The Unz Review: An Alternative Media Selection
A Collection of Interesting, Important, and Controversial Perspectives Largely Excluded from the American Mainstream Media
 BlogviewPaul Craig Roberts Archive
The Looting Machine Called Capitalism
🔊 Listen RSS
Email This Page to Someone

 Remember My Information


Bookmark Toggle AllToCAdd to LibraryRemove from Library • BShow CommentNext New CommentNext New ReplyRead More
ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
These buttons register your public Agreement, Disagreement, Troll, or LOL with the selected comment. They are ONLY available to recent, frequent commenters who have saved their Name+Email using the 'Remember My Information' checkbox, and may also ONLY be used once per hour.
Ignore Commenter Follow Commenter
Search Text Case Sensitive  Exact Words  Include Comments
List of Bookmarks

I have come to the conclusion that capitalism is successful primarily because it can impose the majority of the costs associated with its economic activities on outside parties and on the environment. In other words, capitalists make profits because their costs are externalized and born by others. In the US, society and the environment have to pick up the tab produced by capitalist activity.

In the past when critics raised the question about external costs, that is, costs that are external to the company although produced by the company’s activities, economists answered that it was not really a problem, because those harmed by the activity could be compensated for the damages that they suffered. This statement was intended to reinforce the claim that capitalism served the general welfare. However, the extremely primitive nature of American property rights meant that rarely would those suffering harm be compensated. The apologists for capitalism saved the system in the abstract, but not in reality.

My recent article, “The Destruction of Inlet Beach,” made it clear to me that very little, if any, of the real estate development underway would be profitable if the external costs imposed on existing property holders had to be compensated.

Consider just a few examples. When a taller house is constructed in front of one of less height, the Gulf view of the latter is preempted. The damage to the property value of the house whose view has been blocked is immense. Would the developer build such a tall structure if the disadvantaged existing property had to be compensated for the decline in its value?

When a house is built that can sleep 20 or 30 people next to a family’s vacation home or residence, the noise and congestion destroys the family’s ability to enjoy their own property. If they had to be compensated for their loss, would the hotel, disquised as a “single family dwelling” have been built?

Walton County, Florida, is so unconcerned about these vital issues that it has permitted construction of structures that can accommodate 30 people, but provide only three parking spaces. Where do the rental guests park? How many residents will find themselves blocked in their own driveways or with cars parked on their lawns?

As real estate developers build up congestion, travel times are extended. What formerly was a 5 minute drive from Inlet Beach to Seaside along 30-A can now take 45 minutes during summer and holidays, possibly longer. Residents and visitors pay the price of the developers’ profits in lost time. The road is a two-lane road that cannot be widened. Yet Walton County’s planning department took no account of the gridlock that would emerge.

As the state and federal highways serving the area were two lanes, over-development made hurricane evacuation impossible. Florida and US taxpayers had to pay for turning two lane highways into four lane highways in order to provide some semblance of hurricane evacuation. After a decade, the widening of highway 79, which runs North-South is still not completed to its connection to Interstate 10. Luckily, there have been no hurricanes.

If developers had to pay these costs instead of passing them on to taxpayers, would their projects still be profitable?

Now consider the external costs of offshoring the production of goods and services that US corporations, such as Apple and Nike, market to Americans. When production facilities in the US are closed and the jobs are moved to China, for example, the American workers lose their jobs, medical coverage, careers, pension provision, and often their self-respect when they are unable to find comparable employment or any employment. Some fall behind in their mortgage and car payments and lose their homes and cars. The cities, states, and federal governments lose the tax base as personal income and sales taxes decline and as depressed housing and commercial real estate prices in the abandoned communities depress property taxes. Social security and Medicare funding is harmed as payroll tax deposits fall. State and local infrastructure declines. Possibly crime rises. Safety net needs rise, but expenditures are cut as tax revenues decline. Municipal and state workers find their pensions at risk. Education suffers. All of these costs greatly exceed Apple’s and Nike’s profits from substituting cheaper foreign labor for American labor. Contradicting the neoliberal claims, Apple’s and Nike’s prices do not drop despite the collapse in labor costs that the corporations experience.

A country that was intelligently governed would not permit this. As the US is so poorly governed, the executives and shareholders of global corporations are greatly enriched because they can impose the costs associated with their profits on external third parties.

The unambigious fact is that US capitalism is a mechanism for looting the many for the benefit of the few. Neoliberal economics was constructed in order to support this looting. In other words, neoliberal economists are whores just like the Western print and TV media.

Yet, Americans are so insouciant that you will hear those who are being looted praise the merits of “free market capitalism.”

So far we have barely scratched the surface of the external costs that capitalism imposes. Now consider the polution of the air, soil, waterways, and oceans that result from profit-making activities. Consider the radioactive wastes pouring out of Fukushima since March 2011 into the Pacific Ocean. Consider the dead zones in the Gulf of Mexico from agricultural chemical fertilizer run-off. Consider the destruction of the Apalachicola, Florida, oyster beds from the restricted river water that feeds the bay due to overdevelopment upstream. Examples such as these are endless. The corporations responsible for this destruction bear none of the costs.

If it turns out that global warming and ocean acidification are consequences of capitalism’s carbon-based energy system, the entire world could end up dead from the external costs of capitalism.


Free market advocates love to ridicule economic planning, and Alan Greenspan and Larry Summers actually said that “markets are self-regulating.” There is no sign anywhere of this self-regulation. Instead, there are external costs piled upon external costs. The absence of planning is why over-development has made 30-A dysfunctional, and it is why over-development has made metropolitan areas, such as Atlanta, Georgia, dysfunctional. Planning does not mean the replacement of markets. It means the provision of rules that produce rational results instead of shifting costs of development onto third parties.

If capitalism had to cover the cost of its activities, how many of the activities would pay?

As capitalists do not have to cover their external costs, what limits the costs?

Once the external costs exceed the biosphere’s ability to process the waste products associated with external costs, life ends.

We cannot survive an unregulated capitalism with a system of primitive property rights. Ecological economists such as Herman Daly understand this, but neoliberal economists are apologists for capitalist looting. In days gone by when mankind’s footprint on the planet was light, what Daly calls an “empty world,” productive activities did not produce more wastes than the planet could cleanse. But the heavy foot of our time, what Daly calls a “full world,” requires extensive regulation. The Trump administration’s program of rolling back environmental protection, for example, will multiply external costs. To claim that this will increase economic growth is idiotic. As Daly (and Michael Hudson) emphasize, the measure known as Gross Domestic Product (GDP) is so flawed that we do not know whether the increased output costs more to produce than it is worth. GDP is really a measure of what has been looted without reference to the cost of the looting. Environmental deregulation means that capitalists can treat the environment as a garbage dump. The planet can become so toxic that it cannot recover.

In the United States and generally across the Western world, property rights exist only in a narrow, truncated form. A developer can steal your view forever and your solitude for the period his construction requires. If the Japanese can have property rights in views, in quiet which requires noise abatement, and in sun fall on their property, why can’t Americans? After all, we are alleged to be the “exceptional people.”

But in actual fact, Americans are the least exceptional people in human history. Americans have no rights at all. We hapless insignificant beings have to accept whatever capitalists and their puppet government impose on us. And we are so stupid we call it “Freedom and Democracy America.”

(Republished from by permission of author or representative)
• Category: Economics • Tags: Capitalism, Neoliberalism 
Hide 25 CommentsLeave a Comment
Commenters to FollowEndorsed Only
Trim Comments?
  1. Now consider the external costs of offshoring the production of goods and services that US corporations, such as Apple and Nike, market to Americans.

    Well, Apple and Nike aren’t ‘US corporations’; corporations aren’t owned by countries anymore: globalization. These days, countries are owned by corporations. And that’s the drama of our times…

  2. Capitalism has been a highly successful system for the general good. One only needs to look at Victorian Britain or 19th Century Germany, or 21st Century China, where 800 million people have been pulled out of abject poverty.
    Dr Roberts seems rather to aim his fire on Neoliberalism. I agree with him. Neoliberalism has been a disaster for nearly all industrialised states- Germany and Japan excepted.
    But here’s the rub. Dr Roberts was a fairly minor member of the Reagan Administration, which actively pursued a malignant Neoliberal economic policy. He has never apologised for this. In fact, he has rather boasted about his time in office.
    Dr Roberts, if you wish me to take your attack on Neoliberalism seriously, you must be man enough to apologise for promoting Neoliberalism in the past.

    • Replies: @MarkinLA
  3. Anon • Disclaimer says:

    Capitalism has been a highly successful system for the general good. One only needs to look at Victorian Britain … people have been pulled out of abject poverty.

    You must have failed history class.

    Victorian Britain was the place where free farmers were forced off their lands and into near-slavery.

    Also, Boers.

  4. willem1 says:

    Two observations: 1) The phenomenon described in this piece is already known as “tragedy of the commons” and much writing has already been devoted to it. 2) What we have in the US is not true and pure capitalism, but is more like “cronyism” (for lack of a better word).

    • Replies: @MarkinLA
  5. The fall of the Soviet Union is for many proof that Communism doesn’t work. When the Ango/Zio Empire collapses will that mean Capitalism doesn’t work?

    • Agree: Seamus Padraig, bluedog
    • Replies: @low voltage
  6. Paul, take a drive through the Outer Banks to see what your neighborhood will be like. Nothing but three story rentals lining the beach destroying the wild sense of place and wonderful scenery. On every small beach road in America what had been one story cottages with a delightful sense of neighborhood are being replaced in the way you describe.

    Small family-run motels have disappeared. Quaint fishing and hunting rental cabins in which former working class families were able to afford two-week summer vacations are long gone.

    If you think you have it bad, try moving to a farm or property adjoining a working farm. Insecticides and week killer are sprayed anytime although they are not supposed to be spread if the wind exceeds 8 mph. You will find yourself living in a veritable fog of deadly nerve poisons and toxins that can cause respiratory failure. All protected by a form you sign which essentially gives up your rights to protest called, “The Right to Farm”.

    From Wiki:

    “Right to farm laws in the United States deny nuisance lawsuits against farmers who use accepted and standard farming practices and have been in prior operation even if these practices harm or bother adjacent property owners or the general public. Agricultural nuisances may include noise, odors, visual clutter and dangerous structures.”

  7. MarkinLA says:

    He like Buchanan will never tell the truth about Reagan.

    I would love to see a book about what really went on in those discussions of policy and what was really said about every day Americans. Imagine the discussions when talking about NAFTA or Reagan’s amnesty. I bet every other word was about how worthless the American worker was and how he was finally going to take it where he deserved it.

    Of course, a real factual book on Reagan would destroy all the myths about him, and the Reagan myths are too valuable to the GOP.

    • Agree: Realist
  8. MarkinLA says:

    What we have in the US is not true and pure capitalism, but is more like “cronyism” (for lack of a better word).

    What you think is true and pure capitalism is a myth. Capitalism has always been about cronyism. When haven’t capitalist colluded at every opportunity to screw as many people as they can get away with?

    • Replies: @Seamus Padraig
  9. @MarkinLA

    So true. Before deregulation, the libertarians used to complain that what we had was not really capitalism at all, but rather state-corporatism. Now, after dereg, they complain that what we have is still not capitalism, but rather ‘crony capitalism’. Maybe it’s just time we stopped listening to libertarians.

    • Replies: @MarkinLA
  10. @Anon

    He must’ve never read Charles Dickens in English class either. Victorian Britain was just neo-liberalism 1.0: loads of wealth for the Cecil-Rhodes-one-percent and gobs of poverty for the masses.

    Things were nice at Downton Abbey, though.

  11. dearieme says:

    “Victorian Britain was the place where free farmers were forced off their lands and into near-slavery.” Complete bollocks. Your ignorance of history is clearly intensive; is it also extensive?

    • Replies: @Verymuchalive
  12. dearieme says:

    “capitalism is successful primarily because …”: it goes with the grain of mankind.

    • Replies: @bluedog
  13. @Anon

    In fact, the enclosure of fields and the subsequent movement of labour to towns, cities or the colonies occurred in the late 17th and in the 18th centuries. By 1840, near the start of the Victorian Age, Britain was already an urbanised country and agricultural workers and farmers were a small minority.
    Crafts and Mills estimate that Real Wages doubled between 1840 and 1910. Others have similar estimates.
    Your argument is wrong and part of it, “Also, Boers “, is incoherent

    • Replies: @Anonymous
  14. Parbes says:

    Great piece by Roberts – congratulations!

  15. bluedog says:

    Ask the coal miners the Pullman workers the small country farmers how wonderful capitalism was as they fought for a decent wage/income,one mine owner said it was cheaper to hire new workers than to shore up the mines to prevent cave ins, and we are headed right back to those by-gone years as the profit endless profit is worth more than the worker..

  16. “However, the extremely primitive nature of American property rights meant that rarely would those suffering harm be compensated. ”

    I think that Mr. Roberts identifies the real culprit in the above sentence. It is not capitalism per se that is the culprit but the fact that property rights are given lip service and not taken seriously in our legal system. Property rights ought to be the legal bedrock of a free society, but instead, in our society, it is simply a political tool used often to justify the violation of the property rights of less politically powerful people by more politically powerful people, described quite clearly in Mr. Roberts’ examples.

    • Replies: @MarkinLA
  17. MarkinLA says:
    @Seamus Padraig

    Whenever somebody pulls out that “true capitalism” stuff, I am tempted to ask if he could point out that 15 minutes in humankinds history when people weren’t colluding with each other to rig the game for themselves. That glorious 15 minutes where everything was aboveboard and everybody was getting a fair days pay for a fair days work and there was no need for lawyers and fine print in contracts.

  18. MarkinLA says:
    @Old Cheese!

    Imagine our overlawyered society if you could sue because you think somebody has reduced your quality of life.

    • Replies: @Old Cheese!
  19. Fred249 says:

    And your alternative? Communism? Socialism? Capitalism has it’s issues, but it’s proven over and over again to bring the greater good to the most people, where there is not one example of socialism or communism succeeding. People are selfish and greedy – doesn’t matter if they live under a capitalist or communist society. The only difference that matters is one allows the freedom for improvement, movement, and growth for everyone. The other one only allows the greedy and selfish to tell everyone else what to do.

    • Replies: @Mao Cheng Ji
  20. Anonymous • Disclaimer says:

    Boers were also forced off their land, or more precisely dispossessed of their country. I suppose you can blame Rhodes and Beit for that, though the system that allowed them to do that was not capitalism per se but its terminal decay.

    That might actually have been the most accurate part of “Anon”‘s post.

    • Replies: @Verymuchalive
  21. @MarkinLA

    Depends on what you mean by “quality of life”. If someone has done objective, physical harm to you or your property, unintentionally or otherwise, you should be able to sue for damages if necessary.

  22. @WorkingClass

    Ideology doesn’t work. Taking communism seriously was suicidal. Taking capitalism seriously is suicidal. Society must allow for innovation, but it must also be regulated. It must allow for success while not making it a winner take all situation. The government should focus on making the economic infrastructure low-cost and efficient. Our economy is now only efficient at producing McMansions, trailer parks, prisons, and an obese population.

  23. @Fred249

    People are selfish and greedy – doesn’t matter if they live under a capitalist or communist society.

    I don’t think that’s true. People can be selfish or they can be altruistic; or more to the point: individualist or collectivist, or anything in the middle. Social conditioning determines what they become.

  24. @Anonymous

    Thanks for your post. Rhodes et al were disastrous for White South Africans, Boers in particular. I never thought of Rhodes being emblematic of decayed capitalism, but, on reflection, you may very well be right.

  25. @dearieme

    Well said.
    One of the problems of an American website is that a certain percentage of commenters show invincible ignorance of historical matters. Not only of important matters like Victorian Britain, but on basic American History.
    Schools and colleges in Britain and elsewhere in Europe may deal with history quite poorly, particularly compared to how history was taught in the quite recent past. However, history as taught in America seems to be particularly dumbed down and simplified politically. There seem a lot more Americans really quite ignorant of basic historical events, even recent ones. Of course, that may be the aim of the education system- to keep the masses ignorant of what’s really happening.
    The reason I like commenting on Unz Review is you generally get a much better class of commenter. But you still get the odd historically ignorant moron.

Comments are closed.

Subscribe to All Paul Craig Roberts Comments via RSS