The Hidden Costs of Capitalism

We have highways, high rises, beach front property, inexpensive toys, and organic food shipped quickly to Whole Foods daily, but at what cost? Who profits most from these luxuries, and who pays the most? This post tries to answer those questions and, in the end, suggests a different path forward.

The Hidden Costs of Capitalism

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is The Neoconservative Threat to World Order. He published the article “The Looting Machine Called Capitalism” for CounterPunch and I have excerpted a series of passages with commentary to tie his point back to NM, to Santa Fe, and by extension most any community. His major premise is that capitalism thrives because in our ‘democracy’ developers and corporations are able to reap their profits without paying for any of their ‘external’ costs. Guess who pays those costs: we do. And for those external costs related to the environment, our children and their children will pay. It is worth noting that Roberts is not some foaming-at-the-mouth radical, but the former Assistant Secretary of the US Treasury who now works for the WSJ.

In past blogs, we noted how both political parties have been entirely beholden to the two-party system, and our current electoral options, the GOP and neoliberal Democrats, essentially being two peas in the same pod. Today, we examine how unfettered capitalism’s profits can come from avoiding a variety of external costs, external costs that we cover.

External Costs from Community Development. In a relatively benign example, let’s see how even small-scale urban development can reap profits for developers while leaving taxpayers paying a significant amount of the freight.  “When a house [hotel] is built that can sleep 20 or 30 people next to a family’s vacation home or residence, the noise and congestion destroys the family’s ability to enjoy their own property. If they had to be compensated for their loss, would the hotel, disquised as a “single family dwelling” have been built? Walton County, Florida, is so unconcerned about these vital issues that it has permitted construction of structures that can accommodate 30 people, but provide only three parking spaces.” Does this sound like some of the current thinking in Santa Fe, considering the permitting of additional casitas on lots that currently house single-family dwellings?

As Roberts describes, in Walton County rampant development of this type has generated enormous profits for developers but has strangled the community in traffic and even jeopardized everyone living there, as highways that once provided swift egress in the event of a hurricane would now be gridlocked entirely in the event of a major hurricane. This is what happens when developers are not forced to consider the ‘external cost’ of expanded infrastructure and the impact of development on existing residents. This will be the focus of a series of posts and KSFR radio shows as we look at how to mount a grassroots process aimed at achieving sustainable development without displacement at both the state and local level. But to develop without displacement, stakeholders like elected officials, Party leadership, and the business community must consider an entirely different business model. For example, as Roberts describes, in Japan developers must compensate for the impact of their development including: increased noise, loss of views, parking, congestion, and even loss of sunlight on surrounding properties. The remaining two examples of external costs passed on to us, are of far greater import.

External Costs from Offshoring Jobs. As Roberts goes on to describe, the impact of unpaid external costs goes well beyond lost views and congestion. “When production facilities in the US are closed and the jobs are moved to China, for example, the American workers lose their jobs, medical coverage, careers, pension provision, and often their self-respect when they are unable to find comparable employment or any employment. Some fall behind in their mortgage and car payments and lose their homes and cars. The cities, states, and federal governments lose the tax base as personal income and sales taxes decline and as depressed housing and commercial real estate prices in the abandoned communities depress property taxes. Social Security and Medicare funding is harmed as payroll tax deposits fall. State and local infrastructure declines. Possibly crime rises. Safety net needs rise, but expenditures are cut as tax revenues decline. Municipal and state workers find their pensions at risk. Education suffers. All of these costs greatly exceed Apple’s and Nike’s profits from substituting cheaper foreign labor for American labor. Contradicting the neoliberal claims, Apple’s and Nike’s prices do not drop despite the collapse in labor costs that the corporations experience.”

We Americans pick up the tab for a raft of social and health services required by those who lost their employment, and local, state, and national government suffer from lost tax revenue. And then Governors like our Susana refuse to raise taxes to cover these costs and our social safety net and public services are shredded. Roberts goes on to opine:  “A country that was intelligently governed would not permit this. As the US is so poorly governed, the executives and shareholders of global corporations are greatly enriched because they can impose the costs associated with their profits on external third parties.” No surprise, that last December New Mexico was once again rated the worst governed state in the nation. Click here to find out why.

External Costs on the Environment. Roberts points out that the worst offense is not in lost views and lost jobs, but a lost planet. “Now consider the pollution of the air, soil, waterways, and oceans that result from profit-making activities. Consider the radioactive wastes pouring out of Fukushima since March 2011 into the Pacific Ocean. Consider the dead zones in the Gulf of Mexico from agricultural chemical fertilizer run-off. Consider the destruction of the Apalachicola, Florida, oyster beds from the restricted river water that feeds the bay due to overdevelopment upstream. Examples such as these are endless. The corporations responsible for this destruction bear none of the costs.” And here we need look no further than the Four Corners. PNM has exploited that treasure of a region ruthlessly for decades leaving behind toxic waters, toxic air, hundreds of individuals with cancer or asthma and an economic base entirely dependent upon coal. Now that coal is losing its profit margin, PNM will move on. They will threaten bankruptcy, point to ‘stranded assets’ and do all they can to shift the cost for clean-up to….guess who?  While it is possible that at great public expense we may repair much of the damage done by PNM, the cumulative damage done by capitalism across the nation and the world is much less easy to repair, whatever the cost.

“The measure known as Gross Domestic Product (GDP) is so flawed that we do not know whether the increased output costs more to produce than it is worth. GDP is really a measure of what has been looted without reference to the cost of the looting. Environmental deregulation means that capitalists can treat the environment as a garbage dump. The planet can become so toxic that it cannot recover.”

It Isn’t Just the 1% Who Reap the Benefits. As is usually the case with my posts, I get a few comments and even more emails, usually in praise of the work. But over the past week, when the lens has focused on our two-party system and on capitalism’s avaricious greed, I have also gotten quite a few comments like: “We should be grateful for our Democratic party,” or “You should be grateful for all that capitalism has given you.” As I read those comments, I have to wonder how deeply the commenters read the article or considered the degree to which we enjoy our privilege at others’ expense. Certainly Roxanne and I enjoy a good life, and certainly we worked damned hard for more than 40 years, but only a person with cultural blinders would not appreciate the degree to which our current comfort has been constructed on the suffering of millions of unseen victims, those who sweat 12-16 hours a day for pennies so we can have a bigger screen, a nicely fitted suit, or organic quinoa. Frankly, I hope some of my posts do make you uncomfortable and force you to consider the cost of your and our privilege. Only when we do so will we begin to do the radical rethinking of what we mean when we say the words: profit, development, success, and necessity. If we don’t reconsider these terms, we will simply continue to consume until there is nothing left for our children to consume. We will have had a good life, but we will be consigning our children and grandchildren to an unimaginable future. There is work to be done at home, in our city, our state, and our political system. We are not nearly as successful and extraordinary as we like to think.

I close with one last excerpt from Roberts: “But in actual fact, Americans are the least exceptional people in human history. Americans have no rights at all. We hapless insignificant beings have to accept whatever capitalists and their puppet government impose on us. And we are so stupid we call it ‘Freedom and Democracy America’.” Harsh indeed. He said it, not me. But at times, it is hard to argue his point. We did elect Donald Trump, after all. Click here to read the entire article by Roberts. It is an excellent read.

At a Local Level, What We Can Do.  Retake will soon be announcing a community-wide grassroots canvassing and organizing process designed to surface a new vision for development without displacement in Santa Fe. It will be a long-haul process. It will incorporate the perspective of those who historically are rarely consulted and it can include you. We will need researchers and canvassers. The canvassing process will be primarily an engagement and listening exercise, an opportunity to meet your neighbors, get to know what troubles them and what their hopes are for the city, state, and nation. So if you are interested, reply to this post and give me contact information. Planning and training begins in May, canvassing in June. The City Different needs to step up. You, too.

At a State Level, What We Can Do. The Democratic Party is holding its elections for Party leadership roles, State and Congressional District Chairs and Vice Chairs, and a number of important committees, including the Platform Committee. In local elections, progressives and activists have won many seats and will be voting today for these statewide officers. Hopefully the results will send a message that business must be done differently. Hopefully those activists in wards and county committees will persist in trying to reshape the Party. Next week, I will report on how the State Central Committee elections turned out. Our nation’s transformation needs to begin at the city and state level and blossom by 2018 and 2020 as a force to be reckoned with. We aren’t going to get too many more chances to get this right.

In solidarity,

Paul & Roxanne



Categories: Capitalism, Economic justice

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3 replies

  1. Capitalism is a destructive system based on self-interest, greed and oppression. It needs sexism and racism to survive. It requires unemployment to function. It forces citizens to not only slave for the wealthy and corporations but also to subsidize their profits through paying for infrastructure and cleaning up the environmental damage they cause. Read “The Origin of the Family, Private Property and the State” and “Das Kapital”.

  2. To me this is an excellent article – “Hidden Costs….” and can help to provide a foundation for local, state and national development – I like the suggestions for beginning the work on the local level to build a better community and bring folks together for the common good…. I am hoping we can move forward on this in Taos …. Thank you.

  3. Utopia is what we make of it in our minds and our lives. Regardless the treatises on politic or sociology all of the resultant concepts of proper human organization have fallen short over time. No political or economic system we have conceived has yet prospered for the good of society beyond its inward focus on the tribal “us”. We can take the ideologies from past triumphs and failures and begin to make the changes our civilization may need to survive on our now global scale. For most of us changing the world is a more than Herculean task. It is far more easy to see what changes we may be able to bring in our own lives that set an example and define a new paradigm. If we are successful at making changes locally, the ideas and the actions will grow in use and practice.

    Culture changes glacially, attitudes change on a whim…

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