Capitalism Condones Bad Behavior
April 25, 2023 | 1,357 words | Economics, Politics, Philosophy
My thesis this morning is how easily our version of capitalism condones behavior that is fundamentally inconsiderate of others. And how this is not just a case of bad manners, but rises to the level of injustice.
We are all familiar with the many positive aspects of capitalism, how a free market unleashes creativity and innovation, generating an avalanche of economic activity that benefits everyone up and down the food chain. It yields the proverbial rising tide that lifts all boats. Older readers may recall “trickle down economics,” a pithy catch phrase from the 1980s that perfectly captured the “you have nothing to worry about” spirit of those boom years.
Given all the glowing press capitalism has received since then, many of us have trouble addressing the obvious negative aspects of capitalism with a clear eye. Any such discussion is immediately derailed by ad hoc arguments about socialism being an intolerable alternative.
We have even more trouble seeing economics as being tied in an inextricable way to moral behavior. Or with admitting that when economics is untethered from morality it becomes a free for all that leaves the social fabric in taters, while the rich get richer.
Things in this realm have devolved to the point where we no longer recognize the central role morality was designed to play in modern-day economics, and argue instead over how much government intervention is needed to balance the scales and create a safety net for those hurt most by predatory practices. Or whether the market should be free to operate apart from such intervention, in the expectation all social ills and inequities will eventually be ameliorated.
This belies a basic reality: social justice hinges on the moral behavior of individual economic actors. On doing right by people you don’t know but who are nonetheless affected by your economic behavior. The countless others who are not part of your inner circle, that cadre of trusted lieutenants who execute a business strategy and help maximize profitability.
Conservatives continue to insist their favorite form of economic exchange is “inherently moral,” despite all evidence to the contrary. This dubious claim picked up steam in the early 1980s and provided much-needed cover for the greed is good era of junk bond, private equity take-overs that began in the late 1980s, and has been with us ever since.
Much has been written on how our style of capitalism has failed to provide a living wage for so many Americans. But none of that commentary seems to make a dent in the conservatives’ leave-it-alone view of economic life. Nor do the boom-and-bust cycles we can’t seem to avoid. Or the pillaging of so many industries by private equity firms who buy up companies only to slash jobs and siphon off assets, raising prices and negatively impacting customer service in the process.
And why isn’t there more hue and cry heard from the general public about all this economic mayhem? Maybe because it is being drowned out by or diverted to noisy debates over cultural issues. Like how many types of assigned public restrooms we should provide. Or what pronouns we should employ when addressing our fellow citizens.
Not that adequate bathroom facilities and proper forms of address are not important. But in the hierarchy of societal needs I do wonder why the fourth estate seems so lax in its evaluation of economically immoral behavior on the part of the most privileged Americans, while choosing instead to direct the majority of its ire at what all enlightened souls now take to be the anti-woke contingent of “deplorables” in our culture wars.
We have hit a few snags on the way to achieving the informed electorate said to be a pre-requisite for democracy. Our liberal media prides itself on defending “individual freedom.” While our conservative media is committed to protecting “economic freedom.” What is lost in this liberal/conservative obsession with “freedom” is any consideration of the common good.
Which brings me back to economic behavior that is fundamentally inconsiderate of others, and how capitalism too easily condones such behavior.
In addition to the big, splashy examples of injustice that do sometimes make the headlines, there are other, less prominent indignities that plague our economic life here in what we proudly assert is the greatest country on earth. I would like to offer one small example from my own experience.
I own a contracting business that functions as part of the commercial construction industry. By that I mean my company does work in office buildings and auditoriums and such. Over the years the services we provide have morphed into a “sound proofing” specialty, primarily in the form of fabric-wrapped panels for walls and ceilings. Though we’ve always been based in the western suburbs of Philadelphia, in the last decade much of our work has migrated to New York City, where our client list is a veritable who’s-who of Fortune 100 heavy-hitters.
When things started to take off for me back in the mid-1980s, I was working for developers who were creating some of the first suburban “office parks” outside of Philadelphia. Those developers instructed us to invoice twice a month for work-in-place, and they would fund those invoices in 15 days, like clockwork.
Now, some 40 years later, we are forced to chase the large Construction Management firms we bill our work “through,” and navigate a labyrinth of paperwork to shake loose our payments. The soonest we can expect to see any money is after our invoices have aged 90 days. Though having to wait 120 or 150 days is also not uncommon. The reply we frequently get when inquiring about payment is, “The client has not funded the invoice for that work yet.”
Which is to say, the Fortune 100 heavy-hitters who lease lavish space in some of the most exclusive office towers in North American have chosen not to pay their bills in a timely manner. Why? Because they don’t have to. Somewhere along the line the movers and shakers realized they could drag out payment indefinitely and get away with it. If you complain, they simply move on and hire a competitor, and force that company to wait for payment.
This is one of the sins of omission conservative academics and think-tank scholars never get around to talking about, when penning their hosannas to the free market. The economic engine they celebrate is indeed a wonderful thing to behold. But what is missing from the current formula is any sense of fair play. Any sense of treating those who lack leverage as you would want to be treated, were you to find yourself without leverage. Instead, the prevailing ethos has reverted back to “he who has the gold makes the rules.”
Private equity acquisitions siphon money from the bottom of the food chain. The holding back of payment by the top of the food chain prevents that money from ever reaching the bottom to begin with. It puts a crimp in the cash flow of the many different entities involved in the elaborate, multi-layered construction process.
This forces companies like mine to borrow money to cover payroll and pay suppliers. It prevents us from adding staff to execute the work we have under contract more efficiently, or adding staff to possibly expand operations. It also makes it difficult for us to increase the salaries of the over-worked people already in our employ.
Competition, supply and demand, and self-interest can only bring an economic system so far, if the ultimate goal is social justice, rather just registering an uptick in the standard of living. If you happen to be a big real estate developer erecting a skyscraper, or a major corporation building out a sleek office space in such a gleaming structure, you hold all the cards. You can decide to pay the variety of contractors who bring your space to life as slowly as you want.
Because we in the construction industry are all scrambling for this elite work, we all want this prestige business. Even though the terms we are forced to operate under have deteriorated dramatically over the course of the last 40 years.
Robert J. Cavanaugh, Jr.