Tuesday, April 19, 2011

A Problem with Capitalism

I have had this nagging irritation that capitalism is fundamentally flawed for some time, but haven't had a good way to articulate it till now. It seems to me today that capitalism makes the assumption that it can provide the greatest good for the greatest number of people, by in turn assuming that people are rational and will work in their own self-interest. The aggregate of that rational self-interest will be seen in demand curves and these curves drive capitalism.

The problem with this is that it confuses needs with desires. Like a kid, we assume that what we desire is what we need. And that the demand represented in a demand curve will answer needs humans have. Sadly, more often than not that curve represents not needs but wants, and not necessarily even very valid wants.

It's the job of a marketer to generate demand, and he or she does so by generating a want, and then helping us persuade ourselves that this is a need. Consequently, all my childhood, I needed the latest pair of Nike running shoes … despite the fact it would never answer any real need I had, and would be constructed in a sweat shop. This didn't provide the greatest good for the great number, merely fulfilling a whim for some, while injuring others. Today I need to update my phone every year because, well, I need too, despite the cost in natural resources and pollution that doing so wrecks. Again, not the greatest good for the greatest number.

So in the end capitalism is irrational and against our ultimate self-interest. It serves only to feed money from those with the greatest need to those with the least. Not good, since it seems to be the new religion of most of the world.

Probably not new thinking, but new to me.