Pursuit of happiness under capitalism

My intellectual limitations do not permit me to define happiness. However I would like to differentiate happiness from pleasure. Pleasure is enjoyment of external stimuli. Pleasure can be found by having good food, buying Armani fashion stuffs or going on exotic vacations. One may be doing pleasurable things but still remain unhappy. Happiness comes from internal workings of our own minds.

For the benefit of readers who want to understand the real meaning of happiness, I quote Mahatma Gandhi: “Happiness is essentially a state of going somewhere, wholeheartedly, one-directionally, without regret or reservation”. Another perspective comes from Ayn Rand who considers happiness as a state of non-contradictory joy without penalty or guilt which comes only to a rational man desiring rational goals through rational values and rational acts.

Leaving aside the above finer distinction for the time being, let us dwell on as to whether we are happy today under capitalist system. Adam Smith placed total reliance on “invisible hands” of market to achieve both individual and collective prosperity. Would market mechanism provide remedy for the suffering of relatively in-efficient people or ensure fair reward in un-distorted fashion (beyond the narrow confinement of legalities)? Capitalism creates social inequality in wealth which trickles down, because children of unsuccessful parents will become disadvantaged to start with. This contradicts with capitalism slogan of “Equal opportunity”. High inequality can generate further higher inequality and eventually poor economic growth, social imbalance and formation of oligopolies which will take away the spirit of free competition so ardently advocated by capitalists. The business personnel whose profitable ventures result into emergence of inequality and oligopolies should be responsible to rectify the imbalance. This is not happening as the recent financial crisis has demonstrated.

Happiest countries tend to be Scandinavian socialist democracies. High per-capita GDP certainly plays a role, but even social democratic New Zealand, with per-capita GDP significantly lower, ranks well above US in the happiness index. Let us dig beyond the surface. What factors lead to diminished happiness under capitalism? Some loud thinking throws the following:

1.    Higher incentive to steal:

Capitalism as contrasted with socialism, gives full right to private property. The act of stealing (in its widest sense) is punishable under capitalism and socialism alike but undetected theft under socialism is likely to be limited as acquisition arising out of theft cannot be stored and passed over to future generations. Under socialism, theft will only give rise to undeserved current dubious consumption. As opposed to this, under capitalism the bounty acquired through stealing can not only be used for current consumption but also passed over to successive generations through money laundering techniques of layering and changing the color and label of the acquisition through theft. This distorts the social balance leading to diminished happiness.

2.    Crony capitalism:

If the capitalism system is purged from the menace of stealing, the crony capitalism does pretty much the same albeit at a higher scale. Under this, people with good connections to the center of power - the "cronies" of the government - manage to place themselves in positions of undue influence over economic policy, thus deriving great personal gains. Examples are dime a dozen. Just take issues arising out Nira Radia’s phone tape or 2G cellular spectrum auction. One industrialist is reported to have bragged that Government of India was “apni dukan”. The capitalism gets robbed of its true beauty under this kind of   systematic misuse – often garbed as legal acts. This dampens the spirit of entrepreneurship and fair reward.

3.    Unfair distribution of rewards and widening rich-poor gap:

The current “OCCUPY MOVEMENT” explains this so well. This is directed against economic and social equality. Professor Ravi Batra links rise in "the share of wealth held by the richest 1 percent" to speculative manias and depressions which are close cousins of capitalism. The top 1% of Americans control 38% of the wealth. Joseph Stiglitz, Nobel laureate in his article "Of the 1%, by the 1%, for the 1%" expressed great concern on this. The increased public focus on the growing income brought by “OCCUPY MOVEMENT” will impact the political process. The role of corporate cash in election process is being debated. U.S. Congressman Ted Deutch, introduced the "Outlawing Corporate Cash Undermining the Public Interest in our Elections and Democracy (OCCUPIED) Constitutional Amendment," which seeks to ban corporate money from the electoral process. The systemic amoral opportunistic decision in favor of capitalists at the cost of labor seems to be inherent in the capitalist system as currently practiced.

4. Free ride to pleasure for “HAVES” and uncompensated infliction of pain on “HAVENOTS”

For the sake of argument, let us assume that those who are poor are not so because of the wicked acts of others but simply because of their inferior abilities. Their state of inferiority in materialistic terms becomes a source of joy (though none of the “HAVEs” will admit this) for others as happiness is a relative consent. Various standards of comparison may be possible. Comparison with others is the most talked about. People compare themselves to others in terms of material possessions and social standing. The differences vis-à-vis others make people happy or sad depending upon difference being positive or   negative. Happiness of one is at the cost of other as positive difference for one implies negative difference for the other person. The free ride to pleasure by “HAVES” by simply viewing the plights of “LESSER HAVES” or “HAVENOTS” needs to be priced and organized. The collective happiness of the society can be optimized by distribution of social rewards in such a way that comparison is favorable for most people.

5. Ignoring the negative externalities in allocations of investment:

Under capitalism, the defining theme of production process is maximization of the profits of the capital providers. Profit is ordinarily taken as revenue minus cost. The perspective of capital providers is given in interpreting the term “cost”. Apart from the cost born by capital providers, there are some additional elements of cost born by externals (society) which is ignored. One such obvious cost is pollution and its effect on society. There are many other negative externalities like impact on pricing of other assets in the area before and after a factory having been set up. The list goes on. There are positive externalities also but these externalities are not random in the sense that positive and negative externalities balance out. This is so because of inherent bias on the part of capital providers to ignore negative externalities unless forced by regulations. There is a need to price-in the net negative externalities into the cost born by the capital providers. In the absence of price being linked to true total cost of production, efficient allocation of capital goes for a toss.

6. Ignoring the well-being of future generations:

Investors prefer quick returns. Beneficial projects for future generations likely to be taking multi-decades are ignored. Lack of concern for future generations is also well reflected in ruthless exploitation of oil as energy source despite full knowledge about its scarcity and capitalists remaining clueless about how the future generation would face the prospect of depletion of oil as source of energy. The alternative sources of oil may cost a lot in future but its impact on well-being on the society is not at all considered by present day capitalists.

How can the above problems be addressed? Back to socialism is not an answer. As the citizens of the twenty-first century are well-informed about the life-style offered by socialism; it seems more plausible for capitalism to survive the test of economic turbulence with some modifications.

I advocate the concept of “Inclusive capitalism” under which the inherent deficiencies of capitalism as discussed above are addressed to the extent found feasible. Thinking of utopia is wasteful. We need to respect and reward the individual superiority of human beings so long as it did not diminish the welfare of others and ensured minimum standards of welfare for entire humanity. I am therefore tempted to advocate curb on the absolute right to Passover the deceased property to his/ her progenies. An individual should enjoy and amass whatever he is capable of. Passing this over to successive generations creates economic imbalance, hardening and exacerbating the layered structure of already stratified society, diminishing the enthusiasm of children of HAVENOTS, creation of oligarchies and many other associated evils. An absolute ban on inheriting the property will serve as serious dis-incentive and frontal assault on the concept of libertarianism. A controlled inheritance prescribing cap on amount which can be inherited and heavy estate duty would temper the ill-effects of absolute right to private property. Any income arising out of estate duty should not be vested with government as increasing the domain of government in economic affairs reduces the efficiency drastically. The money thus available may be redistributed equally to all citizens of the country preferably in the form of financial instruments. Additionally negative externalities in the business process should be priced and factored into the cost of production. This is easier said than done because pricing of many externalities is difficult but trend towards pricing of environmental externalities in power sector, carbon emission trading, carbon allowance for consumers, marketable pollution permit etc. are welcome efforts in this direction. Pricing of externalities will however always remain works-in-progress.