The Undiagnosed “Cancer” that Has Killed Capitalism

In the 1920s, Henry Ford perceived a fundamental flaw in capitalism and when he suddenly started paying his auto workers the then extremely generous sum of $5 per day. A unilateral raise of this magnitude was shocking at that time. Ford did this so that his employees would have enough money to buy his Fords. Ford had recognized a fundamental fatal defect of capitalism:

Capitalist Employers throughout the capitalist market can not pay their employees enough so that employees are able to purchase all of the products that capitalism can produce and still make a profit. Without profit there can be no capitalism.

Think about this. If we have an economic system, capitalism, where almost all humans are employees, who, if not employees, will purchase capitalism’s products? Hunters and gatherers? Self employed farmers? What group in society has cash to purchase what capitalism produces? Are there enough money lenders and capitalist employers with enough profit and earned interest to purchase all of the production? Experience now clearly demonstrates that there are not. These sources have far more money than they have needs so their wealth simply is held in multiple dwellings, jet airplanes and other luxuries, investments, loans, and cash. This is not a left-right problem, nor a conservative- liberal ideological problem. It is simply a fact. It is an inevitable, unavoidable result of the core dynamic of capitalism. That core dynamic is:

A person with money hires a person with little or no money for the lowest possible wage to earn as much profit as possible for the person who already has money.

It is this profit generating dynamic over decades of time and repeated by hundreds of employers that has created the immense disparity of wealth and power between the top 1% of our nation and the 95% of us at the bottom. This top 1% has as much wealth and income as the bottom 95% of us. The purchasing power of the bottom 95% of us would be vastly enhanced if the wealth of the top 1% was spread more equitably among us all. The fatal defect of capitalism would be bridged. We employees could then purchase all of the products that our labor produced. The fact of the almost unimaginable wealth of the top 1% is little known and is largely suppressed by the capitalist media. The capitalist media ridicules as “class warfare” any thoughts we may have about the injustice and pain we experience because of this disparity of wealth.

So we have many millions of persons on the planet who have legitimate needs, and these same persons are willing and anxious to work. Why cannot our work meet our needs? There are insufficient jobs because employers cannot hire all of us and still make a profit. Capitalism gives us only one way to meet our needs. We must go to work for somebody who can make a profit on our labor. This fundamental flaw of capitalism perceived by Henry Ford is now causing our capitalism to implode, to destroy itself. Henry Ford was unique among the planet’s employers in perceiving this flaw and acting to correct it within his own company.

So why do not all employers follow Ford’s example? One reason is that the competition by those employers who continued to pay the lowest possible wage would quickly drive the generous employer out of business. Another reason is the simple greed by capitalists to get as much profit as they can as quickly as they can. Employers as a group would have to act together cooperatively and all of them would have to pay enough wages so that employees could buy capitalism’s products. However even if all employers cooperated and paid high wages, capitalism would implode sooner or later because of the large sums drawn out by private employers in the form of profits, CEO compensation, and dividends, and the large sums drawn out by private money lenders for interest on the money loaned for the production process. It is interesting to note that the very successful Mondragon Co-ops of Basque Spain have sustained themselves and expanded over the last 40 years in part because the workers are the owners and they limit the pay of the top managers ordinarily to no more than 3 times the pay of the production workers. The Mondragon Co-ops also have their own Co-op bank to supply their credit.

Capitalism can thus produce far more than can be sold at a profit. Capitalists curtail production to avoid loss of profit. If there is no profit to be made, there can be no capitalism. There remain millions of people with legitimate needs who are anxious to work, but there is no work, because there is no profit to be made. For example, the world wide auto industry has the capacity to produce far more cars than can be sold at a profit. This defect of capitalism existed long before the current mortgage bubble and crisis. Auto plants around the world were operating at less than full capacity because there was not a demand by buyers for all of the cars that could be produced. We have some human needs, for example health care that simply cannot be adequately met by capitalists and still make a profit. If there is no profit to be made, capitalists will simply not provide health care.

This fundamental defect of capitalism that has caused it to implode is a truth that is totally suppressed in our capitalist culture. We do not learn of this truth in Econ 1 or even in Econ 101. We do not learn of this truth from our capitalist media.

Given this truth, and the culture wide failure to diagnose the problem we must look at the false solution that capitalists select for us.

Secretary Paulson, Fed Chairman Bernanke and our elected Democratic leaders identify the problem as a “credit crisis,” or a “liquidity crisis,” and they propose that we employees tax ourselves so as to pay billions of dollars to the bankrupt Wall Street investment banks in the hope that they will again extend credit to employers and liberal credit cards to consumers. They seek to supply the credit to enable capitalists to seek profit making opportunities. (The fact that the Wall Street investment banks have not chosen to use the gifts of our tax money for this purpose so far, while criminal, is irrelevant to the larger problem.) That larger but totally ignored problem is Henry Ford’s 1920s problem. That problem is that there is insufficient sustainable demand for all capitalists can produce at a profit. Human wants are insatiable, and if we humans had the money to buy, credit would flow like a quickly melting glacier. The proposed solution does nothing to provide jobs and wages, and nothing therefore to create demand for capitalism’s products. If we were not so scared, we consumer employees could borrow more money for a short time and thus be able to buy products, but this could not go on very long. Most of us are already maxed out on credit. Sooner or later we have to pay the borrowed money back.

Wall Street and our Democratic elected officials are vainly trying to rejuvenate a dead system. Lending or giving the dead system more money simply does not solve the fatal defect. The fatal defect is neither diagnosed nor dealt with. The truth is hidden behind a culture wide taboo so that it cannot be discussed in the main stream.

The solutions so far advanced seek only to create profit making opportunities for capitalists. These solutions ignore capitalism’s fatal defect. They do absolutely nothing to correct the fatal defect. Capitalism cannot solve the dilemma identified by John Steinbeck in his 1939 book, Grapes of Wrath: “there is work to do, and people to do it, but them two cannot get together, and there is food to eat and people to eat it, but them two cannot get together either.” Even Franklin Roosevelt failed to diagnose this fatal flaw of capitalism in his New Deal when he sought to save capitalism with its profit making opportunities while providing temporary “band-aid” type remedies for those who had no work.

We human being can work together to meet our needs, on a small scale by simply bartering. We can meet our sustainable needs on a larger community scale with Mondragon Co-ops, and on a nation wide scale by causing our government to act solely in our interest to be our lending bank at little or no interest, to supply co-ops, small businesses, partnerships, and self employment, and as our employer of last resort. We can no longer afford profit making employers and money lenders who siphon off the increase in value that our work creates. Because of this fatal defect, our capitalism can be thought of as a huge tornado which having sucked us dry, then dies itself. Or it can be thought of as a cancer that kills those of us who are its workers and consumers, and having killed its host, and then dies itself.

Doug Page is a retired lawyer for unions, a former Democratic politician, and a life long observer of government, unions and business. He can be reached at: Read other articles by Doug, or visit Doug's website.

20 comments on this article so far ...

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  1. bozh said on November 22nd, 2008 at 8:34am #

    if schools in many countries were educational/enlightening wld it be provided for children?
    basic schooling for children was not available for millennia until kings/patricians realized how valuable ‘schooling’ of naive children wld be to them.
    wld privately-owned media be allowed, if it wldn’t be so valuable to the ruling class? more can be said. thnx

  2. James Keye said on November 22nd, 2008 at 9:14am #

    Capitalism is only the most virulent form of wealth “creation” and concentration. Our situation would be improved with a more socially and community conscious basis for our economics, but ultimately growth-based economics of any kind will lead us to this impasse. We are 6.5 billion, of which 1/2 are on the brink – their lives are precarious and often steeped in suffering, a few pennies this way or that is life or death. A great and rapid change in our perception of what is real and of value will have to sweep through the elites and the middle classes. It is not impossible, but highly improbable. Our only option is to work for such a perceptual shift.

  3. Ron Horn said on November 22nd, 2008 at 12:27pm #

    I think you have gotten to the crux of the problem with the capitalist system which destroys people’s lives, whole communities, nations, and the environment in its addiction to the accumulation of wealth. But they devote enormous energy into preserving this goose that lays their golden eggs, and do not hesitate to use violence against anyone who threatens their goose. Only a highly politically aware and organized working class can change things. These elements are clearly lacking–not by accident, of course. The mass media insures that no thoughts along these lines are ever considered, and distractions are its focus. People in the US have a profound sense of helplessness which is informed by a profound ignorance. It will be interesting to see how much suffering they will endure until they finally wake up, look and think for themselves, and take matters into their own hands.

  4. Michael Dawson said on November 22nd, 2008 at 12:52pm #

    If you bother to dig deeper than this familiar left-liberal trope about Ford, you’ll find that Ford increased his factories’ rate-of-production by a factor that was a far greater increase in relation to the industry than the wage hike was. Hence, Ford’s share of the company’s income grew. That means the famous wage hike was no solution at all. Ford’s explanation of it was just his cover story — a fraud.

    And it was never a plausible fraud, either. You don’t solve under-consumption/over-accumulation by raising wages in one corporation. You solve it by system-wide minimum wages and income redistribution. Henry Ford was a fascist and steadfastly opposed those things.

    If you’re interested in the facts, check out “The Fetish of Fordism,” by John Bellamy Foster:

  5. Roger Arnold said on November 22nd, 2008 at 1:45pm #

    Good article; goes to the heart of the problem. There’s a lot more that could be said about “the race to the bottom” and other ills inherent in the capitalist system, but this was a good start.

    I wish more people — and especially policy makers — would read this and other articles like it. We have little hope of fixing our broken economic system if lawmakers don’t have an understanding of how and why it is broken.

  6. Max Shields said on November 22nd, 2008 at 2:10pm #

    Doug Page I think you got the local and Mondragon Co-ops business models right, but the rest is replete with significant issues.

    Production is an old problem which was not solved by either socialism nor capitalism but exacerbated by both.

    I find the whole notion of “workers” a subserviant notion – is it a wonder 99% of the idiots think they’re trudging off to do the “man’s” work?

    An economics based on life rather than production might just give us a chance at having one. The idea of the “capitalists” paying us enough to buy the shit they endlessly make at the expense of the planet and the breathing atmosphere is idiotic from the get go!

    Look, for several decades Americans have ravished the earth with their needless purchases, consuming 30% of the world’s natural resources and polluting and destroying the outer atmosphere in the process. So, let’s not pretend that today’s mess was somebody else’s doing. We PIGGED OUT on the planet at the expense of most of the other inhabitants. Let’s at least get that much right.

    But I agree that the human species has got to refrain from massive growth. Local, real transactions are essential. Start growing a brain, read a book, turn off the tv, have a conversation, learn about something you haven’t a clue about. An economy based on human happiness would be a thought – Suppose the economist report read – Great news with the economy – Happiness index is up by 2 points, and GDP is down by 1 point!


  7. Ron Horn said on November 22nd, 2008 at 2:50pm #

    I think that a careful reading of this article should lead one to the conclusion that Doug Page is not saying that Fordism is the solution. He clearly indicated that the problem was with the system. This system functions only to produce profit for the “owners”, and when they don’t for whatever reason see a profit , they stop producing, and they resist investing in things that may produce profits in the distant future (infrastructure, mass transit, alternative energy, etc) or in things that don’t realize their benefits in the form of profits (education, health care, childcare, etc.) They will produce anything regardless if it is not really needed, or polluting, or harmful to the health of workers and the surrounding communities if they can realize a profit. They just fire up their ad agencies to brainwash people into thinking that they need such useless, harmful stuff. The system produces for profit, not to meet real human needs.

  8. bozh said on November 22nd, 2008 at 3:25pm #

    i conclude, that at least for the last 10K yrs we did not have a solution anwhere.
    we’v always had slavery and serfdom. we’v always had masters and servants.
    so, if one is looking for sol’ns, one must include abolition of this caste system.
    as long we have payer-payee structure, payers will rule. perhaps education may help us to tear dwn that wall btwn us and them.
    and the wall may also be torn by a revolution.
    or both might have to be applied.

  9. RG the LG said on November 22nd, 2008 at 3:56pm #

    I read the article. No great insights … so that gang of lingo-parsers is to be wondered at. On the other hand their seeming opposition missed an critical point as well …

    To wit: the cancer has been well known. It continues to be well known and well understood. We have made a collective decision to ignore the cancer … to the extent that some think the cancer is on capitalism. It isn’t … the cancer IS capitalism and because it appears to benefit enough of us enough of the time we leave it be. It is nothing more or less than classic economic behavior.

    We criticize yet fail to act. So, the cancer continues, and so do we.

  10. Willy Sierens said on November 23rd, 2008 at 2:51am #

    Actually, Mr. Ford encountered big trouble trying to lure workers to labour on his dehumanizing assembly line.
    To give them enough money to be able to buy Fords, may have been an afterthought.

  11. Brian Koontz said on November 23rd, 2008 at 7:00am #

    I think the best metaphor for capitalism and imperialism is a party. There is an abundance of food and drink. The party host (capitalist) accumulates this and everyone else (consumers) welcomes it. “Eat, drink, and be merry” is the motto. So people consume, perhaps drugs, perhaps sex, and the day after is always painful. This party is invite-only – outsiders remain outside.

    The method employed by the party-goers, the driving impetus for their behavior, is to extend the time the party lasts, within both subjective and objective reality. Boredom must be eliminated, because it’s “lost time”. Sleep must be kept to a minimum. Visceral excitement, summed up in the word “fun”, must be maximized.

    The culture of capitalism has so thoroughly penetrated even the supposed left that they have created a whole set of concepts to deride those who object. “Party crasher, party-pooper” being two of them. Those who attack the lust for fun of party-goers are called “prudes” or “squares” and the party-goers make sure they are eliminated from any future parties. Having cleansed the space of any dissent, the party-goers can revel in the spoils of capitalism.

  12. Dan Alba said on November 23rd, 2008 at 7:09am #

    Free-market capitalism hasn’t existed in the United States at least since the Federal Reserve, the Income Tax, protectionist tariffs, SEC, FDA, FTC, ad nauseum. If a capitalist system is to even have a chance of materializing on these shores, then we need more federal regulations and bailouts and bureaucracies like the world needs more Bush Doctrine. No. The capitalism fancied by Jefferson and his economic peers (and the Austrian School economists who, btw, predicted the Great Depression, the ’87 crash, and today’s bubble-bursts) envisioned none of that. Why? History taught, even then, that a central banking- and national debt-based economy beget mercantilism, corporatism, and military empire; all of which are boons for the state but tyranny and death for the people. They had just cheated death in defeating British imperial tyranny, which exacted those very systems on them and the least of their countrymen. Yet, starting with the Bank of the United States, Hamilton’s ill-conceived economic system has existed all this time and thrives like never before. But, it has had precious little to do with free-market capitalism. More like involuntary servitude and assured destruction. The idea of a non-interventionist approach, such as truly free-market capitalism, is to allow for business, community, and social alliances to form — voluntarily. The system stops becoming free once the central government dictates the terms of our otherwise voluntary associations and contracts. The Feds have a place in the market: prosecuting fraud, enforcing contracts, currency based on gold or silver. That’s about it. Currently, however, because of 220+ years of piled-on federal minefileds, neither socialists nor “rugged individualists” are free: they’re bound by the very mandates they believed would either defend their liberties or bring about their preferred system of trade. The arguments for less central government are plenty: extra-constitutional federal intervention is immoral, inefficient, destructive, illegal, and on and on. Yes. End the Fed, the 16th and 17th Amendments, DHS, Dept. of Indoctrination, and you will be on your way to a free, prosperous, well-informed, and well represented society. But the only form of equality you’re sure to receive from the federal government or the U.N. is an equal distribution of tyranny. Take the central state out of the equation and there is an equal distribution of more liberty (and naturally, less tyranny). But what you do with it would be your choice, and not that of some lobbyist, regulator (but I repeat myself), or other cog in the warfare state. Thanks to the Hamiltonian system, politicians are able to keep funding the Israeli occupation, the Iraq War, and the like. In a free market (e.g., free of a fractional reserve, fiat money-printing, price-fixing banking system), no warfare state enterprise would have a prayer with the threat of a people’s revolt from being taxed to death or conscripted for it against our will. The corporate welfare state goes hand-in-hand with the corporate warfare state. They are two sides of the same counterfeit coin that has no place in free-market capitalism. Milton Friedman was not free-market; neither are the Chicago and Keynesian schools. Krugman is a real fascist and all-around statist. History has shown these hucksters and their policy prescriptions to have been miserable and counterproductive failures; yet, they are quoted at length on the attributes and alleged failings of the “free market.” Heh. Go figure.

  13. bozh said on November 23rd, 2008 at 8:51am #

    if one talks ab any event in US from the widest vista possible and connected to all other world events, one wld, i hope, obtain an elucidation.
    to be brutally simple:
    all houses rest on a foundation. all (mis) education, warfare, economy, class structure also rest on fundmentals.
    what r fundamentals on which any war is waged by all nations. well, doesnt fire have the same causes in US as it does in nepal?
    wars r waged based on delusional thinking, greed, lust to control, illusions of grandeur, lies.
    these r some of the fundamentals for panhuman behavior on interpersonal and internat’l levels.
    if anyone wants to assert that US behavior on these two levels r based on different fundaments, one can posit them.
    no, amers r not an exception.
    they ‘r’ exceptionalistic or think different natural laws apply to them, only because of the miseduccation they receive from infanthood. thnx

  14. bozh said on November 23rd, 2008 at 8:56am #

    thinking that obama wld not defend the state (read ruling class) wld be like thinking that suleiman the great, alexander the great, churchill, franco, stalin, mao, king hussein et al have not defended their respective lands/empires.

  15. Dan Alba said on November 23rd, 2008 at 9:12am #

    Free-market-guy blabbing away, cont.: State- or corporate-run “installation” (thus the mention of Friedman) of capitalism, or any system, is absolute tyranny. (As most readers here surely know, Chileans and most of Central and South America know this all too well.) Nothing is “free” when it involuntary and enforced on everyone through govt. (or govt.-subsidized) violence. And then there’s the connivance. Trickle-down, trickle-up, booms, and busts are tools for manipulating, for political reasons, the same fundamentally-flawed and immoral system. Without the system as previously described, wealth and power are earned; one’s greed doesn’t infringe on another’s ability to sustain or pursue happiness; one’s govt.-priveledged situation in the market is no longer means to monopolize; crooks are, more often than not, prosecuted (contract enforcement) and not rewarded (subsidized, bailed out). Senators used to not be bought by D.C. lobbyists and New York bankers; if they were, they’d be recalled by their state. But then came the 17th Amendment and institutionalized “stuff” like this. Half of my friends, family, and associates favor going toward more federal regulations; the other half, like me, have come to favor the less-govt. approach. We all appear to want the freedom to do what we wish with our bodies, minds, fruits of labor, etc. We all seem to oppose “the system,” but disagree on exactly what comprises it. This is about what we have left of our rights: the freedom to decide what is right for oursleves and our posterity based on introspection and discussions with family members and friends and on a limited number of independent newsletters, like, who graciously allow my unreadable one-graf spiels (with painfully long sentences), despite my strong differences in view with them and possibly most of their readers. (:Now, release the tomatoes!:)

  16. bozh said on November 23rd, 2008 at 3:17pm #

    dan alba,
    first, let me say, that i’m not sure if i understood what u meant w. some of ur obsevations/wishes/conclusions.
    but i support free speech als on dv.
    ok. can i point to a few observable events?
    to me, it’s obvious that a person is an inherent interdependency. a person living 30K yrs ago was not, in my mind, a dependency nor independency.
    a person was then clearly interdependent else that person wld have minimal if any chance for survival.
    but at some stage and w. rise of feudal lords, the interdependncy for obvious reasons had been largely or utterly destroyed.
    so, theorecticly speaking and having in view that we were once interdependent and can be again, i wld say no person is free in most of our important realtionships.
    eg, an inlficted person can but is not free to spread wilfully and knowingly a disease.
    it happens now that a person with aids infects knowingly s’mone else.
    one is not free to abort, however, if that person wld be truly interdependent, abortion wld never been carried out (except for med’l reasons) because all people wld be on her side.
    but all of us the unwashed r dependent. and as long that is so, things can get only worse for many people and nations.
    also sprach samuel. thnx “also” is pronounced alzo=thus and not also.

  17. Hilary Smith said on November 23rd, 2008 at 10:53pm #

    The problem with capitalism is this: cheating works. This is why regulation is so important. And yes, there always have to be more workers than jobs available otherwise you’ll have never-ending inflation. Here’s something else to think about: Why isn’t it called “class warfare” when the rich are winning?

  18. bozh said on November 24th, 2008 at 11:01am #

    well, i haven’t put it like u ab classful societies. to me, what’s going on btwn classes is millennia-old and not just since rise of capitalism.
    i’v already stated many times that cheating/lying/misleading/ deceiving is the oldest profession in all cultures and in perhaps all systems of governance.
    US, its capitalism, schooling, cults of personality, religions misteach/deceive just like feudal lords, kings, patricians have.
    by any other name, description i’v just put dwn remains, at least for me.
    in any case, describing is by far more elucidating than namecalling. thnx

  19. Nikos said on December 11th, 2008 at 7:44am #

    The ¨capitalist way¨ is highly contagious and the reason for this is human nature consisting of submittance, arrogance, stupidity, laziness etc. unfortunately very much present in our time.
    Success of capitalism until now is mainly because it reflects a large part of human nature and thus could adopt to all major changes happened in our time.
    In my opinion things are now changing due to globalisation were our excessive arrogance and greed, have once again bring things to reach a point of no return. Riots in various countries are still dealt by the rest of the world like isolated incidents with the help of the media. But not for long unification of the masses towards one cause can easily be a side affect of globalisation.

  20. Bill Burton said on October 8th, 2009 at 12:37pm #

    Mr. Page states in the fifth paragraph-” if the wealth of the top 1% was spread more equitably among us all. The fatal defect of capitalism would be bridged. We employees could then purchase all of the products that our labor produced.”
    This is only true in a developing capitalist global economy in which we are operating with a trade surplus which will provide the capitalist with profit accumulation(the last sentence of the second paragraph is more correctly stated ” without profit accumulation there can be no capitalism”.
    For a fully mature global capitalist economy trade will, on the average, be in balance. The aggregate of all capitalist will own the aggregate of all means of production, raw materials and overhead functions. In this case the aggregate of all workers produce the aggregate of all goods and services necessary to provide the aggregate of all workers, dependents and capitalist with the necessary means to reproduce themselves.
    In this case the aggregate cost of all production (goods and services) $T must contain the aggregate cost of labor $L plus the aggregrate of all profit $P.
    The only money available to purchase product and generate more profit is $L which is always less than $T. It is important to note that this is independent of wage or profit distribution as well as the population distribution of workers, dependents and capitalist. It holds true whether everyone is a worker or there is only one worker with a plant full of robots. The only moneys available to purchase product and maintain a capitalist economy (a necessary requirement of which is the accumulation of profit) are wages paid to labor.
    The myth that capitalism, once established worldwide, will provide mankind with the ideal economic system and everlasting prosperity is being seriously challenged by the present economic crisis. I believe all economic stagnation and the resulting economic crisis’ that follow, including the present “housing bubble”, are merely symptoms of the well known “fundamental flaw” inherent in the maturing capitalist system.
    I welcome responses.
    Bill Burton moc.loanull@444notrubw