CAPITALISM

IVAN HOFFMAN, B.A., J.D.


        Capitalism isn’t easy.  Communism was easy but capitalism can be a major challenge.

        Capitalism, at its heart, is about freedom.  Communism failed because it did not espouse freedom.  The very thing that made it easy made it fail.  If all you have to do is follow someone else’s dictates, things are easy for you.  There is no risk involved.  Nothing ventured, nothing gained, as it were.  If you fail, the other is to blame.  If you succeed…well there actually is no “succeed.”  Communism takes individual responsibility out of the equation.  All you have to do is show up and you are not responsible for the results.  The state takes the blame.  And the credit.

        One of the reasons that capitalism is hard is because there is no one and nothing to blame for the failure of any given individual…except the individual.  Blame of the other, in most instances, is incompatible with capitalism.  Like democracy and freedom, capitalism requires self-reliance, respect for one’s self including a recognition of one’s value in a given instance (read “Leverage in Contract and Other Negotiations”) and, perhaps most significantly, the willingness to accept personal responsibility for one’s successes or failures.  Indeed, what I have seen is that those who in fact are self-reliant, self-confident and who know their worth are often disparaged for those same qualities.

        While we all proclaim our desire for freedom, in truth being free appears to scare the hell out of many.  The very essence of freedom--the role of the individual and accepting personal responsibility—seems to be found only in very rare instances in capitalism in general and in business dealings in particular.  This may be because we are generally not given to this kind of teaching in our early, formative years.  Sure, we learn about the founding “fathers” and their love of freedom.  (Since we are all here reading this, I assume there were also founding mothers who, although clearly contributing equally to our collective and individual origins, apparently lacked the same marketing prowess as their masculine counterparts and thus are often wrongfully ignored by history). But when we read in the Declaration of Independence that a government derives its “just Powers from the Consent of the Governed,” (i.e. us, we, individuals) we do not relate those words to be about us.  These are words and ideas of both personal empowerment as well as personal responsibility but we seem to take them instead to only be about them.  These are words and ideas floating on the ether as it were.

        Instead, society (read “The Law” in this regard), in the broadest sense of that term, teaches how to attribute success to outside forces, whether it be toothpaste, deodorant or some similar product.  It also teaches how to foist the blame for everything onto others.  Blame the big corporation, the other side in a transaction, contracts, mothers, fathers, the “wrong” toothpaste or deodorant…the list is endless.  Although we exist in a capitalist society and proclaim our desire to do so, we appear to act in a manner that is actually contrary to the essence of capitalism.  The notion that we create our own realities, not in the “new age” sense but in the concrete world of business, is virtually unheard of.  Capitalism is based on the power of the individual but we do not appear to recognize, or if we recognize, do not appear to be able to act on our individual power to affect our own destinies.  (Read “Private Laws”)

        In terms of business and legal transactions, the other party is not to blame for advancing his, her or its interest in a transaction.  That is what they are responsible for doing, both in the legal and business sense and in the sense described above.  They have no obligation to be “fair.” (Of course this discussion deals with arms-length transactions and not ones in which any sort of fiduciary or other duty exists to take care of the other party).  Let me give just a few “general specifics.”  There are often provisions in business deals, certainly in the intellectual property area, that are zero-sum provisions.  If one side ends up with certain rights, by definition the other side does not.  These may relate to exploitation rights, reversion rights, contract termination and final approval rights and so on.  If there are royalties involved, there is only the single dollar to go around and if one side gets 60%, for example, by definition the other side can only get 40%.  Yes, there are potential compromises that can be reached but in the end, what is “fair” depends on the side of the table at which you are sitting.

        Thus, if a transaction ends up being “unfair” to you, it may be that it is so perceived because you did not exercise your same responsibilities to yourself as the other party did.   Perhaps you either did not recognize your value or failed to effectively advance it.  If it relates to the failure to negotiate a good deal, the blame is often then attributed to a lack of money to hire an effective lawyer or to “paying dues.”  Those may be factors no doubt but they are not the cause of the failure.  The cause of the failure is your lack of responsibility to yourself to obtain that representation, in this example.  Or your willingness to make a bad deal in order to join what you perceive is the club as to which you are “paying your dues.” The cause may also be that you have not reflected on the other choices you may have in such transactions.  You also have the choice to walk away from the deal rather than make a deal that you may come to deem as “unfair” to you.  Maintaining personal dignity as an element of choice within a business transaction is generally not given a high or in many instances, even a low priority.  Thus we do not evaluate this important aspect in our dealings, perhaps because it is deemed non-quantifiable in monetary terms.

        The point here is not that business negotiations are supposed to change society.  The point here is that you should keep your eye squarely on your goal to make the best deal you can.  And that is always my focus when I represent clients.  However, in the process of making that best deal, you also have to understand the issues that motivate you to make the deal, or not make the deal, in the first instance.  If you come out of a deal, no matter how it went, feeling that your dignity has been preserved, as well as your legal rights and finances, then perhaps you bring to society a better point of view.  Conversely if you feel compromised, taken advantage of or the like, perhaps those feelings as well then play themselves out in that society.  Who we are in our business lives, even if it is mistakenly compartmentalized from the rest of our life, plays a very, very large part in our definitions of our selves.  Each such transaction in a real sense defines the parameters of capitalism.  And as I mentioned in “The Law,” society and in turn, capitalism are us.  Thus, how you handle yourselves in business is a direct reflection of how you become part of and contribute to that society.  And to the definitions of capitalism.

        Having said the above, clearly having freedom and choice does not mean that we are all free to do what we will.  We all operate within the constraints of all forms of regulation, i.e. laws, economic policies etc. as well as constraints imposed by other responsibilities, including those responsibilities that are inherent in human morality and ethics.  Those constraints are essential and valuable and we would not have the freedoms we have if we did not operate within the rule of law those constraints define.  This may seem paradoxical but it is not.  These constraints define our structure and order and in defining certain legal boundaries, they free us to pursue that which is not prohibited and not mandated.

        These constraints, however, do not define what we can become.

        In that regard, we constrain ourselves.

        And we deserve better.

        Capitalism deserves better.

© Copyright 2003 Ivan Hoffman.  All Rights Reserved.

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This article is not intended as legal advice and is not legal advice.  This article is intended to provide only general, non-specific legal information.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article is based on United States law.  You should consult with an attorney familiar with the issues and the laws of your country.  This article does not create any attorney client relationship.

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