One Failure of Capitalism
upscaling collusion and its antidote

here is a specific failure in the design of capitalism that can possibly be corrected by a simple government intervention ... errr ... not our government ... I mean a decent government, of course. The failure here alluded to is the fundamental driving force of capitalism ... which is "greed", i.e. the desire to transfer money to one's own account (by any means whatsoever) on the part of a distinct, prominent class of citizen.

These are "businessmen".

I define businessman as a person (of either gender) who, but for lack of spine, does not rob the local 7-11 with a gun but rather chooses semi-legal devices associated with "selling stuff" to the public or to other businesses. In general, a businessman is just one step up from conman ... just a hair away from criminality. A true businessman is not interested in the welfare of civilization in general ... or ... in the product he is selling. He just wants to get lots of money. He doesn't want to rule the culture ... just be seen as an important member of it. He seeks adulation and envy from others but shirks responsibility ... except to the stockholders ... unless he can get away with some kind of scheme ... heh, heh, heh. He has more foresight than a wildebeest, extending as much as a full year into the future (sometimes even four or five years if he's in a business that is sensitive to political decisions). The average CEO would be looking down the road a couple years, calculating how much he can get away with at the end of that amount of time as they don't plan on being around much longer than that.

Here we must give some acknowledgment to Ayn Rand (whom I admire as the most intelligent woman to have ever lived). I admire her but don't agree with her fundamentals which she elucidated flawlessly and drew conclusions from with equal accuracy. Unfortunately, if you start with the wrong fundamentals, you end up with wrong conclusions. If she were alive today, I would geve her her own exhortation to "Check your premises".

As an example, Hank Rearden is her best drawn character in Atlas Shrugged.She projects him as the representative of the business community that is being destroyed by government intervention which causes such honorable people to be replaced with "louts". Her error here is that that lout IS the truest representative of "unfettered" capitalism ... not Hank Rearden. What is admirable about this character is his occupation as metallurgist-engineer ... not businessman. He is a technical geek - first ... who happens to be in business - second.

The true representatives of capitalism at its best occupy the lower half of the spectrum of ethics, morals and intelligence. And this is why pure, unfettered capitalism is so vastly superior to communism. In communism, you start with a few genuine ideologs and end up (very quickly) with psychopaths running civilization. Millions are murdered in the name of "the people". With capitalism, the civilization is run by semi-conmen but supported by engineer-types who don't have any say in its direction ... so it advances technically and the overall state of man improves ... at the expense of nature ... while the dis-advantaged are left out to rot in the city dump. The offense of capitalism is not murder but rather neglect ... the total neglect of nature and of people who are unable to participate in the capitalistic ethic (dog eat dog ... limited aggression). Hence, capitalism is vastly superior to communism ... but it sure is a long way from any imagined ideal.

I say "limited agression" because the businessman is too timid for guns. Unlike communists who glory in shooting thousands in the back of the head, the standard businessman is just a failed conman who would gladly lift your wallet if he could ... but ... not if you are awake and could possibly detect and hurt him. The communist projects physical aggression while the capitalist projects limited psychological aggression.

Then, who should rule? Of course, my answer is well known to the visitors of these pages. You can find it here.

So, what about the specific failure?

The failure I wish to discuss on this page is the tendency of capitalists to advance the cost of individual units so as to improve their cash flow. What I mean here is that if you sell 100 widgets at $1.00 each and take a 10% profit, you make $10. But if you can drive up the price of the widget to $10.00, taking that same 10%, you end up with a profit of $100 instead of $10 ... a tenfold increase ... with one proviso which is that ... the total number of people getting a cut doesn't increase, i.e. more money for the same number of people. Hence, it is incumbent on the capitalist to increase the cost per unit of any imaginable product. The way to do this is by outright collusion (a monopoly) or ... more often ... relying on the very nature of capitalism and the dregs that control it, to instinctively understand that it is in the best interests of all businessmen to increase costs and pass them on the the consumer.

A good case in point is the cost of automobiles. They used to cost about a half year's pay ... now it's gone to a whole year's pay. So the rake off per unit is greater. The business is more profitable. If you want to drive to work, you have to pay much more for a car than it is worth to you. You might expect to pay $5000 bucks for a "take me to work dependably" type car ... but you have to fork over $20,000 anyway ... or go to the used car lot. And ... that increase in cost is not totally caused by new, government-mandated "safety and environmental features". That's a convenient way to mask the much greater general collusion increases.

The point is that the car makers won't produce a $5000 car to get you to work because the percent rake-off is not high enough for such a model. They want to sell you ONLY luxury cars so they can make on that one sale say, 4500 bucks instead of 500. Get it?

And they do all sorts of "squirrely" things to get you to buy a more luxurious car too. This is the porbably the biggest laugher going right now. I have a Honda Civic. The seats are the most uncomfortable I've ever had in a car. The best seats I ever sat in, as far as comfort is concerned, is the 1985 Dodge Omni I bought new. And the bench seats in the 1970 Torino Brougham I had weren't at all bad either. So why are the seats now so hard and misshapen? Clearly, they've been designed that way to get you to move up to a more costly car ... for surely ... everybody knows that comfort (soft & nice) costs a lot more ... doesn't it? Everybody knows that soft foam rubber costs more than hard foam rubber ... don't they? If you believe that these people did not purposely design the seats to be "uncomfortable" ... you are an idiot. You deserve to be "plucked".

So, what's the antidote?

The United States Motor Corporation

The USMC ... hmmmm ... that's already taken ... so it will have to have some other name ... hmmmm ... Wait a minute! ... Let's get the Marines to kill 'em all and let God sort it out ... wait a minute ... there is no God ... so, we'll have to devise a better mechanism.

What is needed is to create a baseline car company dedicated to the production of ... just the "barest transportation requirements" of our current civilization. This means a car to get you to work and to the store dependably. Such a "non-profit" company would never compete in the luxury vehicle department. It's purpose is to keep the other companies honest by providing a viable alternative. Thus, if you think the luxury cars are too expensive, you can buy a new car on the cheap instead. This option will hold the prices down by preventing the "up-scaling collusion" between the other free market companies.

It would be non-profit because it is to be run ...

By the employees

That's it. Whomever works for this new baseline company will have a vote in how it proceeds in design, engineering, development, marketing, pricing, employee salaries ... and whatever else is necessary to keep a company going. They will advance in a hierarchy of company management by the same mechanism I have chosen for government in general (as referred to above).

No regular car company can compete at this level. So, the baseline field will be almost exclusively the domain of the Baseline Motor Corporation (BMC ... no, wait, that's already taken to). By creating such a company, we also create the thing that does not exist in a totally free market economy ... an objective standard ... to which all other companies are forced (by the mechanisms of that free market) to adhere to. This means that if you charge too much, you will be punished in the marketplace.

Of course, if such a baseline company does the same things as the other car companies ... then, we're back to square one. I believe that this would not be the case however. The persons selected by a bottom-up hierarchy should exhibit maximum responsibility in following their fundamental charter which is ... to provide the barest acceptable product which can establish the aforementioned economic baseline. Every car buyer whatsoever would see the cost of the baseline vehicle and think ... "If the el Cheapo costs $4000, what does Honda offer 'extra' that's worth $24,000?". If they like the answer, they can buy the Honda. If not, they can go with el Cheapo then, take it to Juan Diego's el Cheapo Upgrade Garage to be fitted with some deluxe components ... like wheel rims that go around while the car is standing still and speakers that make the windows vibrate.

And the result would be ...

In the case of the automobile, one would expect to see a catastrophic collapse of the used car industry ... because ... who is going to buy an old "luxury car" which has expensive problems when you can buy a brand new, trouble free but cheap car for the same price or less ... just to get to work and back?

You would expect to see two cars in every garage. One cheapo to get to work and run errands ... and ... one good car (the luxury type) which would be trotted out on Sunday for church and to take long trips where comfort is prized. Hence, the expensive car would last a much longer time ... eroding the new car business by weakening sales. Then, and only when ... a standard is established ... will car prices be reasonably honest.

The same is true in every other large scale business ... none of which have any baseline standard ... and all of which are subject to upscaling collusion.

Ebtx Home Page