On Capitalism and Greed

[Omaha Steve]

http://www.americanchronicle.com/articles/67417

M. Orhan Tarhan
July 06, 2008

I have the habit of defining first what I will be talking about. But in this case, I will make an exception for capitalism, because it is the system we are using. My readers don´t need to read a definition of capitalism. But I think, I need to define greed: "it is an excessive desire for more of something (such as money) than is needed."

The popular mind all over the world usually associates capitalism with greed, because they do not quite understand the concept of profit. There is no greed in the normal operation of a corporation. A business may buy some wares from the manufacturer and sells them in retail at a little profit. Or a corporation may manufacture a widget. It pays its raw materials, its labor, its engineers, its clerks and its management and sells its widgets at a little profit. We can talk about greed, only if that business wants to sell its widgets with a 30 , 40, or 50 % profit.

Any business in the theoretical American capitalist system must maintain a three way balance: (1) it must compete for labor (That includes all the employees) in the labor market, (2) it must compete in the market of its products by producing the best products at the lowest prices, in other words, it competes for its customers.

(3) it competes for its share holders by providing big dividends to them which results in the increasing of its stock price. If this balance is not maintained, all sorts of degenerations occur. There is one important condition for this balance to work properly. There must be full competition between several similar businesses. If any single business buys its competition and becomes a monopoly, then the balance is destroyed . The company can ask any price and most likely will get it. The U.S. has laws to maintain the competition in the market.

The competition for labor is complicated by the existence of labor unions. Labor unions pressure companies to provide safe working conditions for its members, a higher pay, a good pension, and long vacations.

Unions have a legal compulsive method to force the businesses to give them what they want. They can strike and shot down the business. In some businesses such as coke plants, sudden shut downs shorten the life of the brick ovens. Thus strike is a very powerful (and some times very dangerous) weapon in the hands of the unions. Here the government usually interferes, because it is the public that suffers (Such as in transportation strikes). During the last 50 years Republicans supported the businesses while the Democrats were on the side of the Unions.


FULL story at link.