Can’t capitalism work without a hierarchy? Isn’t profit maximization, the concept of employment and wages, and free trade between firms and between individuals fundamentally devoid of a hierarchy? Ultimately, an employer-employee relationship is a trade. Goods (or a medium of exchange, usually) are traded for a service, so these are just a series of trades that go on as long as the agreed upon contract lasts. Ideally, those who will provide the service or labor would have almost as much bargaining power as that of the person willing to pay for the service, and wages and work hours will be determined by what is deemed fair by both parties.

Just as a person in a pawn shop trying to sell a certain item wants a high price tries to find an agreeable arrangement with the pawnbroker to get a sale, so can an employee find an arrangement where more work hours will mean more pay (provided that the employee is efficient with his service provided), and find the least amount of working hours where s/he can get paid a reasonable amount. The limits on wages and prices in the market determined by state intervention keep wages at a fixed price for a lot of firms, and people who want to trade their services for money are as limited as the firms themselves, since the profit they should be making is going to taxes which barely goes into public services anyway.

Here’s a rather informal example of how power is also applied by the employee for the arrangements of a wage: My mom is a Labor Arbiter with a shitload of cases to make a decision for. She offers me an opportunity to make some money to help her. The task is to help summarize cases for her, how many I’ll do will be my choice, and I will be paid P100 for each case I summarize. I could try to convince her to pay me more if I don’t see this arrangement as being fair, let’s say P150, but that would cost her more and the payment she’ll get for the cases might not cover what she lost when paying me, so she offers P100 again, but, again, the assumption is that P100 per case is not enough to cover my own expenses, so I raise to P125 per case and say I won’t go any lower. If we both agree upon that, then we can assume that the arrangement benefits me because it’s at least higher than the original wage offer which wasn’t enough for whatever I had to spend it on, and my mom won’t be losing as much as she might have should she have taken my P150 per case offer. I had almost, if not exactly as much power in this decision as my employer (and mom… wow, that’s a dangerous scenario. LOL), and we ended up with a fair exchange that will last as long as I’m summarizing cases before her deadline.

In a perfectly competitive market, there is room for prices and wages to be more dynamic to fit the demands of consumers and would-be employees. Wages are then determined by agreed upon trade contracts between those who demand the service, and prices would generally be lowered in order to fit the demands of consumers, as there are many firms offering alternatives to choose from.

Here’s one example of how prices might be forced to lower in a market: My older brother and I are consumers. In fact, we’re both getting fatter already. We like to eat in different places around the UPLB campus and any homogenous dishes and drinks, we make sure to compare between eateries. Lower price? Sure, but is it any good? Is it too far or conveniently close to our dormitory? Is it clean or dirty? Is the food consistent or will it taste from better to worse from time to time? We find the best possible alternative that fits our situation or our demand and we go to that place. Now, competitive firms are basically at the mercy of consumers in a perfectly competitive market. My brother and I are still searching for the perfect sisig, or at least the best around our campus, while not being a hassle to walk to.

The common notion that the corporatism that exists today is the only form of “capitalism” is nothing but a misconception. True, this all sucks, but this is not capitalism under a perfectly competitive market. What’s happening here are large firms lobbying the state to raise barriers for smaller businesses and competitors to have a difficult time in entering the market so there will be a playing field where only big corporations are competing against one another. Capitalism does not inherently require a hierarchy, internal or external. Without a state to lobby, a firm’s profit maximization will be incentivized by supplying the consumers’ demands, and fitting employees’ wages in order for more people to flood in and either buy this firm’s alternative, or to offer their services for a reasonable wage.

Want a real-world example of an effective market? Denmark. It’s a mixed economy, and virtually freest market in the world. Very little state intervention, and it makes the playing field relatively level for competing firms. Also, they have great pastries… and a park in Copenhagen has a sign that says you can have sex, just as long as you’re not too noisy and kids can’t see you. Denmark has a park that lets you have sex… so don’t ever tell me that Marxist “economics” is any kind of alternative.