Hey world,
Like many of us who were born and raised in the United States, it is hard for me to imagine a world devoid of capitalism. It has become so deeply ingrained in our society and culture that a complete departure from it is entirely unlikely and unrealistic. But, when looking at the various negative externalities of a free market, I am constantly reminded that maybe capitalism needs some help. How can the system that built the modern global economy be adjusted so that matters such as human rights, conservation, and general wellbeing are not cast to the wayside in favor of single-dimension numbers like GDP? To answer this question, I have embarked on a six-week journey to understand not only where we stand in terms of market regulation in America, but where we should be heading in the future.
I am already very familiar with the adverse consequences of unregulated capitalism, so I wanted to actually begin my search by determining which of its aspects have been a net good for humanity: which parts do we need to ensure we preserve? John A. Allison defends capitalism in a uniquely human way. He avoids the standard arguments that the free market allows for maximum economic growth, and instead, as his article’s title suggests, makes “the Moral Case for Capitalism”. He reminded me why capitalism has such a large place in western society to begin with. “Entrepreneurship and innovation,” two things that the free market fosters, “are overwhelmingly American phenomena” (Allison par. 10). Without the freedom and the incentive to question the status quo, our rate of innovation would significantly decline. Allison further argues that the free market “is the system most conducive to allowing people to pursue their dreams and creativity, which – for the overwhelming majority of people – manifest themselves through professional work” (Allison par. 6). I do not find this particular argument very convincing because unregulated capitalism allows for freedom of expression just as much as it tends to promote standardization and monopolization.
In what ways can we preserve the freedom and efficiency of capitalism while ensuring no one and nothing gets left behind? I intend to discover what is missing from the free market that would leave the GDP alone but could pave a path towards a system that works for everyone, not just the ones with capital.
Matt
Hey Matt,
My name’s Luca Anzilli, and I think you might be interested in some research I did back in the day about this exact kind of thing. My interest in the topic of quantification and the economy was sparked by your exact concerns about the limitations of indices like GDP in painting a full picture of a country’s well being.
The good news is that many people, and even some countries, share these concerns. The idea of having better metrics for determining the relative success or effectiveness of a country has been gaining momentum over the past decade or so. I learned when researching about various strategies that the “United Nations has produced a Human Development Index (ISU/HDI), which measures the society progress basing upon not only of income, but even on life hope, alphabetization and education level, poverty, health assistance and sure food and water” (Anzilli, Facchinetti, Mastroleo, par. 18). “At the beginning of 2008 unsatisfied with the present state of statistical information about the economy and the society, [French] President Nicholas Sarkozy asked, Joseph Stiglitz, (Columbia University Professor), Amartya Sen, (Harvard University Professor) and Jean Paul Fitoussi (IEP, Paris), to create a Commission, called ‘The Commission on the Measurement of Economic Performance and Social Progress’ (CMEPSP) to face the problem of define sub-indexes for a new wellbeing evaluation” (Anzilli, Facchinetti, Mastroleo, par. 27). The result of this effort was the Stiglitz document which my team used as inspiration for our proposal.
The Stiglitz document recognizes eight crucial subcategories that measure a country’s wellbeing. The problem is not simply which metrics to measure, but how to package up all of these factors into a dense, useful, and understandable form. This is why my team developed the FUZZY Inference System (FIS) which is a superior method of aggregating this wellness data as it organizes it into a verbal tree diagram. Not only can the final indices be compared much like GDP, but if more specific information is wanted about the environment or even lower-level data like local recycling policies, then it can be easily traced. Although strict quantitative measurements might overlook some of the most important factors of a country’s wellbeing, that does not mean that we can’t supplement it with qualitative analysis to develop a more adaptive tool for representing the changing tides of a country’s vast and intricate details.
I hope this emerging field can answer some of your questions about the current state of quantitative analysis in capitalist economies. Feel free to email me if you have any questions.
Luca Anzilli
Hey Matt,
It’s refreshing to hear young people asking these kinds of questions. Sometimes we all need a reminder that the status quo is not, and should not be taken as, a given. And now, with the various adverse effects of coronavirus on the world’s economies, it is especially easy to see that Capitalism can’t survive on its own in times of crisis. As I made clear in my op-ed The Coronavirus Outbreak Has Shown that Capitalism is Failing, “if there’s ever been a time to radically change our social service policies, this is it” (Winters par. 2).
What can we learn from this current pandemic? Firstly, we can see that capitalism does not care about you or your father or anyone not in the top 1% for that matter. Because capitalists are only concerned with economic metrics like GDP, and we don’t have any practical numbers to represent more pressing statistics such as the types described by Anzilli, we are left to the malevolent billionaires and their infallible power. Blindly prioritizing economic growth has led to “numerous small businesses… shuttering and laying off staff,” “a surge in unemployment compensation claims,” and “severe economic disruptions that are likely to be long-lasting” (Winters par. 1). When our whole economy rests on the success of the free market, in times of crisis, we will always be left with the choice to save capitalism or to save lives. Do you trust our government officials to make the correct choice? Who do they care more about: the average citizen or the corporations and billionaires paying their bills? If you need proof, look no further than “Texas Lt. Gov. Dan Patrick, who suggested that seniors should be willing to sacrifice themselves for economic results” (Winters par. 16).
Capitalism has never cared about anyone or anything except profit. This is why we need socialist policies like universal healthcare and social security as a check on capitalism. The free market is not entirely evil. I agree with Allison that it has led to the success and innovation of the western world, but have we forgotten about slavery, the terrible working conditions of the industrial revolution, and the destruction of the environment that it has directly prompted? In what world can that be seen as moral? It is time that we finally put an end to the endless hunger and greed of capitalism and put some restraints on it. Vote progressive this fall.
Chris Winters
Hey Matt,
It seems like you are interested in how Capitalism accounts for unquantifiable–at least not intuitively quantifiable–externalities. I see that Winters and Anzilli have already given a great overview of the problems of Capitalism in respect to humanitarian problems, so I will focus on how it has neglected the state of our planet. A few years ago, I was interested in the debate around if and how the free market can address climate change arguably “the greatest externality the world has ever seen” which I covered in depth in my paper Capitalism and Climate Change: Can the Invisible Hand Adjust the Natural Thermostat (Storm 7). Since “capitalism is, in essence, an ‘externalizing machine’”, I was curious if an invisible and long-term externality like global warming can “be stopped while capitalism remains the dominant system?” (Storm 7). It turns out economists and theorists have given many different propositions for how this could be done with varying levels of regulation and planning. These strategies, I found, could be broken down along two different axes.
“The first dimension (or axis of debate) measures ‘faith in the capacity of the invisible hand to adjust the natural thermostat’” (Storm 7). On one side of the spectrum, there are economists with faith in the free market who speculate that as the consequences of pollution become more concrete or if the costs of such pollution is constructed through tradeable permits, companies will inevitably move towards cleaner energy and the environment will balance out once again. Critics, who believe this is overly simplifying the problem, argue that “Capitalism does not work when it comes to protecting our climate, because it is ‘flying blind’: it lacks the sensory organs that would allow it to understand and adjust to the climate system” (Storm 6-7). In my paper, I enumerate and describe five separate concerns that show how an unregulated free market will fail to address climate change: fossil fuel technology lock-in; problems of measurement, verification, and monitoring; inherent market failures; negative over-spill effects; and distributive concerns (Storm 9-11). This is why proper planning and regulation is a necessary visible force to help to the invisible hand.
The second axis describes to what degree a viewpoint describes efficiency as an economic ideal or a political one that is deeply intertwined with equity. At one end, “we have the Coasean perspective, which holds that issues of efficiency and equity can be nicely separated” (Storm 12). This theory has the benefit that efficient and effective policies can be implemented now while questions of equity can be tackled at a later date. “At the other extreme, we find those who think that Coase’s proposition is fallacious and ‘reductionist’, and who argue instead that efficiency and distribution cannot be separated in a market economy” (Storm 13). Since the market only measures what is efficient for people with money, the efficiency of the rich is overwhelmingly accounted for while it might be dangerously costly for the poor. In this view, efficiency is itself a political and social issue, not a solely economic one, so policies must address who is being regulated and to what degree.
As you can probably tell, Matt, the problem of whether capitalism can reverse climate change is deeply divided along many different dimensions, but that also means the economy is far from a hard science. In any case, nothing will happen for a while unless regulations are put in place soon. I hope this has given you plenty to think about in terms of what ways capitalism can change or mold in the future.
All the best,
Servaas Storm
Hey everyone!
I am honored that so many of you saw my initial, humble blogpost and offered me some awesome perspectives to take away. If anything, I have realized just how complex and vast my original research question was.
Thank you Luca for demonstrating your research in the realm of GDP replacements. Initially, I was under the impression that things like the environment or health could not be accurately represented using numbers, but you have made me rethink my initial position. There are certain strengths of numbers and quantitative thinking that make metrics like those that your FUZZY model implements superior to straight qualitative prose, despite the fact that some intricacies might be lost along the way. Being able to easily plot trends, compare various nations, and apply various statistical models makes having these numbers essential.
Thank you, Chris, for your unique lens of looking at capitalism during the time of COVID-19. It has confirmed my suspicions that a purist ideology like unregulated capitalism should raise an eyebrow as to how it handles issues below the surface. If capitalism fails during a pandemic, it makes me think that it is probably always failing someone somewhere as there is always some sort of crisis happening at the micro-scale. Now the whole world has become a macrocosm of the tiny issues that have negatively affected the lives of people and the health of our planet for the past few centuries. Also, if capitalism cannot be effective at meeting the needs of the people during a pandemic, then how could it ever hope to be effective during the future climate catastrophes that are likely to ensue.
I always assumed that there was no way that capitalism would ever make an attempt at solving climate change, so thank you Servaas, for highlighting the various current perspectives about how the future might unfold. It seems to me though that although the invisible hand might eventually try to combat rising temperatures, it does not have the foresight to do so before it is too late. I also never considered how intimately connected the issues of wealth disparity and environmental impact are. Combating climate change could mark the start of addressing poverty if approached correctly.
I realize now that my original research topic was far too broad and complex to achieve an adequate comprehension of it in a mere six week period. Now, I have decided to change my focus and narrow in on quantification in the intersection between capitalism and environmentalism. The modern world economy is entirely built upon the scaffolding of capitalism, so instead of reinventing the world, I am now curious how the power and influence of capitalism can be harnessed for conserving natural environments?
Signing Off,
Matt Reed
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