Friday, November 07, 2008
John K. Galbraith - Innocent Fraud
Capitalism - An Innocent Fraud?
Richard E. Noble
"When capitalism, the historic reference, ceased to be acceptable, the system was renamed. The new term was benign but without meaning."
And so says John Kenneth Galbraith in his book Innocent Fraud. The substitute explanation was The Market System which Galbraith states is benign and meaningless. Professor Galbraith suggests that the "Corporate System" would better define the American experience or evolution than the old "Capitalist System."
I'm not sure if Mr. Galbraith is stating that the U.S. no longer has a Capitalist System and that what once was a Capitalist System is now better described as a Corporate System or he is simply debating with the acceptability of the terms.
A Capitalist System is most often defined, as a non-governmental system. A system owned and operated by individuals and that functions independently of governments - a system that is the antithesis of feudalism, socialism, communism or whatever. It is supposedly a "free" laissez faire economic system. There are those who contend that such a system is "real" and others who consider the whole concept to be a platonic fantasy.
I am with the non-platonic school both in philosophy and economics. I do believe that powerful individuals, Capitalists, have owned the capital goods and natural assets of our nation. I do not believe that this ownership necessarily constitutes a "system" - whether that so called system is economic, social, political or otherwise.
We have always had powerful individuals who owned America's assets. In today's world it may be corporations who own America's assets, as Mr. Galbraith explains. But this ownership does not constitute any system or necessitate any dogma. It is simply a statement of what is or what has been.
Mr. Galbraith contends that by calling our system a "Free Market System" it is implied that this system is amorphous and harmless and uncontrolled. It operates much like a force of nature or by Divine whimsy. Mr. Galbraith considers this notion, concept or dogma to be fraudulent. He considers our system and what we once called the Capitalist System to be a managed and contrived system. It is manipulated and operated by large corporations and, more specifically, their managers, CFOs, CEOs and executives. He goes on to explain that owners, shareholders and boards of directors are not important - managers and executives run the show.
This is all interesting to the economists and the intellectuals but the talk down here in the street where I live is always about socialism, communism and capitalism. If it is capitalistic it is good, if it is socialistic it is government controlled and if it is communistic it is war.
We are all positive that we do not live in a communist state. Most of us think that we have and still do, live in a capitalist state. The vast majority of us are very fearful that our free capitalist state might one day be turned into a socialist state.
But what is a socialist state?
Galbraith contends that it is termed socialistic when the public sector infringes on the private sector, but what, he asks do we call it when the private sector infringes on the public sector. As an example of the private sector infringing on the public sector he cites the Military Industrial Complex and its “privatization.”
This is an interesting point. When taxpayer money is used to shore up or subsidize Military research, or to pay for storage costs, or to absorb the costly rent on huge warehouses or factories, or to pay for civilian armies (Blackhawk etc), or to pay for civilian cafeterias to feed troops at war or at peace – is this not socialism?
What about when taxpayer’s money is used to bail out banking fraud? What about when taxpayer’s money is used as incentive to business and corporations or even overseas suppliers? Is it not socialism also? Is there any large corporation still functioning in America that is not assisted by the government and the taxpayers?
Let’s face it, socialism is the name of the game – capitalism is the fantasy.