How Time Has Changed the Relationships of Capitalism

(Rochester & Genesee Valley Area Labor Federation)Consumers and Citizens: Same Person, Different Responsibilities

Philosopher, Adam Smith, writing in the 1700’s, understood and explained the basics of supply and demand to our world. He wrote that rising prices would encourage producers to enter a market, while decreasing prices would discourage these same producers. Certainly in the classroom we look to Smith to help us explain capitalism in the same manner we explain socialism through Karl Marx; democracy through John Locke; and the state of nature through Thomas Hobbes. Drawing an analogy to Henry Gray’s 1918 “The Anatomy of the Human Body”, we can also help medical students understand organs within ourselves. However, Gray could not have predicted the affects of Singulair on the individual human lung cell, as Singulair, the pharmaceutical drug, had yet to be invented. Like Gray, philosophers Smith, Marx, Locke and Hobbes gave us a foundation from which to work, but the clarity of these pictures could only be improved upon through experience and further exploration.

In Smith’s time, it was not unusual for a single person to own a single business. For example, a butcher was unlikely to own several meat markets throughout the land. Instead, that butcher likely owned one shop in town, to which he dedicated his work. Consumers could visit the butcher, discuss their purchase, and negotiate a final price. Each step of the process had a negotiation of price, which concluded at the final counter. These negotiations included the cost to each merchant, to continue his/her business – which again, was likely their family’s single source of income.

Today’s market is vastly different from the market of the 1700’s. Walking into the deli at Wegmans, one does not expect to discuss the meat selections with Danny Wegman. In fact, it would be unlikely to find anyone with a major financial stake in Wegmans within the deli. Instead, these individuals work in the Wegmans Corporate Offices. This is not the system Smith directly envisioned, though it is a more complex model of that capitalistic idea. It’s these complexities which require pause in our thinking.

Several months ago, author J.K. Rowling blessed us with her final installment of the Harry Potter series. Millions of copies were sold, including two copies to my friend John and his father. What does Harry Potter have to do with capitalism? Everything. John asked his father why he would purchase his copy at Wal-Mart, to which John’s father replied: “It’s the same book, but cheaper.”

Adam Smith stated “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” What Smith noticed was a need by the butcher to negotiate a price equal to his own needs for housing, clothing, food, etc… What Smith could not see, was a time when corporations would employ craftsmen by the thousands, effectively removing the consumer/producer relationship. This can be seen today in that most of us do not find ourselves ever speaking with the owner/producer at a business, but rather we find ourselves speaking with a craftsman, providing a service but not directly negotiating his/her own compensation with the consumer.

Companies, such as Wal-Mart, are able to negotiate large volume discounts, and in turn sell these products at discounted amounts. For the stakeholders in Wal-Mart (those who have a financial interest in the company’s financial success), the bottom line is the important variable. However, based upon Smith’s reasoning, the element of capitalism which makes the system a success, is removed when the producer and the customer no longer directly negotiate. I’ve worked for the American Postal Workers Union for over 30 years, and lead the AFL-CIO for 10 years, to solve this exact problem: to give the line-level employees a voice in wages, health benefits, retirement benefits, as well as non-financial benefits. These are the costs of doing business. By refusing to negotiate with employees, companies like Wal-Mart have effectively removed the capitalistic nature described by Smith more than 200 years ago.

As consumers, it is true we will seek the lowest cost for the best value. Even within the union movement we recognize that tenant of capitalism. However, as citizens, we have an obligation to ourselves, to our state, and to our future. Our votes can determine whether or not governments can form one large group from which to negotiate with drug companies. Our votes can determine the benefits required to be given each working person when companies like Wal-Mart fail to see the need. Our votes can even tell the construction industry to hire our neighbors in an effort to keep more money in our local economy. As a consumer in Smith’s time we could have asked questions of the producer. However, in our time, as citizens or consumers, we must demand both information, and answers.

Unrestricted and unregulated capitalism is a horrible system that has given the world slavery, exploitation, colonialism, war, and at times unsafe products. Its distribution of wealth is unjust. However, we know from the fall of communism in 1989 that a collective economy is at least 50% less productive than capitalism, creating much less wealth for its citizens. Unions through collective bargaining help put democracy in the workplace, distribute the wealth more justly to those who produce it, and regulate the excesses of capitalism. Without a free trade union movement there is no real freedom and that is borne out by history, regardless of whether one looks at dictatorships of the right or of the left. It is the reason Hitler went after the trade union movement even before he went after the intellectuals and the Jews. Our greatest President, Lincoln, once said “If a man tells you he loves America, but hates Labor, he is a liar.” He understood the contradiction. Anyone who interferes or discourages in any way, workers from joining or forming a union, is not a supporter of democracy.

Perhaps unions are imperfect, but to paraphrase Winston Churchill, democracy is a horrible form of government – the only thing worse is everything else. And, the same can be said of unions. Perhaps one day we will determine a more appropriate way to solve this problem, then again, perhaps we will only find better solutions which require the embrace of unions. Until that time, when a politician tells you they are anti-union, they are truly anti-capitalist and anti-american.

Jim Bertolone, President, Rochester & Genesee Valley Area Labor Federation, AFL-CIO and President, American Postal Workers Union Local 215

Assisted by: Aron Reina, Lead Field Organizer, Rochester & Genesee Valley Area Labor Federation, AFL-CIO

With Thanks to: Tim Barbeto, Rochester Labor Council, AFL-CIO Trustee and member of Teamsters 118