Critical Critique of the Role of Government Under Capitalism

Economics 605

30 November 2005

Critical Critique of the Role of Government Under Capitalism

As a dynamic discipline, each economic school of thought continually challenges previous schools and advocates certain ideas and developments. In light of the millions of children that die each year because of the misallocation of food- while the rich get richer, this paper will preface the need for socialist revolution. Certain concepts from the classical, Chicago, and Keynesian schools are treated, while these theories are juxtaposed to reality; including callous wealth distribution inherent to capitalism, environmental un-sustainability due to capitalism, imperialistic warfare at the highest stage of capitalism, and, central to the occurrences just stated, the necessity of an economic profit as condoned, authorized, and/or encouraged by each nation's government. Despite the truly innovative aspects of capitalism and the transformation of the social landscape due to technological advancements, our world has seen great horrors during this epoch. This paper will further refute the logic that the present economic system has allowed for the most efficient allocation of scarce resources and will call for the abolition of the pressing concerns of our day, such as military conflicts, mass poverty, workers oppression, and environmental ruin, will be actualized through a transformation of the role of government.

The founder of the classical school, Adam Smith, failed to account for the short sighted aspects of the economic system he idealized. In fact, the main influences that stimulated the theories he presented in his two major publications were derived from one of the major tenets of the physiocrats- which should be particularly credited to Vincent de Gournay, whose phrase, "laissez-faire," in effect means "let people do as they please without government interference." (qtd. in Brue 39). This idea was later adopted by the Chicago School in their advocacy of limited government since " government is inherently inefficient as an agent for achieving objectives that can be satisfied through private exchange" (qtd. in Brue 511). Of course, this idea does not take into consideration the depths to which capitalists sink (out of necessity and greed) if they were not regulated, nor does it take into consideration the true role of the government which has been uncovered by the leading socialist writers; which is to act as a temporary reconciler of antagonistic classes, the bourgeoisie (capitalists) and the proletariat (workers). Otherwise as summarized in Essentials of Comparative Politics textbook authored by Patrick O'Neil, the state, as seen by Marx, is a "coercive mechanism, monopolizing force not in order to generate security, as Max Weber discussed, but to defend the haves against the have-nots and to allow the elites of various counties to wage war against each other in the ongoing pursuit of wealth" (O'Neil 211-212). In actuality, the government, or more broadly termed, the state, can be a positive entity for beneficial change if it were under the control of the majority of people; some would term 'fuller democracy' which will be addressed later. However, the state, today, acts in the interests of the capitalists which Smith and his contemporaries did not theorize (or mention). Instead, they argued that humans display a "harmony of interest."

Smith's short sighted ideal fails to address the fact that not only will the government act in the interests of the capitalists, but this is necessary for the politicians survival as it is to the survival of the capitalists. Smith believed that "the pursuit of self-interest, restrained by competition, thus tends to produce Smith's social good- maximum output and economic growth" (Brue 77), so there will be this "harmony of interest." Smith assumes that "resources get allocated to their highest valued uses; [and] economic efficiency prevails" (Brue 76-77). This assumption does not account for the consequences of the need for the involved actors (capitalists, politicians, consumer = workers) to essentially reduce their financial and political costs. (The costs to the worker will be elaborated on intensively below.) Accordingly, a politician will trump up allegations in order to warrant military intervention for the covert economic reasons. As seen with this most recent war in Iraq, Democrats and Republicans alike have continually voted for the occupation of another country despite the growing poll figures signaling an American opposition to the war, not to mention the disagreement by millions of people around the world. Interestingly enough, most of these politicians would not be in office if it were not for large corporations donating to advance their campaigns. In fact, opensecrets.org states that over $828 million was spent on the 2004 presidential elections not to mention the over $1.1 billion dollars spent for that election cycle's congressional races. Just as ties of big business and government are inexcusable and unmistakable, so are the ties of military intervention and capitalists.

Under capitalism, the first example of callous behavior as mentioned earlier is the necessary proclivity of capitalists to pursue cost reduction and open new markets resulting in warfare for economic gain. Smith's concepts of competition and limited government are central to his theory of the harmony of interests, but he failed to understand (or mention) that the state acts for reasons other than these three main reasons Smith proposed, which are "(1) to protect society from foreign attack; (2) to establish administration of justice; and (3) to erect and maintain the public works and institutions that private entrepreneurs cannot undertake profitably" (Brue 79). Smith fails to further expound upon the primary reason one nation would need protection from foreign attack. "National borders are too narrow for the growth of [consolidated] industries. So they are compelled to constantly acquire new markets, new sources of raw materials, and new outlets for investment outside the "home" nation" (Jones).

In light of China's growing economic prowess, the leaders of the United States government have sent many soldiers to fight an illegal and immoral war in Iraq in order to secure a sphere of influence for the United States' capitalists; further controlling the flow of oil and other hydrocarbons out of the Middle East and subsequently the rate of growth of other industrializing nations, such as China, which are in need of an ever increasing source of energy. In fact, imperialism is nothing new to the United States of America. In 1894, Senator