One of the hallmarks of American capitalism is its faith in the efficiency of the marketplace. This means the setting of prices, the allocation of resources and the distribution of labor across different industries. Inefficiencies are ruthlessly punished.
But how efficient is it when two companies producing the same product compete for market share? Isn’t there an overall inefficiency? Isn’t there a redundancy? Why waste resources rather than combine the two, ensuring economies of scale and overall cost reduction?
We allow redundancy in military operations: If A doesn’t work, B will, so that soldiers and pilots will not be in harm’s way without proper protection. With sufficient redundancy, safety is assured.
It’s a balancing act in the marketplace between safety and efficiency.
The marketplace is the best place to ensure an efficient balancing act where the dynamics of free operations allow for immediate changes and adjustments.
No company can survive without paying close attention to whatever market forces — the Invisible Hand — dictate.
Since the marketplace is somehow regulated by political forces, government agencies, congressional mandates, and presidential directives, it has been customary to assume that our democracy is up to the task: checks and balances as well as term limits and ongoing election cycles.
Between a dynamic political framework and economic marketplace, it would seem that efficiency, productivity, and even creativity would be guaranteed. The balancing act found its home in the best of all worlds: a capitalist democracy.
Yet, a different story emerged when the Conference Board for the Business Council asked 70 CEOs to evaluate the political and economic climate. According to Gillian Tett of the Financial Times, “when this group was asked which global institutions they considered most competent and credible,” they put themselves in first place (90 percent).
Self-congratulation is a funny thing; you hear it more often than you expect, and it’s hard to argue with the one so earnestly declaring it. Isn’t this true, especially when the average compensation in 2011 for CEOs was $9.6 million (AP)? What can you say? Perhaps retell the story of Narcissus, who was lured to a pool to look at his own beauty, and not realizing he was looking at an image of himself, was unable to stop looking at the image and died.
In second place the CEOs put central banks (80 percent of them), a reasonable choice if one considers their bailout plans as guarantors of last resort for failing commercial and investment banks. The CEOs seem to say that they can count on central banks to stabilize a faltering economy; this also entails counting on politicians who oversee them.
Relying on central banks, government regulators and politicians who oversee them is akin to asking the Politburo to watch your back. Either you believe in the marketplace’s competitive capitalist powers or you believe in a socialist planned economy. Choosing the latter at your convenience to protect the former is ideologically dishonest.
The most astonishing result of this survey was the third-place choice: the Chinese Communist party leadership (64 percent). The U.S. president garnered a mere 33 percent, while Congress unsurprisingly came in at 5 percent. The justification was that unlike U.S. politicians who think only about the short-term, the Chinese enact long-term policies.
This way, the CEOs explained, they know what to expect. Unknown variables cannot be plugged into spreadsheets; nor can one plan investment strategies without any idea what government policies and regulations will be forthcoming. Risk mitigation is crucial for success, and our own government raises business risks as opposed to the totalitarian Chinese regime that is transparent and predictable (you know what to expect, even if you don’t like it).
So, while we may debate ‘til the cows come home how superior we are in comparison to the Chinese, CEOs of global corporations leave such debates to television pundits and uninformed ideologues. They admire China’s proactive intervention, ensuring that the 2007 crisis was less disastrous than what the U.S. and EU have experienced.
In a bizarre way, corporate leaders admit that government intervention is necessary and welcome: They like rescue plans and coordinated operations; they like to know they’ll be saved if they drown; they like to play like competitive warriors as long as the battlefield is rigged to ensure their victory.
Maybe they are rich enough to speak truth to power; maybe they can afford to question the presumptions of the capitalist marketplace. Their compensations don’t depend on their ideas or speeches, only on the compensation committees of their boards. And those committees are usually appointed by them — yes, they are all narcissists!
Raphael Sassower is professor of philosophy at UCCS who published Postcapitalism in 2009. He can be reached at firstname.lastname@example.org. Previous articles can be found at sassower.blogspot.com