Disclaimer: We own shares in some companies and mutual funds. In our retirement we will depend more and more on dividends and interest. However, we don't feel compelled to hide the warts in the system.
We read many complaints that the U.S. is becoming socialist and turning against free markets and capitalism. Well, we are seeing many efforts to erode free markets and capitalism, but these efforts are being made most strongly by those who proclaim them.
The classical definition of a free market is one with many buyers and many sellers and with both buyer and seller having all the information they need to make a decision. Oh, also, either the buyer or seller should be free to enter or leave the market.
We see many moves to reduce the number of sellers as companies gobble up their competitors. We also see some moves to reduce the number of buyers - Wal-Mart has become the sole buyer for many suppliers.
Many large corporations fight efforts to give buyers important information to make a good decision. The tobacco companies denying their products caused harm is one of the more egregious distortions of important information. Agribusiness companies don't want foods labelled as genetically modified. Many large dairy companies don't want competitors products labeled BGH-free (bovine growth hormone). Telecommunication companies make it difficult to know the exact cost of their services before a customer makes a purchase. How come the billing computers know exactly what a customer should pay but the sales computers supposedly don't have that information?
Freedom to enter and leave the market exists in varying degrees. There are certainly many products we can choose to buy or not buy. Suppliers with a single buyer can stop selling to that buyer, but they will have a lot of work to replace that buyer.
Capitalism - ah, a lovely concept when it started. Some people got together and pooled their money to form a company, each getting shares proportional to their contribution. Then markets developed to buy and sell those shares as owners wanted to reallocate their investments. All well and good. If Smith wanted to sell his shares in XYZ to buy a house and Jones was glad to buy XYZ shares because he missed out when they were issued, that's all above board.
I won't get into day-trading versus investing or all the derivatives that Wall Street thinks up. This is almost all smoke and mirrors and a long, long way from capitalism.
As economies grew, so did the companies originally financed with stock. But as they grew, the shareholders became more and more distant from the operation of the company. They had to hire executives and board members to run the company. All well and good. But with all the buying and selling of shares, the shareholders had little interest in the company other than it grew and turned a profit. Few had any interest in the day-to-day running of the company.
As time went on, the board members nominated themselves for successive terms, without any competition. Shareholders could either accept them or withhold their votes; the boards made any mechanisms to offer a different slate extremely difficult. To make matters worse, many of the shares were owned by mutual funds and other institutions; in general, the operators of these institutions exercised their "fiduciary responsibility" and voted with the board.
In many democratic countries, the boards lobbied their friends in governments to put up various hindrances to any shareholder control beyond the above yes or no votes.
These board members grant their appointed executives shares in the company for their "performance" and grant themselves the same. In other words, they are giving themselves more and more of the company and more and more of the votes. The board members often get over $100,000 per year for showing up for six meetings. Nice work if you can get it.
Many define this whole process as capitalism and as a great good. I call it capturism; the few have captured control of a company to run as they see fit. At least, unlike many oligarchies, they don't throw dissidents in jail.
