Capitalism, and market economies in general, but especially capitalism, are guilty of terrible crimes against humanity. They are guilty of poverty and war, of inequality and competition, nationalism and hatred, of subjugation, oppression, domination, and thought-control. One of the ways in which capitalism has inflicted horrible thought-control on humanity is by an utter bastardization of the definition of the word “efficiency”. Under capitalism, “efficiency” is said to mean that the least amount of resources are expended in the production of a good or carrying out of a service. But, thanks to the structure of capitalism, the definition of “efficiency” that comes to mind is by all means not efficient. When somebody tells you that capitalism is efficient, the first thing out of your mouth should be “by what standards?”
The first problem is the question of “resources”: What are the resources being expended and who is expending them? Well, this depends on your perspective. Some may say that the resources expended are the money of investors, spent in hopes of making a profit. Another person may say that the resource being spent is human labor power, spent by the laborer in hopes of earning enough money to survive. Or perhaps, it is the wealthy investor spending the labor power of the worker in order to gain a profit.
In the case of capitalism, all employment may be seen as a transaction just as one buys a car or groceries, except for a few differing factors. The first of these factors is that the number of people hiring and the number of people looking for work are incredibly unbalanced numbers, meaning that those looking to get hired are already at a serious disadvantage to the employers, because they generally have to take what they can get, whereas employers will almost always have a large hiring pool. The second is that the employing class owns the resources necessary for survival (food, water, shelter, etc.), while the working class has nothing to sell but their own labor power, so they must work in order to access the means of survival, whereas the employers already have access to them due to violent enforcement of “property rights” by the state without the need to work. The third is that workers generally work for a set wage that doesn’t vary proportionally to the effort they expend, but the profit (the surplus value that the employers receive for selling goods and services produced by the workers) does increase with increased productive capacity by the workers, meaning that profit is based on the labor of the workers, yet the workers don’t receive any of the profit while the employers who did no work receive all of it.
As you can see from this quick critique, capitalism is unjust, exploitative, and coercive, but is it efficient? Well, I guess those with decision-making power are the ones spending resources, which means the owners of capital. So what cost to them does this system entail? A monetary cost of course. Everything in capitalism is based around money and property, and if you want to make the most profit, you’re going to spend as little money as you can relative to your expected return on investment. The best way to do this while still maintaining a quality product is to push the costs of production somewhere else onto someone else, to externalize the costs. By treating these costs as externalities, one can ignore the true cost of production and instead focus on spending the least money to get the highest returns.
Some examples of externalizing the costs of labor would be to not pay your employees enough money to survive off of so that they have to find other jobs in addition to the one they do for you, or perhaps living off of government assistance programs. Or perhaps hiring people who can’t or won’t ask for more money like undocumented immigrants and people from poverty-stricken areas. Or perhaps pouring waste products into rivers, lakes, and other water sources to cut down on waste management costs. Or ignoring work safety and environmental regulations at the expense of workers, community members, and humanity as a whole. Yet capitalism encourages these behaviors because worrying about them isn’t cost-efficient and therefore will put you out of business.
So we can see that there is a discrepancy here between the capitalist definition of “efficient” and a truer definition of “efficient”, for when capitalism seeks the most “efficient” outcome, it actually means the most cost-efficient. Efficiency on the other hand, would entail using the least resources, both human and natural resources, for the outcome that satisfies the most people. Does destroying the drinking water of millions of people in order to get cheaper oil to make money for a few wealthy business owners satisfy the maximum number of people involved in the situation? Does it use up the least resources relative to the gains to be made? No, of course not.
We find that capitalism’s definition of efficiency here is hardly sufficient for calculating the true economic cost of a particular event or practice, but beyond economic efficiency, we find that the market economy, in particular capitalism, is inefficient in many other ways beyond pure monetary cost. The idea of having competing firms spend time, resources, labor, and human creative and intellectual power spent developing essentially the same products is an immense waste of human potential and resources. All the while, these firms are cutting costs through compensating workers less, polluting areas without power to stop them, and creating further waste through the process of planned obsolescence. And throughout all of this, it is inevitable that most of these firms are going to go out of business, resulting in job loss and a waste of resources spent building that firm.
Another strength that the market economy claims is that it is the best at distributing society’s scarce resources. Whether or not this is true in practice (it’s not), it relies on the false premise that we have a scarce amount of resources. In the United States alone we throw away more than enough food to end world hunger. Empty homes outnumber homeless people by far. No there is no scarcity of resources here, in fact, we build our technologies with planned and built-in obsolescence in order to create more demand because we have more supply than we could ever sell under reasonable circumstances. We withhold resources such as food and water and housing and medical care from many among us because it makes more money to pretend that there isn’t enough for everybody, because the market economy puts making a profit over meeting the needs of people. Which is further proof that the market economy is not a proper means of distributing resources, as the great quantities of excess we produce never reach people, while millions starve, go homeless, or die from preventable diseases. Market economies encourage the creation and protection of artificial scarcity in order to secure the profits of those at the top.
Capitalism and market economies tout themselves as being the most “efficient” economic system, promoting advancement and progress at the least cost, but all it does is lower costs on the few individuals who own the means of production, and create endless waste for the rest of humanity to deal with. It is easy for the dominant ideology to brand itself as the most “efficient” when it also changes the definition of “efficient” to describe the one thing it is good at: producing profits for capitalists.