of money doesn’t mean they don’t have to earn it. (Of course, some things, like health care, I believe you earn just by being human).

    Sunday, February 9, 2014 at 11:38 pm | Permalink
  10. ebdoug wrote:

    PATRIOTSGT: What you said before about finding the solution to drugs. California had the solution to higher education. Education at the college level was free to the high achiever from the disadvantaged family in the 1960s. California thrived with these well educated people. Well educated people pay more taxes to help more people achieve.
    And then California elected an actor who played the part of Governor. He took away the free college for those achievers. I watched from afar as the state deteriorated. Next the actor went on to play the part of President of the United States and like the governor of Texas, wrecked havoc on the US. “When will they ever learn, when will they ever learn.”

    Monday, February 10, 2014 at 5:25 am | Permalink
  11. JOHN wrote:

    I live in a different America now. For the past two years I lived in the inner-city of America’s most dangerous city. I saw the culture of poverty up close and personal. Some insist there is no such thing as a culture of poverty; they would think differently if they spent the last two years in my shoes. But of course they won’t.
    The culture of poverty is many things. Actually it is an accumulation of things. Having one of those things doesn’t necessarily mean you are part of that culture. One characteristic of the culture of poverty is the single-parent household. But there are many middle class and even upper class (though fewer) single-parent households that are doing just fine. That is because they have resources unavailable to the poor. Like savings. Lawyers. Reliable transportation.

    Monday, February 10, 2014 at 6:14 pm | Permalink
  12. PATRIOTSGT wrote:

    John – I believe the culture of the poor is not a list of things, but a mindset combined with a lack or foresight. In my lifetime I have been middle class, lower class, poor, middle class and upper middle class. At no time however did I ever think of myself as poor or without opportunity. That was my mindset and my ability to use foresight. Even today I could loose everything, but never be poor, just someone with less or no money and I would find my way back to being self sufficient.

    The biggest problem IMO with our lower classes and the poor is they don’t have anyone to tell them they can be successful and believe it. They hear it, but think its just a saying and not true. When they believe it they are never poor again no matter how much money they don’t have.

    Have you ever heard of Dr. Ben Carson? He’s a well known pediatric neurosurgeon from my home town. His single mother was illiterate and poor, but she made Ben read to her every night. He didn’t find out till later in life she couldn’t read. She also told him he could be whatever he wanted, and luckily for many children he choose medicine. We need more single mother like Ben’s.

    They pros and cons of public assistance are; yes they help protect people and give them a chance, but when they last for generations those receiving them begin to feel they can’t do any better so why try. The government basically says to them, don’t worry we know you can’t do this for yourself so we’ll take care of you. That’s the other mind set we need to break.

    Monday, February 10, 2014 at 7:59 pm | Permalink
  13. Dan wrote:

    “if I want some money I should be able to just steal it from someone with no consequences”
    Isn’t that what Wall Street is doing every day?

    I’ve said it before, I’ll say it again; Welcome to the Plutocracy! Smith was also against people of the same trade organizing, they could set prices.
    Bring back Glass-Stegal, and the stock trade transaction fee.

    Friday, February 14, 2014 at 8:53 am | Permalink
  14. Iron Knee wrote:

    > Bring back Glass-Stegal, and the stock trade transaction fee.

    I completely agree with you.

    Friday, February 14, 2014 at 7:36 pm | Permalink
  15. Karin wrote:

    Seems to me that what you want is the Nordic welfare model. Funny, considering that Sweden is a favorite horror icon for the republicans :-)
    http://www.economist.com/news/leaders/21571136-politicians-both-right-and-left-could-learn-nordic-countries-next-supermodel

    Tuesday, February 18, 2014 at 12:51 pm | Permalink