Why Capitalism will fail us?

Capitalism is an economic and social system in which capital, the non-labor factors of production (also known as the means of production), is privately owned;[citation needed] labor, goods and capital are traded in markets; and profits distributed to owners or invested in technologies and industries.

When I talk about Capitalism in this article, I am essentially talking about the commerce system we all participate in. I’ll keep my points simple and because of this I might not go into too much detail on certain topics, however if you are interested in learning more, you can follow the links at the bottom of this article. Bear in mind this article is written lay, so that its understandable to anyone who reads it.

The system we have in place today consists of corporations. A corporation in structure resembles a pyramid. At the very top of the pyramid we have the governing body, below this directors, and below that various other levels of management all the way down to the team leaders who are a level above the average worker. It’s important to note that from a structural point of view there are a lot fewer people on the top, while generally the majority of workers comprise the base of the pyramid. It is also worth noting that in almost ALL corporations the better earning potentials exist higher up in the structure.

Now I won’t go into equality issues here. Neither social dynamics. But its worth noting that the wealth is not evenly distributed. The true profit is reaped higher up in the structure, while the average workers might be earning a little over minimum wage. Even their collective earnings do not in most cases exceed that of the top elite few. In other words the collective earnings of workers generally do not exceed the collective earnings of the governing body in an organization. A good example of this is Microsoft, where the top 10 elite earn more than their entire workforce globally combined. Before we digress too much, let’s get back to this point, it’s very simple: Workers generally get paid as little as possible to do as much as possible, to make the top elites as much money as possible. This is one of the foundation principles governing capitalism.

Knowing this, lets move onto the next point. A worker is only valuable to a corporation if that worker contributes to the profit margin. The responsibility of the corporation is NOT to keep people employed, rather it is to fuel profits for the elite few right on the top of the structure. If you have any doubt about this think of companies that outsource their support or telesales operations to 3rd world countries where the equivalent services are provided at a fraction of the price of employing locals.  These companies make superficial claims to care about their workforce or country.  Mostly these companies will go with what is financially feasible, and do not care about “the little guy”.  This brings me to my next point – Efficiency (yes we’ve all heard the buzz word). Efficiency in a production context is basically producing goods in the most cost-effective way possible to maximize profits. There are of course other elements to efficiency such as the producing things quicker, or with less defects, or by using less energy with environmental benefits. The typical stance however, is driven by greed and to maximize that profit line.

This is why when a new piece of machinery comes out, corporations WILL replace the less efficient human component with the machinery which is way more efficient. Cheaper, quicker and more accurate, but ultimately it maximizes that profit line.

Capitalism is a dog eat dog world. The firms that actively develop efficient technology are in their own right governed by the rules at play, and also comprise a pyramid structure. They have one agenda too, to maximize their profit lines.

Where does this leave the average worker? The short answer: replaced and out of work. Where do these workers go? Would it surprise you that about Almost half the world — over three billion people — live on less than $2.50 a day. You might be reading this article on your Mac book in a lovely air-conditioned office working in the service industry, you’re a million miles away from the reality of poverty my friend, but many people are already feeling the brunt of technology in the workforce, and as things progress, more and more technology will automate more and more work done by the labor force, even in developed countries.

Technology improves exponentially. Meaning we’re developing new technologies quicker and easier than ever before. If you’re in any doubt of this, please take a visit to Dubai where the very first completely automated underground system is being implemented. Yes you heard me – 100% fully automated. Remember the goal of the corporation is to be as efficient as possible and the real definition of efficiency is to get things done as cheaply as possible, eliminating as much of the labor needed to produce the desired result in such a way as to maximize profits.

What else is on the list for automation? Lots of work we already do is being automated, work we thought would always be around is now being done by machines, or by advanced technology.

  • Vending Machines
  • Call centers
  • IT Support
  • Factory work
  • Sales staff
  • Restaurants can be fully automated, including stock management and accounting
  • Cars are learning to drive themselves
  • Various areas of the transport sector
  • Various areas of the banking sector

I could go on for hours, the point is automation is happening everywhere, no sector is immune, because when a part of a process can be automated the entire process benefits and becomes more efficient.

This is ultimately why Capitalism will fail. You see there is a flip side to this story. As automation gets implemented, the workforce is done away with, but ultimately (and here is the catch) – there goes the buying power. You see it doesn’t matter how efficient the development of the product was, if there is no buying power out there, then who is going to buy the product?

If you’ve done away with your whole work force, who are now statistics living on $2.5 dollars a day, who is going to buy your Ipods, new cellphones, your BMW’s? Here you might be thinking – the same people who are buying them today – those saved by the service industry. You would be wrong, even the service industry is now becoming more and more automated.

Capitalism is a walking time bomb, it has an expiry date and the system has to eventually fall flat on its face. I’m not even talking about wealth distribution here, the point is – while more and more of the work force get automated, eventually the buying force that motivates the seller gets removed, and this means the incentive of the whole Capitalistic system is in danger.

Is there a solution?

I recommend you watch Zeitgeist, it explains way better than I can the exact problems we face as a planet. I would also recommend you check out the Venus Project. I would say its a good idea to understand the dynamics at play here, even if you take no action and are a complete slacktivist. Just by understanding you already are part of the solution.