Capitalism, coercion, and slavery

I have been a proponent of capitalism and have seen it as a voluntary and efficient system. Many have made a big deal about the rise of wealth inequality and has been seen as a partial part of capitalism that needs to be dealt with by the state. I have recognized that wealth inequality is a problem, but have saw it as a problem of the state and central banks. I thought of capitalism as retaining the same amount of wealth among the classes and not leading to a greater share for the top. I also have seen monopolies as a product of the state and not capitalism. I thought that wealth inequality could not increase overall without forcing the money from the bottom classes (coercion). I saw the idea of wealth inequality being able to rise through the voluntary institutions as complete nonsense. Since capitalism is a system of exchanging (like exchanging goods through a medium of exchange and trading labor for a share in profits), all parties are benefiting, therefore, the wealth distribution throughout the economy remains pretty stable.

What I am bringing here isn't really about wealth inequality, but coercion (and a bit on the monopoly) in capitalism. I have seen capitalism as voluntary and the state as being the main coercive institution, however, I realized that coercion exists in capitalism as well. The state enforces laws and if you disobey, you get a penalty. It acts as force or threats. Coercion can exist in many forms, not just with point of gun and prison. I can coerce you by stealing something extremely valuable to you and telling you to do something or I will not give it back. You can refuse a threat, just as I can refuse to follow the law or listen to the police, but it is still coercion. The definition of coercion (from googling it) is, "the practice of persuading someone to do something by using force or threats." By looking at this, I see that coercion is possible in capitalism. An employer can pay low wages to an employee and refuse a raise. The employee may realize that they will not be able to find work elsewhere. They are lucky to have the job they have. So, the choice is, keep the job, or quit and lose all wages (and not be able to provide). This is an act of coercion. While the employee can quit (just as a person can refuse the law), they are threatened to stay with the job and wages.

Many refer to capitalism as a force behind "slave labor". This may be true since the workers labor is the property of the capitalist. However, slaves are property of the individual, so workers are not exactly slaves in capitalism. There has been argument on whether slavery in the U.S. existed because of the state or not. I see that since the state enforces property law, and slavery is property law applied to humans, the state was therefore behind it (and what ended it). However, capitalism resembles slavery in many ways. In order to make a profit, the capitalist (and shareholders) must take a share away from the workers labor.

What do you think?

Bi0Hazard: I almost forgot, there is also the controversy on the monopoly. While the natural monopoly may seem unrealistic, it can exist in industries with high infrastructure costs. The monopoly exists because of barriers to other entry's to the market. The state may erect these barriers, but we also must recognize that barriers exist without state intervention. High infrastructure costs are a barrier since not just anyone has the capital for entering the industry. The first supplier in the market has an enormous advantage over the other competitors. In a smaller scale economy, there may only be one supplier of large infrastructure. In the U.S., public utilities are sometimes natural monopolies since the infrastructure required is very expensive. Another example is internet service providers. In my area, there is only one supplier that is able to provide wi fi in my area. The same may be true in numerous small towns. A natural monopoly then exists in the area (unless the government is enforcing it as well).

Bi0Hazard: What you observe about coercion is very true and central to critical organizational theory.

admin: Why is it that people will tend to refer to a person working for a corporation at poverty wages and can barely make a living as an example of slave labor, but not someone working for a business that pays decently high wages, provides paid leave, and numerous other benefits?
Is it an emotional type thing or something else?

Also, do you think of working in capitalism as slave labor?

Bi0Hazard: You have layers of autonomy. It's not like "you're free" or "you're a slave". It's just that there are many implicit and explicit forms of coercion. When we try to describe these in terms of explicit taxonomies (slave, not a slave) you run into all sorts of challenges. Instead it can be helpful to critically analyze what the power dynamics are. People use these labels as simplifications and stereotypes - it's a heuristic because, very often, those of lower "status" in society have less autonomy.

Autonomy can manifest itself in many ways. To use Durie's model of the Maori concept of Hauora, there are essentially four types of well-being: physical, emotional, social and spiritual. When we consider the physical effects of coercion we might think of people being whipped, but it can also be more implicit forms of control. Students not getting enough food or sleep in universities, for example. You are also right to identify there are emotional effects. People are motivated by autonomy and feel unhappy being able to achieve it. One might think of the idea of "self-actualization" in the sense of Maslow. There are social effects. Coercion often distances or limits our contact with our friends, or forces us into contact with those we don't want to be with. Like for example, who likes their boss, right? And there are spiritual effects, not just religious, but what the Maori call mana (life-force). You actually can start to lose your sense of identity and sense of self in a coercive environment.

admin: Slavery is property law applied to a human being. I just thought it may be accurate to refer to "slave labor" as a part of capitalism since the labor the worker provides is the property of the capitalist to profit from. The capitalist pays the worker a share of the profits for their work, but they effectively coerce them to stay in their job if there is limited opportunities for them.
Of course, coercion will vary all across a capitalist economy.

I disagree with both of you, in that there is no coercion under unregulated capitalism. As such, I am opening a debate on this topic, and I invite anyone of you to the challenge:

http://www.edeb8.com/debate/There+is+no+coercion+under+unregalated+laissez-faire+capitalism/

boris7698: I will think about it.
What do you think about the concept of the natural monopoly?
Also, wouldn't you agree that money in capitalism limits choices and leads to barriers in production and choice (in laissez-faire)?

Bi0Hazard: No, I don't agree. In fact, I have an open debate waiting for an opponent, and my pro position that unregulated capitalist is a perfect system, a moral system, and the only one. Natural monopoly is perfectly moral if one company satisfies fully the needs of the customers. For example, a single 7/11 in a small town (no more 7/11 type of shops are required). For a bigger company, like say Google: no I don't think it is possible to hold a natural monopoly. There are always small startups that invent great things, that Google buys because they are willing to sell to Google. They have a choice not to sell.

boris7698: I'd take that debate

boris7698: You would surely agree to barriers in capitalism that can lead to monopolies. For example, the state can create monopolies with certain barriers. In capitalism, money/cost acts as a barrier in itself. You can't just get access to whatever goods and/or services you want. You need the money. This is how a natural monopoly can arise. A great example is with public utilities. They require enormous investment. It is a high cost industry that gives the first/largest supplier an enormous advantage since the fixed cost is high, but marginal cost is low. This is a recipe for a natural monopoly. This is why some public utilities today are natural monopolies. It is very expensive to enter the market and very hard to compete since the costs to provide are low for the current top provider. This monopoly power can be an issue if abused by the private provider, but the state largely regulates or even nationalizes some public utilities.

Bi0Hazard: The word "public" in "public utilities" is the give-away that this is government interference in the market. It is not true that generating electricity requires enourmous investment: a small company can generate electricity for a town at a chaper rate than the cost of a big electric compnay to put up the wires to deliver the electricity there from the central powerplant. There are also many alternatives to energy, and free market would optimize it. In a free market landscape, our energy use and distribution of surrounding services would be dramatically different.

Let's instead talk about your general point that it is expensive to enter some markets. The first answer is: then, why enter them? No one compels you to enter them. There's always something else to do in another domain.

The second answer is that it would never happen that one company grows in vacuum until suddenly it is big, and no one can take up on it. As that company grows, other companies grow alongside it. The capital held by investors invested in this vertical domain, also grows. Therefore, there will be enough capital to create a rival company funded by such investors.

Let's take Google. Google makes money not directly off-of consumers who do google-searches, but from advertisers of products. What prevents these advertisers, who at the moment, collectively provide 90% of revenue to Google, to form their own Google2, and leave Google1 without all that cash? It is possible, but not needed because Google does an excellent job. In other words, if a large company does its job so well so that everyone is happy, it is not a problem, and it will look like it is a "natural monopoly". But it is not: the moment it will skip a beat, a small startup will create something in the missed aspect, and will cater to the disgruntled customers.

boris7698: The word "public" in "public utilities" is the give-away that this is government interference in the market.
Utilities can be privately owned. They provide services to the public.
I never said generating electricity necessarily requires enormous investment, just that these industries with a low marginal cost but high fixed cost create the potential for large public utilities that can form natural monopolies. Small companies can't provide services at a larger rate than a large company.
Let's instead talk about your general point that it is expensive to enter some markets. The first answer is: then, why enter them? No one compels you to enter them. There's always something else to do in another domain.
This isn't my point. My point is that the natural monopoly can form under these conditions which may lead to market power and inefficiencies.
The second answer is that it would never happen that one company grows in vacuum until suddenly it is big, and no one can take up on it. As that company grows, other companies grow alongside it. The capital held by investors invested in this vertical domain, also grows. Therefore, there will be enough capital to create a rival company funded by such investors.
It does happen in industries with high costs to enter but low costs to produce (providing a large barrier of entrance and significant advantage). When limited to particular areas (and economies largely are), this is simply a problematic assumption to make.
Let's take Google.
I am referring to public utility industries, not google. It can become classified as a public utility eventually.

The idea that natural monopolies can only rise when a company satisfies its customers to the point that other companies can't keep up is appealing in theory, but in practice you have to account for imperfect competition, limits, and market failures. That natural monopolies can rise with certain companies in industries gaining advantage through the market and being able to abuse their power is actually basic economics. Here: http://economicsonline.co.uk/Business_economics/Natural_monopolies.html

Bi0Hazard: I know that it is economics taught in school, but I think it is a flawed theory. If we just restrict to the public utility companies, every such company is government supported in some aspect, which is what creates a monopoly. But this monopoly is no longer "natural".

boris7698: This monopoly forms in the market naturally. It isn't government regulation that is creating it, but the aspects of the industry. Government regulation (or even nationalization) exists in part to prevent the exploitation of monopoly power.

Bi0Hazard: Incidentally, this week the author of the article I am linking below posted on HBLetter forum this:

However, every case I have studied so far as an economist (which I now am) has had a solution. Utilities are an example. For instance, the so-called “natural monopoly” problem which allegedly calls for government regulation of utilities in order to prevent “wasteful duplication of infrastructure” is an invalid argument. My article explains why. Interestingly, the concept of “natural monopoly” was invented *after the fact* of regulation. Regulation came first, in the 1920s, to what was until then a wildly competitive industry. Then economists rationalized it afterwards by stating that utilities, because of their particular economic structure, had to be regulated by government.

And this is the article, but to read it you'd have to buy a subscription, or find just that magazine issue.

https://www.theobjectivestandard.com/issues/2008-summer/property-rights-electric-grid/

boris7698: It makes sense that they would say that considering that this is an objectivist magazine.

I don't really buy subscriptions. It would be interesting to read though.

boris7698: Either way, one thing that needs to be remembered is that laissez faire capitalism has its own regulations (it regulates itself). Barriers exist from money, social inequality, and limited resources. This means that people can be prevented from doing certain things and coerced without political power.
Many will mistakenly leave this out and just assume that people are free to whatever as long as there is no laws preventing it. That political power is the only possible threat to human liberty is just completely false.

Bi0Hazard: Or more accurately, state power. Politics still exists in laissez faire, it is simply not exercised by the state.

admin: What do you mean?
That economic institutions in capitalism are also political institutions or that the corporate elite tends to control the state (crony capitalism)?