Capitalism and the “Business Model”

These days, and for the past decade or so, in almost every venue of government and public works, the politicians and much of the public have extolled the virtues of operating everything from schools, universities, municipalities, and prisons according to the “business model.”   The current “business model,” as applied to government and public services, is based on application of capitalism and “no new or increased taxes’” for anyone or anything.  I honestly don’t know whether all these advocates of the “business model” are sincerely misguided or just uninformed idiots, but it’s time to put a stop to this nonsense.

 First off, I want to make one thing clear.  I am not anti-business, and I firmly believe that the only workable form of an economic system has to be based on capitalism.  That said, capitalism in its purest form is absolutely efficient, and absolutely merciless.  It rewards dedication, skill, luck or good fortune, and the advantages of position handsomely, and disadvantages those lacking in any of those qualities in proportion to their deficit.

 Moreover, in capitalism’s “purer” forms [i.e., those forms unregulated by government], as Americans discovered in the roaring 1890s and somewhat thereafter, such issues as ethics and fairness took a back seat, or were totally ignored, as a result of the quest for profit.  This is not an aberration.  Capitalism is the use of business (defined as the combination of ability, resources, labor, capital investment, and technology) to create a product or provide a service with the greatest differential between the cost and the price one can charge. If inferior or tainted resources are cheaper and the purchaser cannot tell the difference [and there are no laws to contrary, and sometimes if there are], someone will use those cheaper resources in order to maximize profits.  Period.  History has demonstrated this time after time.  We still see this occurring politically today.  If a company or an industry can influence Congress to obtain a tax break or a subsidy, then they have effectively reduced their costs and increased their profits.  If they gain an exemption from environmental rules, such as air or water pollution regulations, they gain a cost advantage, while shifting medical, health, and environmental costs to the general public.  

 The second distinguishing feature of capitalism is one so obvious that it is totally ignored in most economic and political discussion, and certainly in attempts to model public services and education along the lines of the “business model.”  Capitalism has no interest in providing goods to people who cannot afford them.  This is not cold-hearted, per se, but a fact.  A business will go broke if it cannot at least cover all its costs, and you cannot cover costs if you give goods or services away on a large scale or keep prices too low to cover costs, in order to provide more goods or services to those who could not otherwise afford them.

 The third distinguishing feature of capitalism, especially today, is that it must make a profit in the short-term.

 These three necessities for success in a capitalistic society are why capitalism requires some degree of regulation. The amount varies by the society and by political consensus, and how much corporate abuse the public will accept, but the necessity for some regulation is absolute.  These necessities are also why the so-called business model is an absurdity for providing such public services as education, police and fire protection, water, sanitation, and trash collection, not to mention environmental protection.

 Take education.  As we all know, or profess to know, education makes people better workers and benefits society as a whole, but the payoff from the investment in education is years, if not decades away… and contrary to what the proponents of emphasis on STEM education insist, one cannot tell which student benefits most from what education.  Attempts to “steer” education in a particular direction have invariably been, at best, marginally successful, if not disastrous, for societies.  Likewise, when the cost of education increases, the business model, particularly on the college and university level, is to insist on raising tuition, increasing class sizes, or eliminating classes for which demand is low.  The results are that: (1) some students are priced out of education or saddled with enormous debt that many will not pay (which in turn shifts the costs to society as a whole); (2) the quality of that education is diluted; or (3) certain skills and disciplines will not be taught at all, and future society will be impoverished as a result. That is the predictable capitalistic response to increasing costs, especially when “no new taxes” have resulted in state colleges and universities getting fewer and fewer resources compared to the number of students enrolled.

 If we take other public services, the same problem arises.  The current “business model” insists that municipal budgets must be cut, rather than increasing taxes. That means fewer police and firefighters, and slower response times and greater damages to people and their property.  In point of fact, that means that the costs are effectively shifted to those who can least afford the damages – capitalism at its purest, loss of goods and services for inability to pay.  This is particularly hard on the less advantaged when it is applied to vital services, such as food, housing, and health care.

 The result of applying the business model in this fashion is that, without public investment in those who have fewer resources, i.e., the poor and especially the working poor, the youth in those situations will have less opportunity to improve themselves, and this will contribute to the growth of income inequality.  Greater income inequality results in greater social unrest, and if that unrest becomes too great, violence becomes even more widespread.

 As one of the forgotten commercials said, “You can pay me now… or you can pay me later.” [And the cost later was enormously higher.]   But right now, the third aspect of this current business model is all that anyone considers – we want lower costs NOW… and the hell with what comes later.

 So… let’s hear it for the business model.

8 thoughts on “Capitalism and the “Business Model””

  1. Kathryn says:

    Oooh, my eyes just went funny reading this. Silly eyes. They never work right.

    Anyway, on to the topic at hand. I’m sort of in agreement with you in that I don’t think human nature will ever allow us to have a more egalitarian or “fair” system of commerce, which is why I think that – as you say – regulation on capitalistic enterprise is needed.

    Where I’d like to make a point is this: As we’ve seen in the UK and perhaps the US, companies like Amazon are exploiting tax laws to save – potentially – billions in tax. You add up these companies and personalities who avoid paying their civic duties, and nothing can happen because there’s not enough money. So, for example, Amazon not paying their taxes means that money isn’t being funnelled into, say, education. Amazon’s unfair behaviour is, potentially, affecting a generation of children.

    So it’s not just the business practices themselves that need to be regulated, it’s the legal and governmental constructs around businesses that need to be looked at. I firmly believe that the vast majority of cuts to vital and social services could be avoided if businesses and personalities paid their dues like everyone else.

    So yeah, in a way it’s a ‘fault’ of capitalism that these divisions occur. It doesn’t encourage the spread or movement of money except towards a singular point. And this can be evidenced in the wake of closures of various businesses/business styles due to the sprawling arms of, say, Amazon, Wal-Mart, etc. They provide so much at such a ‘pleasing’ value that they’re like honey traps. You get caught in them, and the mindset they create means you just use them for everything. Why look elsewhere for, say, a DVD when Amazon can have it to your door in days, or you can just pop down to Wal-Mart to get it for 50% off?

    As I see it, personally, capitalism is allowing the few to supply the many. There’s little competition, or little serious competition, and this doesn’t benefit the customer at all. In fact, it doesn’t benefit anyone as there’s no spread of money, and if these entities continue to act as they do, that means less and less money is being redistributed to the world.

    Funny, that. Buying your books from Amazon could indirectly lead to greater poverty in a (financially) poor area. You don’t often think about the world that way.

  2. Unfortunately, as I’ve noted more than once before,the “consolidation” of bookstores also leads to intellectual poverty in many areas as well, since there are huge areas of most major cities without a bookstore within five miles, and that often includes local malls.

    1. Kathryn says:

      Yeah, I know what you mean. I mean, grudgingly, I think online stores like Amazon, The Book Depository (my store of choice) and brick-and-mortar retailer sites do help with that slightly, in that they can go anywhere the post does, but they are causing – indirectly or directly – the closure of bookshops.

      This is why I’m such a big fan of discount book stores, ones which sell recalled/remaindered/out-of-print books. Their presence in poorer areas can bring books to deprived areas at low costs. I can get novels for a quarter of their cover price – Heck, I actually got a hardcover of Arms-Commander from a discount store (think Dollar Tree or something like that) for £1. I also think supermarkets do good in that regard, too.

      But it comes at a price. People stop seeing the RRP as reasonable. I think £8 for a MMPB is fair (don’t get me started on US MMPBs costing $8 to the UK’s £8!), but thanks to stores like Amazon it’s become the norm to think $5/£5 or above is expensive.

      Though I’ll admit this is going off on a tangent a bit.

  3. Ryan Jackson says:

    Part of the issue is that the local and smaller shops actively hurt themselves by refusing to keep on top of things or even realistically compete with the bigger guys.

    As an example, I was late getting into the current Imager line, but read Scholar and loved it. Went looking for Princeps. After a week’s effort, going to ten different stores, most of which claiming to have the product, I continually found that they did not have the book in stock. The few places that offered to order it for me advised me it would take over a week to get the product shipped. In light of all that I did order from Amazon.

    The reason these bigger merchants dominate is that they sadly deliver the product. I could have understood if one or two stores happened to be sold out of something, but the fact that every bookstore near me was sold out, or more likely, didn’t bother to keep it on the shelf. That’s the type of thing that is going to sour consumers.

    I’ll forgive one mistake or hassle, I’m less inclined to forgive deliberately poor handling.

  4. JakeB says:


    I’m surprised it’s that slow . . . the local bookstore I like to shop at almost never has any sf/fantasy I want (it’s all Wheel of Time/Ender’s Game/Charlaine Harris) but if a book is in print they generally can get it within two days. If I request a book they will hold it for me . . . of course it’s still more expensive than Amazon usually but since this store gives $5 off for every $100 you spend it’s not so bad.

  5. Tim says:

    Re : local bookstores

    When I worked in the US, I could drive to a local store, park outside and spend an hour looking at the stock. In the UK, I cannot park near the store, so I have to park in a municipal car park which now almost always charges quite a lot. When you add petrol to this bill (and in the UK, we pay £6.30 a gallon, or roughly $9.5) it means you need to go to town to do other things.

    Why bother? I would use my personal time to stay local in my country village. So I order online. Large items normally come within a 2 hour window; smaller items get left in my post box. So Amazon and others of that ilk have become the normal supplier for me. Their returns policy is also exemplary.

    Discussions with friends reveal a similar outlook. The local bookstore is probably a thing of the past in the UK unless you live in the centre of a sizeable town.

  6. Ryan Jackson says:

    I guess just to expand on my earlier observation and what Tim said.

    There’s the legitimate issue that sometimes the “Big Merchant” offers a better product or better service. That’s what tends to win me over.

    As said, I use Amazon over several book sellers a lot because they have better customer service, more reliable product and quicker delivery.

    On a similar note, not to say Target is small, but I continue to shop at Target and Fry’s(Kroger Grocery chain) over Walmart. I don’t care that Walmart has lower prices on some things, the simple issue is that the above stores offer solid customer service, faster check out lines, and a cleaner, more pleasant store to shop in. That’s something that wins me over.

    If these smaller shops would focus on their customer service more they might win back some of their customer base. I can’t be unique or alone in being willing to pay more for better service.

  7. ExLibertas says:

    “I firmly believe that the only workable form of an economic system has to be based on capitalism.”

    Capitalism is founded on nihilism, cynicism, and greed. I doubt that the only solution to the problems we face today (and the more serious ones we’ll face in the near future) would be through government regulation or any other form of cannibalizing this system. The system itself is creating problems (like climate change). Perhaps it is time to consider a different economic paradigm? I suggest the Flow Economy (see here: )

Leave a Reply

Your email address will not be published. Required fields are marked *