Is Peace Possible Under Capitalism?

PART 1 - Underlying Concepts

Background

     Economics is the study of scarcity.  Economics examines choices societies make concerning how to use their limited resources by asking four questions: What is to be produced? How? For whom? And how are these decisions made?  Capitalism is a political, social, and economic system in which property, including capital assets, is owned and controlled by private persons.  Capitalism is characterized by: (1) purchasing labor for money wages, and (2) using prices to signal how to allocate resources between uses.  A market is any context in which goods or services are bought or sold.  Economic liberalism, or neo-liberalism, is a doctrine advocating the greatest possible use of markets and the forces of competition to coordinate economic activity.  Free trade ideology is all about imposing neo-liberalism on the entire planet.

     In the United States we are living under what some call extreme capitalism.  Because I believe that we worship the Market as God, I see current American economic ideology as a religion I call “market fundamentalism”.  As the messengers of the Market God, economists are the high-priests of this new religion.  They preach that the Market’s “invisible hand” always provides the best solution.

Market Failure

     Consider me a fallen priest.  I am an economist, but I don’t worship markets.  My expertise is market failure. To even utter “market failure” today is blasphemous. Market failure, market failure, market failure.  Market failure refers to the inability of a system of private markets to provide certain goods, either at all or at the most desirable levels.  As recently as the 1990s, this blasphemy was taught in every economics department in the United States.  Joseph Stiglitz, the author of the textbook for my undergraduate course in Public Finance, won the Nobel Prize in 2001. My Public Finance text lists eight principal sources of market failure: failure of competition; public goods; externalities; incomplete markets; information failures; unemployment and disequilibrium; redistribution; and merit goods.  This article examines the first five of these sources of market failure.

     Economists know that for the “invisible hand” to work there must be competition.  But when economists say “competition” they really mean perfect competition. Perfect competition describes situations in which there are so many buyers and sellers that no one player can affect the price.  Monopoly is the opposite of perfect competition. The spectrum from monopoly to perfect competition reflects the level of power that players have over price.  To the greatest extent possible, a seller will restrict output to increase demand and obtain higher prices.  The more effectively one player can impact price the greater the failure of competition. Unfortunately, failure of competition, that is, the tendency toward monopoly, is increasing.

     Pure public goods have two critical properties.  Public goods are non-excludable, which means it is not feasible to ration their use.  Individuals who have not paid for the good cannot be prevented from enjoying its benefits.  Public goods are also non-rival, which means it is not desirable to ration their use.  Consumption by one person does not preclude enjoyment of the good by anyone else.  Clean air is a public good.  If my neighborhood has clean air, I will get to breathe it whether I pay for it or not.  Because there is no effective way to exclude me, the only way to charge me is through the tax system.  I cannot be charged per unit of consumption.  Clean air is also non-rival, since I don’t use up the clean air by breathing it.  The private market will not supply, or will not supply enough, of a pure public good, providing a rationale for government activity.  In contrast to public goods, private goods are purchased and consumed by individuals.  When I go to a restaurant, I can purchase and consume lunch.  Since there is no such thing as a free lunch, I do not get to consume what I do not pay for.  What I do consume is used up in the process, and is no longer available for someone else to consume.  Private goods are excludable and rival.

     There are some goods which have both private and public good characteristics.  This is the case with externalities.  An automobile looks like a private good.  When I buy an automobile I own it and no one else can use it unless I decide to share.  But even though I choose to drive a very fuel efficient hybrid vehicle I still have to breathe the pollution that gas guzzling vehicles spew into my air.  Gas guzzling vehicles produce negative externalities.  They impose a cost on people who had no say in the purchasing decision.  We breathe polluted air and fight wars for oil because others believe that if they can pay the purchase price they are entitled to the vehicle of their choice.  Corporations impose giant negative externalities on society.  Designed to privatize benefits and socialize costs, corporations are externality producing machines.  The executives at Coca Cola decide how much soda to produce based on how much they can sell. But the cost of a can of soda does not factor in the societal cost of massive pollution and the theft of our precious, irreplaceable fresh water supply – we all pay those costs whether we choose to drink the poison or not.  In the presence of externalities markets fail to produce the optimal level of output.

     Incomplete markets exist whenever private markets fail to provide a good or service even though they could provide it at lower cost than what people are willing to pay.  Even as they claim to worship free markets, politicians create this type of market failure every time they make goods or services illegal.  The market for travel to Cuba is incomplete because I cannot buy a plane ticket to go there, even though I would willingly pay.  Others might feel the same way about illegal drugs.  Such drugs could be regulated, taxed, and supplied by the market.  Prejudices also create incomplete markets.  Some neighborhoods do not have grocery stores or banks, despite the wishes of neighborhood residents.

     In the past, a lot of government activity was motivated by two factors.  The government saw that consumers lacked access to accurate information necessary to make the best decisions.  And the government recognized that the market supplied too little information.  The government created labeling laws and rules against practices like drug companies advertising directly to consumers.  By taking responsibility for correcting information failures, the government provided necessary consumer protection.

     When we look at information we can begin to see how market failures overlap.  Information failures are one type of market failure.  But information is also a public good! Information is non-rival in that giving information to one more individual does not detract from the amount others have.  Because information is non-rival, economic efficiency requires free dissemination.  Free markets are places where INFORMED consumers make RATIONAL choices.  We don’t really have free markets.  We see market failure everywhere we look, but the state corporate system instructs us to shut our eyes, wave our flags, and “keep on shopping!”

     Is peace possible under capitalism?  Although I did not answer the question posed in the title, I hope I have provided a framework which you can use to reach your own conclusions.  I’ll give you time to think about your own answers before sharing my thoughts.

(this article was written for Women Against Military Madness, and appeared in the May issue of their newsletter.  Part 2 appears in their June newsletter, and is posted below). 

PART 2

     The short answer to “is peace possible under capitalism?” is no.  But I don’t imagine that any reader who has been thinking about the concepts presented in Part 1 and waiting patiently for my thoughts on the topic of peace under capitalism will want to settle for the short answer.  Before delving deeper I should warn readers that the ideas presented here are my own, and hence potentially radical. I am drawing conclusions based on what I was taught when I studied Economics, some of which I shared with readers in Part 1 of this article.  But these are conclusions I draw on my own, because in all my years of study, peace was never discussed.  This is especially ironic, since the classic example of a pure public good has always been national defense.  Our government writes blank checks to purchase the tools for making war – powerful armed forces and the weapons systems they utilize to beat our enemies into submission – leaving taxpayers the bill.  Even today, when government services are being slashed across the board and the most basic notion that the government has the responsibility to care for the citizenry is under attack, national defense remains sacrosanct.  Actually, the term national defense is offensive to me. I don’t believe that waging war on the planet and its inhabitants can make us safer.  The whole idea seems to me like military madness, which I am against.

     Part 1 of this article started with several definitions.  I discussed neoliberalism abroad and market fundamentalism at home.  It occurs to me that the market fundamentalism we live under in the United States may just be neoliberalism coming home to roost.  For decades now the United States has acted through institutions like the International Monetary Fund and the World Bank to force debtor countries to privatize national assets, cut social spending, and focus their economic energy on export industries.  All over the world small farmers have been forced off their land, out of a subsistence way of life and into the dreaded market economy.  The same thing is happening here.  Around the world, public services have been cut in the name of saving much needed dollars.  That is also happening here. Rules governing “free trade” punish governments which attempt to promote autonomy by subsidizing certain critical industries.  There is one exception – national defense.  Sound familiar? 

     It is difficult to imagine the market providing peace.  Even if we accept that the market does a good job of providing private consumption goods, we know from Part 1 of this article that lots of things we want and need don’t fit into the private consumption good category.  Peace is not a private consumption good. Peace is not really a public good either; however, peace is closely tied to many public goods.  Peace activists are familiar with the phrase, “if you want peace, work for justice.”  A functioning justice system is a public good.  A functioning education system is a public good.  A functioning health care system is a public good.  A functioning infrastructure capable of providing food and water to everyone is a public good.  A functioning democracy is a public good.  We learned in the first part of this article that private markets don’t produce or, at least, under produce public goods.  We’ve already seen the tradeoffs around the world and we are starting to see them at home as well.  Around the world, Structural Adjustment Programs force market ideology on defenseless populations.  Market ideology says switch your agriculture to cash crops for export.  Governments comply.  Farmers go broke.  People starve.  Market ideology says drug patents are intellectual property and property rights must be respected and protected.  People get sick.  There is no money for medicine.  People die.  All around the world the very means for survival are being sold off for cash.  The cash is being used to service debt and ironically to purchase weapons.  The irony is that weapons are needed to defend against citizens who fight because their means for survival are being stolen by their governments. And their means for survival are being stolen by their governments to get cash for weapons.  Weapons manufacturers get rich.  The prospects for peace diminish.

     Even as the prospects for peace diminish the importance of working for peace grows.  We know from the discussion of externalities in Part 1 that under extreme capitalism not enough peace work will get done.  Why?  Because there are positive externalities associated with peace work which the market cannot take into account.  When I work for peace I am not the only one who benefits.  Everyone benefits whether they express support or contempt for the work that I do.  Future generations benefit even though they have no way to compensate me.  The market fails to compensate me for the full value of my work.  In fact, the market fails to compensate me at all.  Market fundamentalism tells me that the only benefit of working for peace is the pay I receive for doing this work.  If that were true I would do zero peace work because that is how much it pays.  Even if I take intangible compensation into account, market ideology says that I should only work up until the point where personal effort equals personal satisfaction.  Market ideology does not allow me to calculate the full value of my work to myself, my supporters, my detractors, future generations, and our planet.  Fortunately for me, my supporters, my detractors, future generations, and our planet those of us who work for peace don’t care what market ideology tells us.

     Is peace possible under capitalism?  The short answer is no. But the answer doesn’t matter because there is a more important question.  Is survival possible without peace?  For me, the answer to that question is also no.  So I have to keep working for peace.  And to get there I probably also have to work to overthrow capitalism.  Revolution anyone?                                    

(this article was written for Women Against Military Madness.  a slightly edited version - last 2 sentences removed - appears in the June issue of their newsletter.  interesting edit).