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Monday, August 22, 2011

Why Did Capitalism Fail?

Why Did Capitalism Fail?
By Bob Burnett
The Smirking Chimp
August 22, 2011

We live in interesting times. The global economy is splintering.

U.S. voters hate all politicians and there's political unrest
throughout the world.

The root cause of this turmoil is the failure of the dominant economic paradigm -- global corporate capitalism.

The modern world is ruled by multinational corporations and
governed by a capitalistic ideology that believes:

Corporations are a special breed of people, motivated solely
by self-interest.

Corporations seek to maximize return on capital by leveraging
productivity and paying the least possible amount for taxes and

Corporate executives pledge allegiance to their directors and shareholders.

The dominant corporate perspective is short term, the current
financial quarter, and the dominant corporate ethic is greed,
doing whatever it takes to maximize profit.

Five factors are responsible for the failure of global corporate capitalism.

First, global corporations are too big. We're living in the age
of corporate dinosaurs.

The largest multinational is JP Morgan Chase with assets of
$2 Trillion, 240,000 employees, and offices in 100 countries.

The original dinosaurs perished because their huge bodies
possessed tiny brains.

Modern dinosaurs are failing because their massive bureaucracies possess miniscule hearts.

Since the Reagan era global corporations have followed the path of least resistance to profit; they've swallowed up their competitors and created monopolies, which have produced humongous bureaucracies.

In the short-term, scale helps corporations grow profitable, but in
the long-term it makes them inflexible and difficult to manage.

Gigantism creates a culture where workers are encouraged to take
enormous risks in order to create greater profits; it's based upon
the notion that the corporation is "too big to fail."

Second, global corporations disdain civil society.

They've created a culture of organizational narcissism, where
workers pledge allegiance to the enterprise.

Corporate employees live in a bubble, where they log obscene
hours and then vacation with their co-workers.

Multinationals develop their own code of ethics and worldview separate from that of any national state.

Corporate executives don't care about the success or failure of any particular country, only the growth and profitability of their global corporation.

Many large corporations pay no U.S. income tax; in 2009 Exxon
Mobil actually got a $156 M rebate.

Third, global corporations are modern outlaws, living outside the
law. There is no invisible hand that regulates multinationals.

In 1759 Philosopher Adam Smith argued that while wealthy
individuals and corporations were motivated by self interest,
an "invisible hand" was operating in the background ensuring
that capitalist activities ultimately benefited society.

In modern times this concept became the basis for the
pronouncements of the Chicago School of Economics that
markets were inherently self regulating.

However, the last five years have demonstrated that there is no
"invisible hand" -- unregulated markets have spelled disaster for
the average person.

The "recovery" of 2009-10 ensured that "too big to fail" institutions
would survive and the rich would continue to be rich.

Meanwhile millions of good jobs were either eliminated or replaced
by low-wage jobs with poor or no benefits.

Fourth, global corporations are ruining our natural capital.

Four of the top 10 multinational corporations are energy companies, with Exxon Mobil leading the list.

But there are many indications that our oil reserves are gone.

Meanwhile, other forms of natural capital have been depleted -- arable land, water, minerals, forests, fish, and so forth.

Multinational corporations have treated the environment as a free resource.

When the timberlands of North America began to be depleted,
lumber corporations moved to South America and then Asia.

Now, the "easy pickings" are gone.

Global corporations have ravished the world and citizens of every nation live with the consequences: dirty air, foul water, and pollution of every sort.

Fifth, global corporations have angered the world community.

The world GDP is $63 Trillion but multinational corporations garner
a disproportionate share -- with banks accounting for an estimated
$4 trillion (bank assets are $100 trillion).

Global black markets make $2 trillion -- illegal drugs account for
at least $300 billion.

In many parts of the world, a worker is not able to earn a living wage, have a bank account or drive a car, but can always obtain drugs, sex, and weapons.

And while the world may not be one big village in terms of lifestyle,
it shares an image of "the good life" that's proffered in movies, TV,
and the Internet.

That's what teenagers in Afghanistan have in common with
teenagers in England; they've been fed the same image of
success in the global community and they know it's inaccessible.

They are angry and, ultimately, their anger has the same target -- multinational corporations (and the governments that support them).

We live in interesting times.

The good news is we're witnessing the failure of global corporate capitalism.

The bad news is we don't know what will replace it.

Bob Burnett is a Berkeley writer, activist, and Quaker. Before
starting a second career as a journalist, he was a technologist
and one of the founding executives at Cisco Systems.

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