Capitalism re-clarified, from a different perspective

by Thomas E. Graham

I read Regina Schmiedicke’s Issue 3 article on capitalism and agree with some of her statements but not all of them. I also read the counter articles by alumna Martha Blandford and by Michael Welker, who teaches in the economic department at Franciscan University. With all due respect to my colleague and Mrs. Blandford I feel the need to respond to their articles.

Let me begin with Mrs. Blandford’s. In disputing Regina’s critique of capitalism, she states that “true capitalism has never existed; the closest to it was the U.S. economy before the turn of the century. History notes that social and technological progress was unprecedented during that time.” This may be true, but exploitation of the newly arriving southern, central and eastern Europeans was perhaps at its peak as well. Parrillo (1990) in his book Strangers to These Shores writes: “At that time [the 19th century] the worker had no voice in working conditions…the fourteen-hour day, six days a week for low wages was common. There were no vacations, sick pay, or pension plans. Child labor was a norm…there was no workers’ compensation if, as was likely, someone was injured on the job. A worker who objected was likely to be fired and blacklisted.” If this was the great period of true capitalism then I certainly hope we do not achieve it again.

Mrs. Blandford also states that the “truth about its [capitalism’s] nature… has been drowned in a wave of misrepresentations, distortions, falsifications and almost universal ignorance.” The acceptance of such a statement often depends on where one is located within a stratified system.

It is certainly not a lie that the richest 20% in the U.S. own or control 80% of the country’s wealth. Wealth is defined as that total amount of money and valuable goods that a person or family controls—including stocks, bonds and real estate. The poorest 20% own or control 1% of the wealth in the U.S. The top 20% of families with the highest earnings ($64,000 plus) receive 44.6% of all income, while the bottom 20% receive only about 4.4 percent. Income is defined as occupational wages or salaries and earnings from investments (Macionis, 1995 source).

The point is, if one is in the top 20% one might say the system is fair, non-exploitive, and morally correct. If one is in the bottom 20% or even in the second 20%, which only owns or controls 15% of the nation’s wealth, one might have a different view of the system. One could have a different point of view and not be universally ignorant; one might understand economic theory very well.

What emerges from the facts is that most systems, economic or otherwise, need checks and balances. Sometimes the check on a free-market economy or a “true capitalistic” system is a government consisting of elected officials who have a moral concern for all people within the system. This does not mean the government is without flaw. All systems, because they consist of human beings, have the potential for exploitation.

Now to address Prof. Welker and his criticisms of Regina Schmiedicke’s article on capitalism. He states that “the best method is to start at the bottom…that is, at the level of moral persuasion, education on economic literacy and our Christian heritage, and personal conversion.” I agree with this statement in principle; unfortunately many people—from the top to the bottom—have not arrived at this state of being.

To simply expect corporations to take care of their workers out of some great moral concern has not worked in the past, nor do I think we can expect a change of heart in the near future. Therefore, the masses of people have a moral right to expect and persuade the government to intervene on their behalf: to help them obtain a just wage; to help them obtain a 40-hour work week; to help them get access to supplemental pension plans like social security; to help them get medical insurance; and to help them when corporations downsize to enhance their profit or pay a lower wage in another country.

Prof. Welker also quotes Hayek who writes, “workers under capitalism, despite hardships of factory life, were better off financially and had better lives than prior to the spread of capitalism.” This is probably true, but it does not justify any exploitation by corporations operating within a capitalistic system. A similar argument was made by many southern plantation owners concerning slavery. They argued, as did some southern white ministers, that slavery was an essential part of a great economic system, and that African Americans benefited from that system. Easy to say for those who are not the slaves.

I would like to end with a number of quotes from various Popes. First, Pope Leo XIII, who said: “let workers and employers…make any bargains they like and in particular agree freely about wages; nevertheless, there underlies a requirement of natural justice higher and older than any bargain voluntarily struck; the wage ought not to be in any way insufficient…If…a worker is forced to accept harder conditions imposed by an employer or contractor, he is a victim of violence against which justice cries out.”

As history shows, the natural checks and balances of the marketplace are not enough to protect individual human beings from injustice. The government, at times, should and must intervene. Pope John XXIII states, “the remuneration of work is not something that could be left to the laws of the marketplace…It must be determined in accordance with justice and equity which require that workers must be paid a wage that allows them to live a truly human life and to fulfill their family obligations.”

Finally, Pope John Paul II stated, “the more that individuals are defenseless…the more they require the care and concern of others, and in particular the intervention of governmental authority.”

Thomas E. Graham, Ph.D.

Dr. Graham is Associate Professor of Sociology/Social Work at FUS, and is certified to teach economics in the state of Ohio.