In terms of the justification we have so far considered, the market
as a device to achieve the satisfaction of consumer demand, capitalism
seems at best a doubtful device when viewed in practice rather than in
terms of abstract theoretical economic models. If the theoretical
assumption is made of an equal distribution of resources to everyone
at the outset then, in the short term, the market mechanism seems
to be a fair device for decision making. However, the engine of
capitalism remains the profit motive – which is no more than each
individual seeking to maximise the returns to their efforts.
The problem is that the accumulation of profit over time into the
hands of successful business people (‘entrepreneurs’ in economic
jargon) leads to a grossly unfair distribution of resources. This is
particularly the case when wealth is inherited – the result being an
arbitrary distribution of purchasing power and consumer satisfaction.
In many cases the distribution of wealth is the consequence of
obscure historical events in periods when the market system hardly
functioned. Consider the English aristocrats who continue to own a
totally disproportionate share of the land, or, for that matter, the
superior share of the earth’s resources owned by the current genera-
tion of North Americans.
Further distortions in the market mechanism, familiar to all
economists, include the absence in many industries and places of the
‘perfect competition’ assumed in the model of the market mechanism
explained by Adam Smith and usually assumed by its political
proponents. That is, for consumers to obtain the goods that will
maximise their satisfaction in return for their expenditure, it is
necessary for them to have full knowledge of the goods and prices
available. It is also required that new entrepreneurs be able to enter
the market freely whenever exceptional profits are being made in an
industry. The number of producers is also assumed to be so large they
cannot affect the market price. In reality markets are almost always
‘imperfect’ in that consumers are misled by advertising; new
competition faces considerable barriers to entry into the market; and
governments may subsidise domestic producers and tax or obstruct
foreign competition. Thus the state is often forced to intervene to re-
establish a competitive environment
In a purely capitalist system the producer is responsible only for
staying within the law and maximising profits for shareholders.
Competitive forces are thought to ensure that individual consumer214 POLICIES