Why Capitalism Sucks

Photograph by Nathaniel St. Clair

Capitalism sucks because employees are considered a cost to be minimized whereas owners are considered a cost to be maximized. Corporations struggle to reduce their costs, especially their costs for human labor. Machines don’t sue their employers, so all things being equal (as economists love to say), employers prefer machine performance to human performance. Hiring a human is becoming an expensive, avoidable risk for major corporations.

Every employee should always feel from “day one” (as Jeff Bezos calls it) that their employer cannot wait to eliminate them. Capitalism compels all businesses to reduce expenses to increase profits. Businesses are surrounded by a competitive landscape where their ability to manage expenses will determine their profitability. Owners and investors are always looking over the shoulders of managers, insisting costs be constrained and profits increased. Every employee in America has a bullseye on their back from the moment they are hired until they are fired or quit.

The adversarial relationship between owners and workers is intrinsic to capitalism. It gave rise in the United States to the labor movement as farm workers took up factory jobs where they were treated like equipment, not human beings. There is a tunnel under the Blue Ridge Parkway near my home that was built by both slave labor and free labor. When two slaves died on the job, the tunnel’s builders had to compensate the slaves’ owner a substantial amount. So they switched to “Irish” laborers because they didn’t have to compensate anyone if they died on the job. Fourteen Irish workers died in a single year, without death benefits. Under capitalism, human expenses are a cost to be minimized.

Surely some corporations are in it for their employees, not their owners, and try to grow compensation for employees, not shrink it. No. There are some cooperatively owned enterprises that supposedly act in the interests of all employees, but these are no longer capitalist corporations, whatever structure they labor under. Corporations will certainly lie to employees and pledge their interest in improving the lives of their employees, but this is all done under the umbrella of cost/benefit accounting that not surprisingly results in employees receiving the least amount needed to insure their highest possible production.

Even so-called beneficial corporations, non-profit corporations, and employee-owned corporations still regard employees as living on the cost side of the ledger. Employee health benefits are not carried on the books as investments but are shown as costs against profits. There is no mechanism, even in employee-owned organizations, for maximizing the number of employees and how much they are paid. There’s nothing that rewards these companies for hiring more people at higher wages like the incentives for capitalist organizations to hire the least number of people at the lowest possible wages. Without this existential leverage toward “growth,” employee-owned organizations will never keep pace with capitalism’s brutal efficiency.

Austrian Economics

I consider myself an Austrian economist, because Austrian economics explains how markets work. Unfortunately, Austrian economics says nothing about how markets should work. For an Austrian, that’s like asking how the solar system should work. Who knows? All you can say is that to the extent it moves, it moves by these principles. You can’t say whether gravity is right or wrong, all you can truthfully say is that it sucks, like capitalism.

I confused the functioning of markets with the sanction of markets. One tends to think of competitive survivors as “winners” and bankrupts as “losers,” but neither group deserves the judgmental overtones. Austrian economics tells you that every voluntary transaction increases growth, or it doesn’t happen. You exchange your money for bread because you value the bread more than the money and the grocer sells it because they value the money more than the bread. When you exchange, there is an increase in value on both sides. Austrian economists call that “growth” but a less judgmental term might be “increase.” All things being equal, voluntary transactions result in “growing the pie”: in creating wealth by increasing satisfaction on both sides of the transaction.

Things aren’t equal. Are transactions really voluntary if they’re made under duress? Do you go to work because you value the money more than you value your time, or do you go to work because not doing so would result in harsh lifestyle changes? Is that duress? Is our labor voluntarily given? Does our compensation accurately reflect our economic value?

The first chink in the Austrian armor is the myth that wage labor is voluntary. Most people labor at most jobs for the money and would not work the same job for one unpaid minute. The great trumpeter Roy Eldridge once said, “If I hit the lottery, I’ll make a lamp out of that horn.” Erroll Garner claimed he had played his hit, “Misty,” 10,000 times. That is the equivalent of three times a day, every day, for almost 10 years. Sort of takes the glamor out of being a professional musician!

The second big problem for the Austrians and every other economic school is the origin of wealth. John Locke suggested that substance became property when mixed with labor, but that led kings to declare everything they labored their gaze upon was their property. Anyone using the king’s property had better pay up. This is how people were first forced to pay rent on land they thought they owned. Mixing their labor with the land did not make it theirs; it did not even make the produce of the land theirs.

Somehow, to get from the king owning everything to private companies, individuals and states owning everything, there must have been transactions: titles created, titles bestowed, titles sold, titles bequeathed. However, all of these transactions of assets from the crown to private entities are tarnished with the original sin that the crown never owned them in the first place.

The native Americans did not own Wyoming, nor did the Spanish, the French, the British, the Americans, the Sioux or the United Nations. No one owns fucking Wyoming! You have to start there. No one legitimately owns anything. Everything that exists is a collective asset owned by everyone. There is no legal, justifiable, rational distribution of wealth other than everyone owns everything.

Everyone Owns Everything

If everyone owns everything, why is the man selling your house back to you as a rental, selling your farm produce back to you as groceries, selling your sacred formulas back to you as medicine? Because he can get away with it. As long as you have a roof over your head, food in the fridge, and sex on the screen, you’re less likely to keep asking why the man is selling you your own stuff.

The man can do this because he has created a mythology that wealth is created by hard work and not bestowed by arbitrary title. Why, then, you ask — as Karl Marx asked — is it not those who work hardest who grow wealthiest? Why are those whose bodies are used as human mules to transport rocks and bricks and sticks out of tunnels, across water and up hills, why are they not the wealthiest? Why are they among the poorest?

Marx thought wealth was uncompensated labor frozen into cold, hard cash. He was wrong about that. We don’t value a hole dug by humans more than one dug by backhoe. It takes very few people to operate a nuclear power plant capable of replacing the labor of hundreds of thousands of wood gatherers. Marx was wrong about labor being the source of value. Value is in the eye of the beholder.

Marx was right, however, that all wealth is expropriation. To claim that anything “belongs” to you is to steal it from its natural existence as something without ownership. His concept was stolen from Pierre Joseph Proudhon, the French philosopher who declared, “Property is theft!” No bullshit origin story is going to justify the massive transfers of resources from one group to another over history. Everything not voluntary is theft. Eating is theft. Breathing is theft. Seeing is theft.

No one seems to like this scenario except anarchists. If all property is theft and all origin stories are nothing but wealth laundering, then it’s all up for grabs. The distribution of wealth becomes a near random given at the beginning of one’s life. It has no more moral legitimacy than a loaded dice game. The Clockwork Orange attitude of take whatever you want, whatever you can get away with, prevails because you were being conned, set up into getting a job and paying your predecessors for the privilege of renting your own home, buying your own groceries, and leasing the car you built.

There is a way to regulate the use of assets through both consensus and enforcement that does not require private property. You retain the “rightful use” of the assets you now consider yours: what you worked for, what you bought. Earnings or wealth in excess of your “rightful share,” by either corporations or individuals, would be returned to the community to pay for group benefits. The rightful share is determined by a large and diverse group of elected representatives. It’s beyond the scope of this article. A good discussion of forming a “citizens union” to fight for fair wages for everyone and to protect citizens from corporations, is the Macro & Cheese podcast, The Rent Is Too Damned High, with Cory Doctorow.


To all the jackass libertarians out there — and I used to be a jackass libertarian — no, you didn’t create your own fucking wealth! Jackasses! You couldn’t read this if you weren’t freeloading off an alphabet you’re not paying for. Who made the scale, capitalist pigs? Who made the spectrum? You think you could have generated wealth without using words, or numbers, or colors, or science, or sound? Who do you owe the royalties to, assholes? That’s right! You owe everything to everybody! You don’t get out of the fucking crib without hundreds of generations giving you a boost.

You cannot escape the logical conclusion that all the wealth belongs to all the people if you believe in logic, if you believe in conclusions. Every bit of every asset is tinged with the sin of misappropriation. It does not wash clean through transfers of title, through scores of generations repeating the lie of ownership. All ownership is a fraud, a story we tell ourselves because it is more comforting than the truth.

The Austrian economists stole utility theory from Jeremy Bentham and refined it into marginal utility theory which explicitly says, “We are not going to look at the origins of this transaction but only at the options available to us at the moment of the deal.” I didn’t realize this when I studied economics, but this is a convenient way of hiding the origins of assets and the inequities of power at the moment of the transaction.

In that moment, you are supposed to isolate away the fact that the asset you are being asked to purchase was stolen; that’s not something you can control. You are supposed to isolate away the fact that you’re being forced to buy this item by an employer or lose your job; there is an inequity of power and your transaction is in no way voluntary. “No,” the Austrian economists say, “No, you must not look at the terrible forces that have pushed you into this purchase; you may only consider the price and your need at the moment.” That’s marginal utility. That’s a lie based on a lie. No wonder it doesn’t work.

The Singularity of Wealth

Austrian economic theory would have you believe that the mutual advantage in each voluntary transaction will compound to some theoretical point of post-scarcity where everyone can afford everything they need. There is enough wealth in the world to do that today, it’s just hoarded by the super wealthy. If you divide the entire wealth of the world by the world population, you get about $130,000 per household. That would instantly eliminate all poverty. Even giving households 3% interest on their $130,000 share of global wealth would yield an annual household income of nearly $4,000, or enough to eliminate poverty throughout most of the world.

The Austrians believed excessive wealth would summon competition in order to distribute profits more equally, and this competition would lead to ever higher wages. In fact, just the opposite happens. Excessive wealth combined with unrestricted campaign finance in America allows the super wealthy to take over the mechanism of the state to prevent competition from diluting profits. While they’re at it, the American oligarchs set up an “education” system to provide the skills they need to make profits while promoting the myth of private property and the morality of wealth inequality.

The Austrians speculated, and Thomas Piketty confirmed, capitalism leads to a concentration of wealth, not equality. The hopes of the Austrians were that excessive wealth would float all boats. Indeed, nearly a billion Chinese have escaped extreme poverty in the past 20 years. Capitalism’s search for lower wages is insatiable! But whereas the Austrians thought capitalism would raise up the wages of the poor, they did not realize the same mechanism would beat down the wages of the upper and middle classes.

Is this the utopia neoliberal economists seek, where the entire world makes a flat $15 an hour except a handful of space-trodding billionaires? A third of that $15 will go to rent on average 150 square feet from a hedge fund, another third will go to unhealthy agribusiness products. The water is bad, the air is filthy, there’s no transit and you can’t afford a car. When corporations complete their control of the state, this is what will result: Every citizen will be considered a cost and every crumb of compensation something to be minimized.

Capitalism even has bad news for the one percent. Entry in the realm of the super rich will become increasingly difficult as wealth continues to concentrate. Businesses that used to be as different as fisheries and finance find they’re all in the same business now: Information Technology. They’re forming up a circular firing squad to take each other out. In theory there will be only one winner — Larry Ellison, maybe, or Erik Prince? Witness the fabulously exploding wealth of one Jeff Bezos, who can retire to play with rockets the rest of his life in search of some force that will prolong his existence. There is a chance Ray Kurzweil’s famous singularity refers, not to a technological point of omniscience, but a financial concentration so extreme it results in a black hole of wealth absorbing everything on the horizon.

Post-scarcity comes, not as the Austrians thought, for everyone, but for a select few, who always have shared just enough to keep from having their wealth confiscated, not a penny more. Since wealth is somehow sacred to Austrians, representing property which should never be confiscated (even though 100% of it originated as confiscated property), they are opposed to any forced redistribution. If that ethic prevails, the earnings of the 99% will be stomped down globally to arrive at a universal, flat, subsistence wage.

Parity Not Property

The biggest lie of capitalism is private property: that somehow title to stolen goods is cleaned through transfer and that you own what you have worked for. All property is everyone’s property. You have use of that property which you can prevent others from taking. Joining together with other people is an excellent defense mechanism for keeping “your” stuff from being taken. When you join together, however, you must come to a common understanding of what is theft, what is trespass, what is fraud, what is involuntary transfer. When you define the rules of property, you ignore its origins.

If there is a poor distribution of wealth, it is our fault, not our ancestors’ fault. If everything belongs to everyone, there is nothing stopping us from seizing the wealth of the super rich and spreading it around. It can be done through courts, without bloodshed. If courts were controlled by the people, or were representative of the people, there is no doubt they would find cause to redistribute the wealth of the super rich. When courts are not controlled by the people or their representatives, they will be found illegitimate and overthrown. Courts cannot force us to “respect private property” anymore than they can force us to believe in the Easter Bunny.

When we clear our heads of the fiction of private property and come to terms with the fact that everything is ours, wealth is redistributed even before possession is transferred. You and I hold title to it all! We are missing only an agreement on how to go about facilitating a fair transfer. An economy based on property can be transformed into one based on parity without sacrificing progress or growth. None of this will happen, though, unless we first break the mental chains of cash-based capitalism and know that its endgame is our elimination, and replace it with a system that wants employees to make more and more money, not less and less.

Steve O’Keefe is the author of several books, most recently Set the Page on Fire: Secrets of Successful Writers, from New World Library, based on over 250 interviews. He is the former editorial director for Loompanics Unlimited.