A fundamental flaw of market capitalism

In studying various economic philosophies I have concluded that capitalism is the most productive economic model in current theory and practice. It's not even a contest and I have little patience for fools seeking to replace it with a different economic system. Approaches that improve capitalism's outputs are much more practical.

The capitalism that I learned in school is based on competition. Companies competing against each other for market share, and management and competing with labor for pay are examples. All players act in their own self interest and we collectively end the day with more wealth than we started with. The role of government in this system is:

1. Make sure management and labor don't kill each other
2. Ensure one business doesn't dominate the entire market.
3. Resolve externalities produced by market actors

This unfortunately hasn't worked out for most Americans.

Most would see unfair distribution of wealth as the major flaw of the system. This is such a major problem that some people spend their entire lives exploring socialism and communism for answers. They tilt at windmills looking for some solution to an insurmountable problem.

Consider a scenario where an online site with millions of visitors could optionally sell visitors' personal data for profit without their consent or knowledge.

I would argue this as a net loss because it comes from robbing the other market players causing strife and democratic instability. This is considered normal from the market's perspective, but wrong from the public's perspective. Neoliberal market actors have failed to change the public's perspective on this despite beating them into submission for the last 50 years. Markets are subordinate to the general will and must change to accommodate our needs.

It is incorrect to reduce market output to a GDP figure. It works fairly well because wealth tends to be an extremely good measure of economic health but it is not everything. We need to consider these outputs in our model even if we don't have good measures for them yet.

Capitalism is fundamentally more cooperative than competitive. If I manufacture an item then I must have positive business relations with my customers and the several suppliers with whom I do business. Even competitive activity isn't direct competition in the sense that company A attacks company B. In an ideal market, company A succeeds because they built a better mouse trap and the market rewards them for this.

Large corporations muddle this even further as they compete for market share in one hallway, while working with the same competitors to stop fraud in the next hallway over.

Cooperative capitalism inherits the ideas of market capitalism. It overrides the idea of profit motive being the sole motivation of market actors and replaces it with an idea that rational market actors favor activities that they view as beneficial with profit seeking being the main motivator.

It recognizes that the default market animus is cooperation over competition. Market actions must consider the will of the public in addition to its expected financial value. The real determinant of action is an overall expected value to society.

The overall value is assessed with externalities as viewed from the public's perspective. Technology has advanced to levels where the public can build meters and measure these effects.

It modifies our idea of normal market behavior to align with what the public believes should be normal.

This minor change significantly alters model outcomes. When we reevaluate our company's decision to sell personal data the decision changes. Our company now considers that the public is watching them pickpocket consumers.

More importantly, it isn't dismissed as a normally functioning market and the American consumer is expected to take it on the chin. The activity is now correctly seen as a market perversion when viewed from both the public's and market's perspectives.

Market capitalism views workers as little more than a fungible resource to fill a job. Cooperative capitalism recognizes that managers and employees in healthy companies work together to deliver on company goals. They are as much a part of the company as the CEO even if they don't own stock. Employees are worth investments of time and capital because it's good for your company and society.

In a cooperative system the investment toward the public interest has value on its face alone and an indeterminate future return. I would regard investments of this type similarly to charitable donations, but the main difference is you are managing the project where with a charity you are not. Either could be appropriate depending on whether the company or the charity is in a better position to manage the investment.

Anyway, it's food for thought. I think that there is a lot of potential public benefit in evaluating market actions based on expected value to the general public. Neoliberalism assumed that a larger economic pie meant everyone got a bigger piece. This strategy failed utterly and it's time to make intentional public investments instead.

It would take bona-fide economists to evaluate this theory against existing models. I make no claim to such expertise but I hope the ideas prove useful.