Free market capitalism has done a pretty good job of improving our quality of life. Compared to the alternatives, there really is no comparison, however, it also breaks down after a certain point. Individuals acting in their own self-interest create a big mess where everyone ends up worse off.
Chiang Mai Traffic Jam
The other day, I was riding in a taxi truck in Chiang Mai, Thailand when a thunderstorm knocked out the electricity and traffic lights. At a major intersection, traffic from all directions got all jammed together in the middle because everyone was trying to push forward. All the cars trying to squeeze ahead without yielding to others, prevented everyone from moving ahead. We were stuck. This was a prime example of how Adam Smith’s Invisible hand doesn’t always work. When everybody gets greedy, most end of up suffering.
When Breaking the Rules is Good
Make no mistake, acting selfishly does accomplish a lot. In a city like Bangkok, if everyone strictly obeyed traffic signals and laws, I have no doubt the city would grind to a halt, even worse than the normal traffic patterns. The chaos of motorcycles, Tuk Tuks, cars and every other form of transportation imaginable all squeezing into ever nook and cranny of the traffic, keeps traffic flowing more smoothly.
In many developing countries, traffic laws are not strictly obeyed. When lights turn red, it’s quite common for dozens of vehicles to continue going anyway. You frequently see three or four lanes of cars, when there are only two lanes to drive. It’s even common to see people driving on the wrong side of the road if that will get them to their destination faster.
Current road infrastructure in many countries is hopelessly obsolete so drivers have to improvise to get to where they are going in a timely manner. I believe it actually works better when everyone breaks the rules. The ‘what’s good for me is good for society’ mentality can work, but it has it’s limits.
When the System Crashes
If there is a break down in the system, like a power outage where traffic lights stop working, everything crashes. In the west, traffic light failures typically have back up systems where lights begin flashing, turning major intersections into four way stops. It’s slow, but it works.
With no system, like my experience in Thailand, everyone tries to get an advantage by driving forward, if only centimeters. Even though taking turns giving way would clearly produce a better result for the mass of commuters, self-interest gets people acting against their own self-interests.
Make no mistake, some clearly benefit from this system. If you happen to be at the front of the line, you are more likely to get through. Physically large vehicles and drivers can even intimidate others into yielding. The privileged in any system can reap unfair benefits if they choose.
The Global Financial Traffic Jam
Look at the global financial crisis of 2008. It is almost comical now that the finance industry was basically responsible for regulating itself. The foxes were in charge of the hen house and everyone from the intense lobbying from the financial industry to Fed Chairman Alan Greenspan made it easy for the financial elite to rake in billions from highly speculative investments while their own customers and normal citizens were robbed. The self-interests of the richest in society, rarely coincide with what’s good for the average citizen.
The Limits of Capitalism
In free markets, only that which is profitable gets rewarded, not what is good for society. Capitalism fails in:
- keeping our air clean,
- maintaining clean water supplies,
- protecting natural areas,
- having safe neighborhoods
- reducing poverty
- providing universal health care,
- educating all citizens,
- keeping a safe and healthy food supply,
- and virtually everything else that makes for a quality life.
Getting back to that traffic jam. A traffic cop directing traffic and forcing drivers to take turns immediately gets traffic moving faster. All that is needed is a simple system where all individuals are treated equally and those that need extra help are given it. That’s what makes for a strong and rich society, not unrelenting personal greed and avarice.
We all need the freedom to act in our own self-interests, but we also need rules to make sure that our greed is not destructive to society as a whole. Traffic lights keep traffic moving and people safer. Perhaps our economies need more stop lights.