Alfred Dawes | Capitalism does not equal neoliberalism
Sooner or later, we will learn that the current model of capitalism espoused by the West is extreme and fosters growing inequality in the world. We are led to believe by proponents of neoliberalism that it is this ubercapitalism, or socialism, that is the only options available. But believe it or not, corporations once upon a time looked out for the interest of their shareholders, bondholders, employees, and the community. A far cry from what is practised today.
Now, it is all about executive compensation and increasing shareholder value. Workers and customer welfare take a back seat to profits and are only considered in order to boost the latter. Do you, the customer of a large corporation, feel as if it is your interest, and not money, that is the major factor in the business relationship?
One glaring example of this paradigm shift is that the CEO compensation for health-management organisations has risen explosively during the same time that frontline doctors and nurses have seen their salaries falling. Patients who have diligently paid into insurance policies are sentenced to death by teams employed for the sole purpose of cutting payouts to those who need their coverage the most. Food corporations fueling the obesity epidemic fight tooth and nail against any regulation that could result in decreased sales. Even if it means making their customers sicker, or poorer, by racking up debt, corporations continue to prioritise their singular goal.
Corporate social responsibility now consists of donations of giant cheques that cost more than the actual sums given to beneficiaries. The spend on the public relations for the donation sometimes dwarfs the actual contributions.
In the words of economist Milton Friedman, “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
Whereas this may seem a desirable goal in the free-market system, greed has bastardised this to focus solely on maximising shareholder value and executive compensation. Workers are nothing more than tools used to fulfill these objectives. The customer becomes only an opportunity to increase revenue. But it is not just the boards and executives running businesses who are the disciples of Freidman. The whole system is corrupt.
The stock market is one of the most effective ways of creating a personal fortune or securing your retirement. The stock market index is often used as a measure of the country’s financial health. When it is booming, all should be well. But this is not necessarily the case.
Our own Jamaica Stock Exchange has been the top-performing bourse worldwide over the last five years, with a rally of over 600 per cent. Yet we have only managed to grow the economy by less than two per cent a year over that period.
Have wages increased significantly over this time? More jobs have been created, but how much are these workers being paid in comparison to the CEOs? Whose financial health is the stock market boom measuring? While a booming stock market does not paint a true picture of the level of prosperity for all, a market crash does. As stock prices plummet, the money supply dries up, companies close down, and jobs are lost. With less spending in the economy, there is a slowing of the growth rate or contracture of the economy.
One set of people benefits on the highs, but the masses feel it the most on the lows. And as the layoffs come in and pension plans teeter, CEOs are gifted golden parachutes while the average worker joins the unemployment line. When profits are down, the first expense to get cut is the wage bill. Pity the workers who are not indispensable!
ASSAULT ON CAPITALISM
Freidman proselytised that the sole obligation of the corporation is to the shareholder. That philosophy is now the sole commandment in this era of uber-capitalism. It is all about the share price and the executive bonuses that achieving an appreciation in share price would bring. Increasing bonus targets and laying off regular workers boosts income and cuts expenditures, creating even bigger profits. The average CEO remuneration in the US has climbed from 22 times more than the average worker to more than 270 times since the 1970s. And it still has higher to climb.
The system allows corporations or titans of industry to use their might to destroy competition. They wait for an innovator to create a market and then use their wealth and contacts to establish a larger, more organised, well-marketed business.
Oftentimes, the small entrepreneur is learning on the fly how to manage and grow their business. They can’t compete with the titan and either sell out to them or go bankrupt.
Antitrust laws were created to allow the state to regulate how much these monied corporations and people can use their might to create monopolies. But now, Government regulation is seen as an obstacle to economic development. Any attempt to impose regulations to protect the masses is seen as an assault on capitalism and outdated socialist dogma.
Even as the evidence of the failure of neoliberalism mounts, we continue down this path to destruction. This is unsustainable. Neoliberalism does not equal capitalism. There is another way. It is only for us the masses to demand it.
- Dr Alfred Dawes is a general, laparoscopic, and weight-loss surgeon; Fellow of the American College of Surgeons; former senior medical officer of the Savanna-La-Mar Public General Hospital; former president of the Jamaica Medical Doctors Association. @dr_aldawes. Email feedback to email@example.com and firstname.lastname@example.org