Is the free market efficient?

It's true that capitalist competition provides incentives, but not for the capitalists to produce things human beings need. It's to make greater profits.

"WITHOUT CAPITALIST competition, creativity and invention would stagnate. There wouldn't be an incentive for people to work."

Columnist: Paul D'Amato

Paul D'Amato Paul D'Amato is managing editor of the International Socialist Review and author of The Meaning of Marxism, a lively and accessible introduction to the ideas of Karl Marx and the tradition he founded. Paul can be contacted at [email protected].

This is one of the oldest arguments against socialism. The implication is that capitalist market competition encourages creativity, efficiency and hard work.

Karl Marx and Frederick Engels dealt with the question as far back as The Communist Manifesto in 1848. "It has been objected," they wrote, "that upon the abolition of private property all work will cease and universal laziness will overtake us."

Marx and Engels' answer is as simple as it is devastating. "According to this," they wrote, "bourgeois society ought long ago to have gone to the dogs through sheer idleness; for those of its members who work, acquire nothing, and those who acquire anything, do not work."

While it's true that capitalist competition acts as a spur to increase production, it's also an extremely wasteful system. One need only think of the multibillion-dollar advertising industry or the military-industrial complex to see how much labor is wasted on essentially worthless enterprises.

Imagine what the hundreds of billions of dollars spent on weapons of mass destruction or on ads to convince us to buy one brand of sugar water over another could do in fixing crumbling schools, providing universal health care and cleaning up environmental degradation.

Moreover, because capitalist enterprises depend on increasing profits and market share, they must continually sell their products in ever greater quantities.

There is therefore a built-in incentive on the part of capitalists to produce things that don't last. Think of the college textbook industry where the same $60 book is reissued with a new introduction and rearranged chapters in order to prevent students from using older editions.

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THE HEALTH care business is probably the most distressing example of what happens when we "let the market decide." Health care for profit means delivering the least amount of health care service for the maximum amount of money.

Hence the nightmare of HMOs denying people access to important medical procedures because it will hurt their bottom line. Hence the absurdly of insurance companies denying coverage for people who need it the most--the chronically ill--because it isn't profitable.

Richard Scott, president of the now notorious Columbia/HCA HMO, compared health care to fast food. "Do we have an obligation to provide health care for everybody?" Scott asked. "Where do we draw the line? Is any fast-food restaurant obligated to feed everybody who shows up?"

Above all, capitalism wastes human life. The U.S. spends billions to warehouse 2 million people--many of them young Black and Latino men--in overcrowded prisons. It provides sub-par education to millions of poor students, sending a message that their lives will amount to nothing.

Are people homeless in America because there's a shortage of homes? And if that's the case, is there a shortage of homes because we don't have the concrete, the wood and the steel to build them?

The truth is that under capitalism, there's no incentive to build low-cost housing for the homeless--because it isn't profitable to do so.

The same goes for the more than 800 million people in the world who go hungry. It isn't profitable to feed them. So food is stockpiled or destroyed rather than distributed to them.

What kind of a system spends billions of dollars to build a nuclear submarine but can't find the time or money to feed the starving?

In a socialist society where goods are produced and distributed on the basis of human need, increasing productivity would mean not higher unemployment and longer hours, but shorter work hours and the full use of everyone's talents.

"Overproduction" would not be a cause for economic alarm but a means to improve everyone's quality of life.

Socialism would mean transferring the brain and muscle power now spent on annoying ads, bureaucratic paperwork and bigger and better ways to kill--to creative and useful tasks like ending disease and providing food, shelter, education and quality leisure time to all.

First published in the November 10, 2000, issue of Socialist Worker.