Summary:
Sheppard points out that it has become automatic to think of capitalism as being efficient because this is what is oft repeated. Sheppard uses a neat list to dispell the accepted view and believes that the system is actually inefficient.
10 Inefficiencies of capitalism
1. Product duplication
2. Systematic Unemployment
3. Cost Shifting
4. Waste of Unsold Goods
5. The inefficiency of Hierarchies
6. Planned Obsolescence
7. Price Gouging
8. Creation of False Desires
9. Parasitic Jobs
10. Inefficient Distribution Patters
Notes on the Hx of Capitalism
The system developed out of feudalism after the fiefdoms and lords began to disappear (8). It is thought that serfs worked no more than an average of four hours a day. By modern standards, serfs were extremely lazy. As agricultural workers, there were long winter seasons without work to be done. The newly independent serfs found themselves needing to rent themselves out to people in order to buy their own food, pay new housing costs etc. People started moving around a lot more, seeking the most comfortable living conditions possible. Other contributions to capitalism were the rise of Protestantism, mercantilism and the Enclosure Acts that abolished the Commons (in England) (8).
Working Definitions
Capitalism - system by which there is private ownership of the means of production
Efficiency - this is a loaded term that absolutely cannot be read as being something that is automatically positive. What is efficient for a business, may be bad for society or the environment. "Efficiency" and "convenience" as applied to our modern consumer society are words used to indicate that there is about to be less service, the consumer will do the work, or pay a fee. For example, automatic checkout lines at grocery stores, fast food restaurants and ATM's are all referred to as being fast and convenient. Companies find ways to get unthinking consumers to do labor and slyly redesignate the labor as "fast" and "fun."
Inefficiency #1 Product Duplication
Classic example would be breakfast cereals and bars of soap. It appears that people are making important decisions, but all of the products are remarkably similar, overpriced, and shoddy. For example, a person could buy unbranded whole oats for 5% of the cost of the processed oats and have a much healthier breakfast, getting more fiber, less sugar in the diet etc. (14).
Inefficiency #2 Systematic Unemployment
Capitalism would not work if everybody had full time employment. "Work" meaning it would decrease profits, until the system collapsed. Economists have looked under the microscope and discovered that there is something that, like gravity, exists, and this is called the Natural Rate of Unemployment (NRU) (18). There is some debate, but economists believe the NRU is between 4-9%. When the economy dips below the NRU, the economy becomes inflationary, as workers can begin demanding better wages and there is no competition for jobs. Because one must always remember, without competition, this divine system would cease functioning.
Inefficiency #3 Cost Shifting
Private interests seek to lower costs by pushing them onto the public sector. The military industrial complex in US serves heavily as a subsidy to technological firms. Another example would be how the auto and oil industry profits enormously from public infrastructure.
Inefficiency #6 Planned Obsolescence
Vance Packard's classic 1957 book The Waste Makers discussed limited life spans of products (23). In the 1930's a GE engineer proposed increasing sales by making lamp bulbs that lasted for the duration of only one battery cycle. Many products tell consumers when a product needs to be replaced using things like indicator strips. Many of these indicators tell consumers the products wear out when in reality, the products are still useful.
Inefficiency #7 Price Gouging
Decreased supply supposedly with increase demand, so limited editions and things like that are released. Video game consoles are released gradually. A classic example is the Cabbage Patch Kids dolls in the 1980's (24).
Sources/References
Beaud, Michel. The History of Capitalism 1500-2000.
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