Anti-capitalist business: The impossible dream

Anti-capitalist business: The impossible dream

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The Anarchist, a self-declared anti-capitalist coffee shop in Toronto, recently announced it is closing its doors after one year in business. Although not the only business objecting to capitalism (see large corporations such as BlackRock and the major banks denouncing profit maximization and substituting ESG (environmental, social, governance) criteria), The Anarchist has pursued a peculiar anti-capitalist business model.

The proprietor of the coffee shop has disdained profits, used “pay-what-you-can” pricing for brewed coffee, barred police officers and military personnel, lectured customers about oppression of workers and “genocide” in Canada, and sold apparel and stickers blazoned with slogans “do crime,” “all shoplifters go to heaven,” and “all cops are bastards”).

Despite its 3,000+ followers on Instagram, The Anarchist has not made a profit – unsurprisingly -and its main supplier, the micro-roastery Pop Coffee Works will stop subsidizing its rent and providing coffee beans at a significant discount.

The cause of The Anarchist’s struggle for survival and impending demise is its anti-capitalist business model, rooted in the proprietor’s Marxist strawman-view of capitalism. Contrary to this view, capitalism is not a system of exploitation where workers “produce wealth for their parasitic employers” and where the rich grow richer and the poor grow poorer. The evidence showing that poverty has been most reduced in the freest, most capitalistic countries with high human wellbeing directly contradicts this view.

Instead of exploiting workers, capitalism promotes everyone’s flourishing, including the poorest, because it is a system of freedom. In Ayn Rand’s definition, capitalism is “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”

Because in capitalism everyone has the same individual rights, protected by the government, to life, liberty, property, and the pursuit of happiness, their freedom is guarded against any initiation of physical force or fraud by others.

This means that all relationships in capitalism are voluntary. Employers cannot force anyone to work for them or pay wages lower than what employees accept. Nor can companies force customers to buy their products or suppliers to do business with them or deceive either into trading.

The only way for business to succeed in capitalism is to create and trade material values: those products and services on which we depend to survive and enjoy life, from food, clothing, and housing to transportation, health care, entertainment, and even specialty coffee.

Because there are no protected monopolies or other government cronyism in capitalism, businesses must compete with one another for financing from banks or investors, employees, and for other suppliers, to create material values for which customers are willing to pay prices that exceed the cost of doing business.

Capitalism makes possible and necessitates maximizing profits, through the continual process of striving to outdo competitors in creating the best possible products and services at the lowest possible cost – the kind most of us will buy. Because all relationships are voluntary, this requires motivated, productive employees and suppliers, and satisfied investors. Profits are required not only to provide a return to investors but also for the further development, growth, and prosperity of the business. These, in turn, afford more opportunities and wealth not only to the business itself (its owners) but benefits to all its trading partners: customers, suppliers, and employees.

Capitalism, properly understood, is not the strawman of exploiting workers and deceiving customers but a social system in which people interact through voluntary, mutually beneficial trade and where coercion or fraud are penalized. In such a system, businesses that do not produce and trade material values will fail. Even in today’s semi-capitalist mixed economies, most such businesses, unless bailed out by governments with taxpayers’ money, do fail, like The Anarchist has done.

If The Anarchist wanted to succeed as a business – to be profitable, it should embrace capitalism instead of opposing it. And so should the rest of us – if we want what only capitalism can provide: better, more innovative products and services at lower prices (from cures to cancer to rational education and objective journalism, and to affordable specialty coffee), more and better job opportunities, and increasing prosperity for all.

An update after writing this post: The Anarchist has now announced on its website that it will not close after all. The media coverage of its demise has brought attention to its plight and attracted donations that permit it to continue operations, albeit in a different location. Nevertheless, my argument holds: profits are required to sustain a business in the long term; the anti-capitalist business model is invalid.

Photo by Markus Spiske on Unsplash

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.