Capitalism Run Amok, Part 5

Capitalism Run Amok, Part 5

For to all those who have, more will be given, and they will have in abundance; but from those who have nothing, even what they have will be taken from them. Matthew 25:29

Underlying the muck in which present-day capitalism is mired is the Law of Supply and Demand. This law is both the key to capitalism’s downfall and its salvation. The law of supply and demand describes the marketplace as constantly balancing itself between what is demanded (being purchased) by consumers and what is made available at what price by suppliers. When a product is in low demand, suppliers reduce its production and lower its price since lower prices encourage consumers to purchase more. When a product is in high demand, manufacturers will either make more of it or suppliers will increase the price, or both, since higher prices discourage consumers from purchasing. That is a bare-bones description of a free market economy.

Well-intentioned government interventions often have serious consequences by focusing on only one part of the supply-and-demand equation. When conditions at one end of a closed system are changed, other parts of the system must adjust. For example, today’s consumers are experiencing high inflation, meaning the prices for most products are rising faster than most incomes. The primary cause of high inflation is having too much money in circulation. Money, when present in abundance, decreases in value – meaning we cannot purchase nearly as much as in times of lower inflation. Under the law of supply and demand, when extra money is available to consumers, they are better able to purchase products (for a time), which results in increased demand, less supply, and increased prices in order to balance the supply with the demand. One government response to the financial difficulties caused by COVID pandemic was to send money directly to households – two checks of $1400 each, if I remember correctly – which flooded the marketplace with new money. The result was increased demand, which resulted in higher prices and an increased price inflation. While I do not question the need for government action in times of crisis, solutions like stimulus checks often end up worsening the problems for those struggling and benefiting those with no need of assistance. Current proposals to forgive billions of dollars in student loans will also increase inflation, to the detriment of those struggling the most, which is not to say we should do nothing about student debt.

Flooding markets with money has dramatic impacts for both consumers and suppliers. The practice often provides short-term relief, which is why it’s done as elections loom, but leaves many folks in even worse condition over the longer term. Looking at healthcare, the spread of health insurance coverage for increasing numbers of people, especially with Medicare in the 1960s, led to improved health for millions. At the same time, though, the flood of additional money into the healthcare system has consistently driven healthcare costs higher, well above the inflation rates for other services. As health insurance is now being withdrawn or reduced as an employee benefit, personal bankruptcies after medical procedures have skyrocketed because the uninsured cost of healthcare has grown out of proportion to the rest of the economy. A similar phenomenon has occurred in higher education with the increased availability of student loans. The additional money flooding into universities has resulted in more people going to college, but has also caused the cost of a college education to consistently rise above normal inflation rates, leaving millions with staggering debt when leaving school, with or without a degree. None of which is to say we shouldn’t encourage access to healthcare and higher education, only that there should be better, longer-term ways to assist.

Another area receiving a tremendous flood of additional dollars lately, with devastating consequences, is politics. In 2010, a Supreme Court ruling (Citizens United v. Federal Elections Commission) cleared the way for corporations and other outside groups to contribute unlimited amounts of money to elections as long as they do not directly coordinate with specific candidates. As serious money gushes from corporations, super PACs, anonymous individuals, and foreign entities, the diversity of views represented in Congress becomes increasingly limited and polarized as the focus narrows to the issues of most importance to the small number of groups and individuals providing the majority of campaign dollars. House and Senate members spend up to 30 hours per week in their party’s call centers raising money. And make no mistake – the lust for money is bipartisan.

Timothy, a contemporary of the apostle Paul, wrote: “…the love of money is a root of all kinds of evil…”[1] For politicians, corporations, and individuals, the love of money for money’s sake corrupts moral standards. Piles of new (printed) currency are pumped into the economy each year, most of which is eventually siphoned off by insatiable investors, keeping inflation rates high and forcing greater numbers of vulnerable people into financial hardship, marginalization, and homelessness. And leaving future generations with an unfathomable national debt. This, indeed, is capitalism run amok.

This is the 18^th in a series titled The New-Old Social Pandemic. The opinions expressed here are mine. To engage with me or to explore contemplative spiritual direction, contact me at ghildenbrand@sunflower.com.

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[1] 1 Timothy 6:10a