Anti-Business

Socialist: Corporations are the bane of society! They are useless, vicious exploiters. The world would be a much better place without them!

Brian: Are they really useless? Do you not use anything that was made or sold by a corporation?

Socialist: I do, but that’s irrelevant. We must live in the world as it is, not as it should be. Do you, Mr. Libertarian, not drive on government roads?

Brian: Touché. Alright, let’s agree not to use these arguments against one another, since they cancel each other out.

Socialist: Fine with me.

Brian: So basically, you think that if the government took over the functions currently performed by private corporations, they would be able to provide better service in those areas than the corporations currently do. Is that accurate?

Socialist: Yes, that’s what I think.

Brian: In athletics, do you think that competition between athletes drives them to higher levels of excellence?

Socialist: Sure, it would be hard to maintain otherwise.

Brian: Ok, then don’t you think the same would apply in other areas? If there are multiple organizations competing for the patronage of consumers, don’t you think that this competition will lead to higher levels of excellence in serving the consumers than could be achieved by a single, monopolistic organization?

Socialist: Sure. Monopolistic corporations and cartels represent some of the worst excesses of capitalism for just that reason.

Brian: But isn’t the government, by definition, a monopolist, and a pretty all-encompassing one at that?

Socialist: True, but here’s the difference: legitimate governments are accountable to all of their people, while private corporations are accountable only to their profit-hungry shareholders, and sometimes not even to them! Thus, I would trust a government monopolist over a corporate monopolist any day.

Brian: So you think that we have to choose between a government monopoly and a private corporate monopoly? You don’t think it’s possible for there to be competition in the business world?

Socialist: Maybe in some peripheral fields. But in all of the areas that really matter, there is only monopoly and sham competition.

Brian: So there’s no competition between Wal-Mart and Target? No competition between Apple, Google, and Microsoft? No competition between the big car manufacturing companies?

Socialist: Bah, those are all just oligopolists putting on a show of competition for the masses. In reality, they collude with one another to maximize their unjust profits.

Brian: I was not aware there was such widespread collusion…

Socialist: Then it’s time for you to wake up man! The logic is very simple. The primary objective of corporations is to maximize their profit. Colluding with one another is an easy way for all of them to make a handy profit. Hence, they collude.

Brian: What if one of the corporations was confident that it could make more in profit by outcompeting its counterparts and taking market share away from them? Wouldn’t such a corporation choose not to collude in order to maximize its profits? Also, assuming widespread collusion in an industry, collusion that was keeping prices high and service low for consumers, wouldn’t there be a strong temptation for a newcomer to enter the industry and easily outcompete the shoddy offerings of the cartel?

Socialist: Your naïve individualism is leading you astray, my friend. The capitalist exploiters work as a class. Their goal is to maximize the aggregate profits of the capitalist class, hence they collude. Individual capitalists must adhere to the will of the class, or else they will be crushed. Any newcomer seeking to enter an industry would have to be a capitalist in order to compete at all. He would thus have to follow the rules of his class like the others.    

Brian: Interesting theory. What fearsome weapons do the leaders of this ‘capitalist class’ use to keep individual capitalists in line?

Socialist: They use the power of the capitalist State of course.

Brian: Ah, so the government is the one responsible for allowing these antisocial leaders of the capitalist class to have their wicked way?

Socialist: The government that exists in a vicious capitalist society is partly responsible, yes. But the government in a civilized, socialist society would be a force for good, not evil.

Brian: What would you think of a capitalist society where the government did not have the power to intervene in order to favour the capitalists?

Socialist: A contradiction in terms! There can be no capitalist society without a capitalist State.

Brian: Ok, then let’s come up with a new name. A name for a society where people are free to privately own and accumulate capital and are maximally incentivized to freely compete with one another in order to best serve the consumers. A society where the government is either strictly limited in its functions or is non-existent. Let us call it a ‘free-market society’. What would you think of such a society?

Socialist: Well, it would be better for the consumers than modern capitalism, but as long as there are capitalists, workers will be unfairly exploited, so your ‘free-market society’ is still problematic.

Brian: Exploited? How so?

Socialist: Workers would not receive the full value of their labor. A ‘take’ in the form of profit and interest would still accrue, unearned, to the parasitic capitalists. This ‘take’ would probably be smaller in a free-market society than it would in your standard capitalist society, due to competition between the capitalists, but it would exist nonetheless.

Brian: Choosing the most value-productive industry, line, business, or process in which to invest your capital is not work? Sounds like hard work to me.

Socialist: That part is work, but capitalists can just hire analysts or advisors to do that work for them and still make a positive return without working.

Brian: Ok. Then would you also agree that entrepreneurship and directing the course of a business are also forms of work?

Socialist: Yes, I agree. But that still doesn’t explain the positive return of the idle capitalist, the ‘rentier’.

Brian: Tell me. What would you rather have? $10,000 cash, or an outstanding loan that is due to be repaid to you at $10,000 in one year’s time? Assume that there will be no change in the value of the money during the year.

Socialist: The cash of course. The borrower might default and not pay the $10,000 in a year.

Brian: Yes, the risk borne is one factor. What if we assume that it will be repaid?

Socialist: Still the cash. I might need it for something during the year, so it’s nice to have it available just in case. Also, life is short, so sometimes it’s better to enjoy our resources now while we have the chance, rather than save them for a future that might never come.

Brian: Both excellent reasons. Now, what if it’s a choice between $10,000 cash and $11,000 due to be repaid in one year’s time, with no assumption that the loan will necessarily be repaid on time. Which would you choose?

Socialist: Hmm, this is a more difficult question. I guess it would depend on my specific circumstances at the time, and on how trustworthy the borrower seemed.  

Brian: But you would consider choosing the future $11,000, if the circumstances were right?

Socialist: Yes, I would.

Brian: Great, we’ve just explained the function of the idle capitalist’s return.

Socialist: What? No we haven’t!

Brian: A modern industrial economy requires substantial amounts of resources to be invested, or locked in, for set periods of time into specific businesses, facilities, and projects. These invested resources we call capital. In order for capital to form, we need people with disposable wealth to be willing to lock their wealth into specific production processes for set periods of time, and to be willing to bear the risk that the production process might not work out, which would impair their wealth. These people we call capitalists. Even if an expert guided the investment decisions of a capitalist, the capitalist would still have to bear some risk and would still be the one with locked up money that he would have to wait to use. In order to make it worth his while, this capitalist must be compensated monetarily. This is what part of the profit/interest that we see in a modern economy is used for.

Socialist: Alright, and if this ‘capitalist’ had accumulated this investment money through his own hard work, then I agree that it’s not parasitic. But how can you possibly defend the idle capitalist who receives a return on investment money inherited from his parents? Surely this is a prime example of unearned income!

Brian: Some people are born naturally stronger than others. Those stronger can make more money doing manual labor, with the same amount of effort expended, than those weaker. Are the extra wages ‘earned’ by the stronger man?

Socialist: Yes, because the stronger man can contribute more to the work effort.

Brian: So what one has ‘earned’ is a function of what one has contributed. Is that correct?

Socialist: Yes, although in a civilized, socialist society, people’s livelihood would be based on their needs, not on what they have ‘earned’.

Brian: Ok, but when one is talking about ‘earned’ versus ‘unearned’, what is ‘earned’ is to be measured by contribution?

Socialist: Sure.

Brian: Capital, when invested the same way, makes the same contribution to society, whether it belongs to someone who has amassed it through hard work, or whether it belongs to an inheritor.  Hence, if what is ‘earned’ is measured by contribution, then both groups of capitalists have ‘earned’ their returns to the same extent.

Socialist: Alright fine. It still seems unfair though…

Brian: Well, the world resists being fair. And I say, better an unfair, but generally rich, society, than a perfectly fair, but generally poor, society.

Socialist: Maybe so. Lots to think about and I’m not sure I can fully agree with you on all points. But at any rate, I think we can at least join together to combat the excesses of the capitalist State, yes?

Brian: Absolutely, you can count on it my friend.