The Selfish Capitalist, Turbocapitalist businesses, Economic affluenza. “Unbridled capitalism has taught the logic of profit at any cost, of giving in order to receive, of exploitation without looking at the person”. “The results of such attitudes can be seen in the crisis we are now living through.”
The main goal of capitalism is to make profit, the highest profit with the least possible cost effort.
Profit-maximizing capitalists will prey upon this desperation in order to pay the minimum amount possible, which increases profits.
It is easy to imagine a situation in which businesspeople can profit at the expense of their customers, workers, and others with whom they deal if they behave deceitfully. For example, the quality of many products (say, used cars or diamonds) is difficult for consumers to easily determine.
The seller who takes advantage of this by charging a high-quality price for a low-quality product would capture extra profits from the sale. A business owner who is about to retire can profit by making promises not to be ful-filled until after his retirement and that he does not plan to keep.
The monopoly producer of a superior product (but one that requires the con-sumer to make costly investments in order to use it) can offer the product at a low price and then, once the consumer becomes dependent on it, increase the price significantly. Other examples of the potential profit from dishonest behavior are easily imagined. In fact, such examples are about the only type of behavior some people ever associate with business.
A businessperson who attempts to profit from dishonest dealing faces the fact that few people are naively trusting. It may be possible to profit from dishonesty in the short run, but those who do so find it increasingly difficult to get people to deal with them in the long run. And in some businesses it is extremely difficult to profit from dishonesty even in the short run. How many people, for example, would pay full price for a “genuine” Rolex watch or a diamond necklace from someone selling them out of a Volkswagen van at the curb of a busy street? Without being able to provide some assurance of honesty, the opportunities to profit in business are very limited.
The advantages of honesty in business and the problem of trying to provide credible assurances of that honesty can also be illustrated as a game.
In this example we present a payoff matrix for a buyer and a seller, giving the consequences from different choice combinations. The first number in the brackets gives the payoff to the seller, and the second num-ber gives the payoff to the buyer. If the seller is honest (the quality of the product is as high as he claims) and the buyer trusts the seller (she pays the high-quality price), then both realize a payoff of 100.
On the other hand, if the seller is honest but the buyer does not trust him, then no exchange takes place and both receive a payoff of zero. If the seller is dishonest while the buyer is trusting, then the seller captures a payoff of 150, while the buyer gets the sucker’s payoff of 50.
Finally, if the seller is dishonest and the buyer does not trust him, then an exchange takes place in which the buyer pays a low-quality price but gets a lower-quality product than she would be willing to pay for, and both the seller and buyer receive a payoff of 25. From a joint perspective, honesty and trust are the best choices, since this combination results in more wealth for the two to share. But this will not be the outcome, given the incentives created by the payoffs.
The buyer will not trust the seller. The buyer knows that if her trust of the seller is taken for granted by the seller, then he will attempt to capture the largest possible payoff from acting dishonestly. On the other hand, if he believes she does not trust him, his highest payoff is still realized by acting dishonestly. So she will reasonably expect the seller to act dishonestly. This is a self-fulfilling expectation, since when the seller doesn’t expect to be trusted, his best response is to act dishonestly.
Businesses are not clairvoyant. Individuals, including business leaders, make mistakes. Fortunately, the market discourages mistakes. Short-term schemes invariably backfire in the long term and profit margin declines, and the business suffers losses. Those businesses that repeatedly suffer losses eventually go out of business.
Short-sighted and dishonest business people lose customers, anger employees, and lose support within the business community. In the ideal society, capitalist-entrepreneurs must always remember that the needs and wants of the consumer are paramount. The consumer is king in the market economy.
The best companies satisfy their customers and develop sound management skills with their employees, suppliers, community, and shareholders in order to produce quality products and services. Honesty is the best policy for long-term survival and profitability.
In his influential book Conscious Capitalism, John Mackey criticizes Wall Street and publicly-traded corporations for being too focused on quarterly earnings and short-term profit goals. He argues that “profits are best achieved by not making them the primary goal of the business.”
They are, in fact, “the outcome when companies do business with a sense of higher purpose.” While essential and desirable for long-term survival and success, profits are “like happiness, best achieved by not aiming directly for them.”
According to Mackey, the primary focus should be to fulfill the needs of the cus-tomer, and if successful, profits will result. By the same token, “maximizing long-term shareholder value should not be the primary purpose or goal of the business, but comes about as a secondary result of creating value for customers.”
Mackey goes out to explain: “Is the primary purpose of doctors to maximize the long-term shareholder value of their hospital or is it to help heal people? Which doctor would you want treating you or your family—the doctor dedicated to caring for you or the doctor trying to maximize the profits of the institution he or she is working for?
Is the primary purpose of teachers to maximize the long-term profits of their institution or is it help educate people? Which teachers would you want educating your children? What about engineers, architects, nurses, journalists, ministers, etc.? Their purpose is to create value for whoever they are ultimately trying to serve.”5
“Unbridled capitalism has taught the logic of profit at any cost, of giving in order to receive, of exploitation without looking at the person”. “The results of such attitudes can be seen in the crisis we are now living through.”
“We found middle-income people deeply unhappy because they hunger to serve the common good and to contribute something with their talents and energies, yet find that their actual work gives them little opportunity to do so,” Lerner writes.
Moore says: “Economic terrorism when at a time you are making a record profit, you would throw people out of work just so you could make a little bit more.”
The documentary Affluenza, highlights this alienation and terms this drive towards over consumption a “disease” affecting our lives. Affluenza shows how this disease is spread through a targeted marketing mes-sage linking happiness to having. The mar-keting department’s function is to increase company sales and thereby increase “prof-it.” By refining and endlessly repeating the mantra linking goods to personal happiness and that we are not acceptable unless we consume, sales increase and profit is achieved. Even if this message is false, when profit is the shared value, there is lit-tle outrage.
If affluenza really is a virus, there would be little you could do to protect yourself from it. The Affluenza Virus is a product of what we calls ‘selfish capitalism’, a system geared towards profit at all costs that he believes has affected almost all aspects of modern life.
The purpose of capitalism is to maximise the profits of shareholders against all other interests, …