More on the morality of capitalism

Both Ian at Imagined Community and Gracchi have offered up interesting responses to my morality of capitalism post. Here are my attempts at a response, first to Ian:

"Gracchi points us to a well-made argument from our newest colleague in Blogpower Matt Sinclair suggesting that capitalism actually promotes less selfishness than other ways of organising society, but I wonder if it is too abstract. He argues, for example, that "In a capitalist system my well being depends upon anticipating and satisfying the needs of others." Could it be the case that much actual commercial activity is devoted to persuading people they have needs they were previously unaware of that, just coincidentally, Acme corporation can meet with their new product."

This critique of capitalism, that it manufactures demand through advertising, has a lot of intuitive force to it. Marketing told me I had a drastic need for an iPod whose lack I never rued before. However, I think it oversimplifies the process of advertising somewhat.

I'll use the example of the Phillips Wake-up Light that I recently purchased as an example. I saw the advert on the tube before buying it. Before that I had no inclination to buy a wake-up light as a substitute for my alarm clock. I did have trouble getting up. However, I had accepted the unpleasantness of my mornings as a constant and gave it little thought. It was a part of life. Therefore, I was unaware of the need for an alarm clock with the wake-up light's particular method.

What the advertising did was suggest that things could be different and I bought that message. It was less about manufacturing a need and more about making me aware of a need by showing that the need was not simply one more cross I would have to bear. I suspect that this is often the function of advertising. The advertising tells us that we have a need because it convinces us that a part of our life we had given up on as unimprovable is actually highly malleable.

This works for other, more status oriented products as well. We long to improve our status but give up on the idea that clothes can do it for us. We are convinced otherwise. This perception isn't false, people are shallow and clothes can improve your social standing. The shallowness is in ourselves and not our advertising. Some of the earliest human tools found by archaeologists were vastly oversized axes that were clearly unusable but functioned as status symbols.

I'm a little unsure about Ian's next two paragraphs.

"Also, does it risk under-estimating the complexity and potential incompatibility of the recipient's needs?"

Sometimes peoples needs are complex. That's why capitalism's rewards are so much better at encouraging people to take care of each other than the social rewards of gifts and charity that they often develop out of. The price system provides information about which products are really valued and which are valued most.

Ian then talks about the potential of firms to abuse the contracting process. I'm not sure of the particular relevance to this discussion but I'd suggest two common responses:

1) When contracting is particularly difficult a common response is to internalise that work within the corporation. A classic example is research and development. It is hard to specify price and requirement for research and development contracts thanks to the uncertainty that is inherent to research work. That is why research and development has so often been done within the firm or bought in after the fact by purchasing small and innovative firms.

2) Reputation does matter. Even if there are only a couple of firms in the market a duopoly can still be highly competitive. Monopolies are rarer than people think. They tend to exist in either geographical or very small product niches. Even then the monopoly is only pernicious if others cannot enter the market. If others can enter the market an inefficient company will need to stay on top of their game to avoid new competition. True, unshakeable, monopolies are particularly rare without some form of state intervention.

"In fact, surely the tendency to remove restrictions on managed capitalism in the name of the free market has had a significant impact on social breakdown - traditional industries have collapsed, whilst only mcjobs have replaced them."

With so much welfare dependency so often set alongside a need for immigrants to fill jobs I don't think the problem is a decline in economic opportunity. Some communities have suffered with economic change, that will happen under any system as tastes and technologies move. However, the decline has gone too far in too many places where economic opportunity is abundant for economic pressures to explain social decline. I think Dalrymple's peerless essay "The Frivolity of Evil" captures the true cause of social decline far better.

Gracchi's contribution is more esoteric. I think this is the crucial paragraph:

"This is a fascinating film- and there is much more to it than just what I have written- as ever there are interesting things to think about here which I haven't touched on from sex to alcoholism and the nature of addiction. But central to it all I think is this perception of the corrosive influence of capitalism upon our habits, that living in an other regarding society can turn us all into fraudsters and destroy our closest relationships as we seek that popularity known as profit. The point is extreme and in its extremity wrong- not all employment is geekdom. But the point that capitalism undermines true sympathy is an accurate one- and the issue that that points to in morality is a central problem that we live with constantly. This is neither a Randian individualistic manifesto (we are looking for real sympathy and not to abolish sympathy) nor is it a particularly positive manifesto (these problems may be endemic). What it does though is offer a corrective to the too easy view that if an action is other regarding, it is sympathetic. Gresham and the director and actors suggest it isn't."

Gracchi's argument is a funny one as he isn't really arguing for anything. He doesn't claim a moral superiority for any other doctrine (I claim some credit for the proviso he inserts that he isn't really a Randian). In fact, I'm almost concerned that Gracchi has come to conflate any human flaw with some deformity of capitalism. In any political state of affairs our very best instincts can be turned to evil: Love can turn to jealousy. The ambition that drove the most sublime of art also brings us the evil of Macbeth.

Does the desire to be of value to others, engendered by a capitalist system that makes our fortunes contingent upon the fortunes of others, lose its quality because in some it becomes a desire to fool people? Capitalism offers no particular favours to the trickster and will often punish them brutally (losing a reputation for honesty is usually very expensive) if they are found out. I'm not naive enough to think this will always be sufficient but neither am I expecting utopia.

This is clearly a domain for private morality that must be sustained by values and traditions. While I would still disagree with it Gracchi's film may be a better case for the necessity of combining Christian morality with capitalism than for an inherent immorality in the capitalist system.