Capitalism’s Creation, Everybody’s Problem

Nicholas asks a very, very important question. He asks, what would be the difference in how a democratically run worker co-op would manage one of the key, central problems of modern capitalism that the system itself has not solved. Now he’s mostly talking about environmentalism, and the climate, but he broadens it out in a very important way by saying that in modern economic analysis there tends to be a focus on the creation in capitalism of goods and services, but an ignorance about a refusal to face, let alone to measure all that is destroyed while you go about creating the goods and services that we know flow in capitalism. Now, in economics this has been recognized as a problem and I want to introduce that language, because it can be useful in answering Nicholas’s question. In economics the key word is externality. And by that economist mean the things that go on in an economy that are not counted, that are not taken into an account, that are in that sense external to the accounting system. And the classic example is in fact, environmental.

It goes like this: the question is should we build a factory in this part of town, let’s say that cleans clothing? A clothing cleaning factory and the calculations are done that show that this factory would bring in more revenue than it would cost to perform the service. In other words, it would be profitable. And under the normal rules of capitalism, if it’s profitable, a capitalist will come along and invest in doing that. It’s a positive rate of return, it’s profitable, the problem is that this factory that cleans clothes has a smokestack and it pours smoke out of that smokestack, and that smoke filters over into the neighborhoods of all the workers who work in that factory, who now get coughs more often, who get asthma in for their children, who have to repaint their homes more frequently than they used to. Those are all costs of putting that factory there, but they’re not the costs the capitalist has to pay for. He doesn’t have to account for them. They are external to the accounting system that capitalism works by.

Here, this is a very, very important. Why? Because, it says that when the capitalists claim their system is efficient, that they only produce something that the community wants, more that it costs to produce it, so, it’s a net plus. It’s only a net plus because you have encountered the destruction to – use Nicholas’s term – you haven’t counted the externalities, so, for example, we now know looking back that it might have been profitable to build all kinds of urban dense areas, it might have been profitable to use all that fossil fuel energy, but we might have destroyed the planet in the process. The externalities that were never counted could have been, should have been, are now slowly being and the result is we may decide that many of the activities that were privately profitable if you didn’t count a bunch of bad things now become things we’ll never do again because we know the bad results outweigh the good ones.

Now let’s make it real. It’s not externality because we don’t count it. It’s externality because the people who run this society don’t want to count it. Who decides where the investment is made. The people who get the profits. If those profits are good, they’re going to go in. They’re not going to worry about the negative bad results, because that’s not their problem. They are not required in this system to pay for them, if they’re rich investors they won’t live near the factory to stay with my laundry example. They’ll move to a gated community, they’ll install equipment that filters their air, that filters their water, they will use their wealth to escape as much as they can from the destructive externalities, but the mass of people they can’t. They can’t afford it, they don’t have the wealth, and they were excluded from the decision because the decision is made to use profit not what we can figure out about the creative versus the destructive.

If we as a society wanted to we could ask about the externalities. Stop thinking of them as external, say, that while it is interesting that we would get clean clothes, how important is it to build a factory given that the clean clothes which could be cleaned other ways are polluting the air and having all these external negative consequences. So, in fact capitalism hasn’t been efficient. Which is what the ecologists are screaming at us every day. But it’s more general. What about if a factory does more damage to the mental health of the people working there? Then is counted by the employer who doesn’t have to pay for mental health, who either has a flat rate insurance, so it’s somebody else’s problem. Or doesn’t offer insurance to his workers which the

majority of Americans no longer have. Wow! What about the physical injuries that only show up later in life? We may know about them, but there’s no way to make the employer at this point take them into account.

So, here comes the reason why worker coops are better. In a worker co-op, a few people are not making all the decisions, they only care about profit because that’s what they get. They don’t care what is the burden or the externality, but the workers there have to paint their house more often have to compensate with visits to the doctor for their asthmatic children. If the workers themselves made the decisions, not the minority that live off profits, they would take all the other stuff into account. At least as much as we ever can. Can’t know every aspect of production, but they would take into account when a scientist told them, well, you get clean clothes, but you’re also going to have asthmatic children. They would then weigh that in. Deciding whether or not to make an investment. That isn’t the way it works now. The profiteers make the decision, we all live with the results and that is why one major reason for moving from capitalist hierarchical enterprises to democratic worker co-ops is the agenda for social change here and now.