Free Enterprise vs. Capitalism

I think often free enterprise is confused or conflated with capitalism. I thought it was worth a follow-up post to my "Inherent Violence of Wealth" post to talk a bit about it, since I don't think I was especially clear in my discussion that I was talking only about wealth gained from capitalism.

Free enterprise is the idea that you, or, me, or any group of people have the right to create an independent process whereby we make money from our own creative labor. I am absolutely a product of free enterprise (my father) and I have made a living via free enterprise for most of my working life. Free enterprises are small enterprises. Maybe it's one person running a web design shop, a collective grocery store, someone hiring some workers to print t-shirts, or an artist. Hallmarks of free enterprises are that they are business models that are local, small, and sustainable, and everyone employed gets a living wage.  Many (most?) small businesses in the US fit this category. 

Capitalism is a different animal entirely. Capitalism is the process whereby people with large amounts of money invest that money in business for the sole purpose of making more money. And capitalism, unlike free enterprise, requires one thing, and one thing only: increasing profits.

How do you increase profits continually? There are a few ways to do it. Every business has revenues and costs. On the revenue side, you increase revenues by convincing more and more people to buy what it is you have to sell. In some cases, that's easy because the product is good, and it's what people want. But that's not always the case. Often, it's done through the use of advertising (my definition of most advertising now is "stealing your self-respect and selling it back to you for the price of a product.") Some products, such as fast food, tobacco and alcohol, have their own ways of convincing people to buy more. Other products need some help from the government in the form of overly broad patents. Other products (like services) require ongoing, increasing fees. Some increase revenues by making products that are "designed for the dump," which means they need to be replaced more often.

Then there is the cost side. Ever increasing profits requires ever decreasing costs. There are two kinds of cost: labor and resources. Capitalist enterprises decrease labor costs by decreasing wages, decreasing benefits, shipping jobs to cheaper venues, and convincing the government to maintain a minimum wage that is far from a living wage. They externalize labor costs (such as health care benefits) onto the government.

Capitalist enterprises decrease resource costs by sourcing resources from countries with few regulations and by externalizing environmental costs (dumping waste, leaving open strip mines, dumping carbon into the atmosphere, the costs of landfilling all that shit we buy, etc.) They get tax breaks from governments, and the money is made up by individuals. They decrease resource costs by using the cheapest materials available. 

This quote is attributed to Ghandi, and I can't agree with it more: "The Roots of Violence: Wealth without work, Pleasure without conscience, Knowledge without character, Commerce without morality, Science without humanity, Worship without sacrifice, Politics without principles"


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