One of the serious drawbacks of a capitalistic model is that the necessary controls are seldom drawn early enough in the process. Any form of government can be susceptible and victimised, but it appears to be a universal truth that a democracy without these controls will very easily become a captive of uncontrolled capitalism. And this means the companies, not the government, are running the show.
Unrestricted capitalism is always thus, and any country that does not control and regulate capitalism for the good of the country and thepeople, will have serious difficulties. It will always become elitist, with only a few controlling most of the wealth. And increasingly, as we see every day in the US as with the recent Health Care Bill or the Subprime Meltdown, big business will do only what is in it's own best interest. The good of the country, or of society, or in fact of morality, play no part in the capitalist model.
Much of US Capitalism is based on the 'efficient markets' theory - which says that the markets contain all knowledge, adjust all prices to the correct levels, and are infallible. Government, therefore, should avoid regulating markets, but just leave them to do their jobs. Since the onset of the 2008 financial crisis, this theory has finally died the death it so richly deserved. The theory has been totally discredited by now, and few people anywhere would be willing to defend it - except the US Far Right Wing.
Left-wing (or Socialist) governments do not permit unrestricted capitalism because of their higher level of concern for society as a whole. These liberal governments have a much higher social conscience than do the Right Wing, and are unwilling to risk a business model that could destroy their economies and even societies, so they naturally institute regulations.
The Far Right, on the other hand, often has NO apparent social conscience whatever, and typically strongly resists controls of any kind. After the recent successful Health Care passage in the US, thousands of members of the country's radical Right Wing were marching in the streets - protesting almost violently against the news that they now had health care. There is no cure for this kind of blindness.
One reason that Canada's economy and banking systems didn't suffer the meltdown that occurred in the US in 2009 is that the liberal, Left-Wing Canadian government instituted high levels of financial controls to prevent such occurrences. The US used to have these controls and regulations, but Reagan and Bush (both far Right-Wing) eliminated all of them, setting the stage for the most serious worldwide financial crisis in 80 years.
Given the tense and acrimonious climate today between the US and China on currency and trade matters, it's important to understand that the lower-paying jobs and the manufacturing jobs were not 'stolen' from the US by China; they were DRIVEN out.
As the US de-industrialised, it began to shed jobs that were lower-paying, dirty or unappealing in some way. Often, in those days, that meant manufacturing jobs. A direct result was that wages increased for the remaining service jobs. If a country raises its average wage to $20 per hour, all the $10 jobs will disappear because nobody will work for those wages. That's why the US is full of illegal Mexican workers; no American wants to do those jobs at those wage levels. Ditto for manufacturing.
Americans don't appreciate that it isn't CHINA that stole the jobs; it's the US companies themselves that did the 'stealing'. There are hundreds of US companies in China, manufacturing products and shipping them back to the US. China cannot be blamed for that.
Mattel manufactures almost all of its toys in China because it's more profitable for them. It's Mattel who laid off or fired tens of thousands of Americans and created the same number of jobs in China. Ditto for Ford, GM, Microsoft, Dell, you name it. It's not China's fault that Mattel came here, and it's not China's fault that Mattel fired all those people and that the US lost all those jobs. It's Mattel's fault.
But before we punish Mattel, we have to realise that this is the American Model - free enterprise, the market is always right, profit for shareholders is the most important thing. Mattel, and all US companies like them, are just living the corporate version of The American Dream.
Wal-Mart used to purchase its products from US companies but discovered they could make more money by buying at lower prices in China. THEY made the decision to 'outsource' all those jobs to China. You can't blame the Chinese for Wal-Mart coming here and placing orders. For sure, hudreds of thousands of manufacturing jobs disappeared from the US because of Wal-Mart's outsourcing, but for that you need to blame Wal-Mart.
And not just Wal-Mart. Philips, Sony, Nokia, everybody moved their factories to China to get the lower costs that Wal-Mart and other resellers demanded. Goodyear, IBM, 3M, Microsoft, Intel .....
And none of these companies have regrets because their mission is not to protect jobs in any one country but to make as much money as possible for themselves.
In this whole story China is as much a victim as the US workers. The workers did nothing to deserve losing their jobs, and China did nothing to deserve international criticism. China's only sin is low cost.
Chinese corporate tradition has not focused on branding in the way Western firms have. Their model focuses on products, production and sales. I have a hunch that this undifferentiated product environment has been one of the drivers of economic growth in China, and that to move too quickly to a branded business model might be counter-productive.
This undifferentiated tradition is one reason Western companies don't find great brand loyalty in China. The Chinese won't spend a lot of time listening to how you 'lovingly hand-pick only the finest sun-ripened tomatos in the early morning dew'. They know better. Here, a can of tomatos is a can of tomatos. If you want them to pay more, you need more than hype. And, everyone likes to try new things.
It's possible that branding - the trust given to a person's name - may well be a universal concept that has existed since the dawn of man. But US ad agencies spent 60 years developing this concept to a (probably) excessive degree. They began by conditioning customer values to support the branding model, and the models we have today are largely artificial constructs with no redeeming features except profitability for the brand owner.
US marketers spent billions on psychologists and psychiatrists to learn how people thought and felt, to learn what were their core values. And then billions more were spent on advertising to CHANGE those core values so that consumers would be brainwashed toward brands and brand loyalty.
They were so successful that today, many identical products that emerge from the same factory will sell for very different prices because of the consumer brand conditioning.
Knowing that a product originates from the same farms, is processed and packaged at the same factory and on the same assembly line, and packaged in the same containers with only a different label on the can, no thinking person can argue that one 'brand' of canned tomatos is any better than another.
But in fact, US consumers do know these things and yet will pay premium prices for premium brands, only due to the extensive psychological conditioning carried out over 3 generations.
In what way is this a 'good' business model, and FOR WHOM is it good?
The Economist recently published an article saying that companies in China would go to greater lengths to maximise profits, but I'm not sure that's true. The early robber barons in the US had no public conscience at all, and melamine milk would have been right up their alley. Dishonesty in business, and cruel disregard for human life in the pursuit of profit, are not recent inventions of the Chinese.
Here is a small sampling of examples of unregulated capitalism flourishing in a market.
A few years ago, one of the largest mobile phone providers in Hong Kong was repeatedly in court for (among other things) refusing to provide customers with a contract or information on costs. After years of complaints, and after several court orders, the company obeyed. They produced the 4-page contract reduced in type size so small that it was printed on only one side of one single page - on grey paper with pink print. Totally unreadable by man or machine. Back in court, the company claimed it was just saving trees.
And recently, an HK businessman had a problem taking his public company private, because in Hong Kong, that required a certain percentage of shareholders (number of people, not number of shares) voting yes. So this man gave away thousands of shares just before the vote, a few to each person, in an attempt to skew the vote his way.
Surprisingly, the court disallowed his tactic, saying that he cheated, but normally in Hong Kong they let you cheat. It's always been a surprise that the British let Hong Kong develop into such a grossly unethical business environment. I suspect it was because the Brits themselves profited by the same means.
The laws now against lead in paint for children's products did not happen by accident. US toy manufacturers knew for decades that lead was poisonous and some children died from it, but they fought tooth and nail for those same decades to prevent legislation.
General Motors knew full well that their Corvair auto was unsafe and was killing significant numbers of people, but they suppressed that information and continued to manufacture the car for many years. And when Ralph Nader began investigating them, their response was to hire a private detective to try to destroy Nader's reputation.
There was the 1977 worldwide boycott of Nestle and its products, for what was seen as unethical and possibly criminal marketing and distribution of baby milk powder. In part, Nestle apparently attempted to shame black African mothers into abandoning breast-feeding and buying Nestle milk powder. But it seems that babies who are not breast-fed are many times more likely to die, and claims were made that many tens of thousands of babies died in in poor countries by being fed Nestle milk powder instead of being breast-fed.
By all accounts, this was one of the most shameful episodes in all corporate history. It was such a serious issue that some international organisations have persisted in, and still promote today, a worldwide boycott of all Nestle products.
There was thalidomide, the wonder drug for pregnant women that caused tens of thousands of hideous birth defects in North America and Europe, and whose manufacturers dragged out compensation hearings for almost 10 years. And after the drug was made illegal in the West, the pharmaceutical company began distribution in Africa.
Some years past, the Canadian Banks discovered what they thought was a street of gold - if people don't come to us and apply for a credit card, we'll just send one to them anyway.
University students were the first. Each bank would obtain students' names and addresses from the institutions and mail a credit card to every student at every university. Oil companies did the same, issuing cards that could be used for gas, auto accessories, and other purchases. Later, the banks began issuing millions of 'free' credit cards to virtually every resident of a city. There was of course a recognition that loan losses might be high in some cases, but then the banks had very efficient collection and litigation departments.
The result was what one might expect - far too many people used those cards and were so deeply in debt their lives were crumbling. It was apparent from before the initiation of this marketing scheme that there would most likely be some heavy social costs - in other words, maybe good for the bank, but not good for society. But in spite of the great amount of obvious damage being caused to peoples' lives, the banks refused to discontinue their campaigns.
It ended only when the Canadian government passed a law that anyone who received a credit card without actually having requested and applied for it, was not responsible for the charges. The program died instantly.
We have the US government itself, who subjected countless thousands of its own soldiers to enriched uranium artillery shells and explosions (and other chemicals) in the first Iraq war, who is now denying that these soldiers are suffering from radiation poisoning and refusing them medical treatment or payment.
Recently, there was the Medtronic pacemaker where the manufacturer suppressed information and continued to sell - even though it was clear that people were dying because of it.
And today we have the taser - which is killing people with surprising regularity in every country where it's used, and where we have a conspiracy between the manufacturer and the police departments claiming there's no real 'proof' all those people died from the taser (immediately after they were tasered).
Not many people know that in the US in the early 1900s there were more than 1,000 electric railroads, both local urban transit and intercity transit.
General Motors (Capitalist) in the US (Democracy) waged an all-out campaign against those electric railroads, using force, intimidation, bribery, blackmail and other means, to buy up and destroy all electric trains and trams, and convert all transportation to gasoline-powered vehicles. In only 3 years, GM had 'converted' more than 900 of those railroads to gasoline buses and locomotives. This, more than any other single factor, turned the US economy so far toward the heavily-polluting automobile instead of the electric cars that we are now finally on the verge of adopting.
It's not a surprise that no country in the world (except China today, unfortunately) would ever have considered purchasing American cars. The US automakers could have spent time and money building the best cars in the world. Certainly, they had the technology and opportunity to do so. They deliberately chose not to do that; the marketers had a 'better' idea.
They spent 60 years and untold billions to turn automobiles into fashion accessories, conditioning the American public to throw away last year's car model and buy a new one. The ads made you feel ashamed to be seen driving an old car, and, to help you come to the right conclusion, they deliberately made poor-quality cars that would expire at the same time as the warranty.