Monday, July 12, 2010

Typing This On A Dell Computer Is Evidence: Capitalism Doesn't Regulate Itself

By Manifesto Joe

We Americans are indoctrinated, usually quite effectively, in the notion that capitalism is an ultimately fair, if sometimes unmerciful, economic system. It is supposed to be merciless competition itself that disciplines the market. If you make an unsatisfactory product, your competitors, in theory, eat your lunch, and your company soon goes under.

There are many examples of why this is merely theory, divorced from reality. The latest comes to us from the company that sold me the very computer I am typing this on, Austin, Texas-based Dell.

A recent New York Times article reported that Dell employees knowingly sold millions of defective computers "from 2003 to 2005 to major companies like Wal-Mart and Wells Fargo, institutions like the Mayo Clinic, and small businesses." The University of Texas, in Dell's hometown, was another victim of this corporate malfeasance.

This came out as a result of a 3-year-old lawsuit against the computer giant. "Documents recently unsealed ..." the Times report says, "show that the company's employees were aware that the computers were likely to break. Still, the employees tried to play down the problem to customers and allowed customers to rely on trouble-prone machines, putting their businesses at risk."

To read the full article, go here.

The obvious question is: How the hell is Dell still even in business? The Times article does mention that Dell has been going through harder times in recent years, with complaints of poor customer service (I can attest to that) among other problems. That they would knowingly sell defective machines to companies and institutions big and small seems the most damning thing.

Why are they still operating? Granted, they don't have the market share they used to, and they have a few competitors. But that is a key word -- few.

For 120 years, the U.S. hasn't seen many blatant monopolies in our economy, mostly because the Sherman Antitrust Act more or less outlawed them. Intentional monopolies, such as can still be found in some places among utilities, are an exception.

But better economists understand the very strong presence of oligopolies, and also monopolistic competition, in the contemporary corporate world. "Bigness" is the defining factor here. We've seen it all too well among the banks, some of which are now termed "too big to fail," so they rate bailouts with taxpayer money. But it exists in plenty of other enterprises that don't benefit from such wide-open subsidization. (The subsidies are there -- but often indirectly, so you have to poke around to find where they are. The tax system is a good place to look.)

Dell became so staggeringly big that it could engage in this kind of malfeasance and yet still be in business, years later. Its competitors are few, and they are huge, too. All these folks appreciate a quiet life as much as anyone else. One of the crucial lessons of real competition is that you can lose.

So, Dell has lost market share, but it retains a great deal. It's so big, it almost can't fail. I still get plenty of junk mail from them, and here I sit, typing this on a five-and-a-half year-old Dimension 3000.

The marketplace discipline that competition is supposed to bring may have been very real in Adam Smith's day. There, we're talking about microeconomics at the village smithy and yeoman farmer level -- maybe small manufacturers. But today's enterprises have grown so large, they can get away with astounding things and still pay a very limited price for their misconduct. They still have the profits from the sales of millions of faulty computers; and even the aforementioned lawsuit, yet to come to trial, won't really compensate the victims.

So, what's the alternative? There aren't many good ones. But one thing seems clear. The "free market" model of popular indoctrination looks, in reality, nothing like it does in theory.

Maybe I could go to some bank, get a loan, hire techs to start building good, moderately priced computers, and put these rapacious bastards out of business. Which bank would you suggest? One of those that's "too big to fail?"

Manifesto Joe Is An Underground Writer Living In Texas.


Jack Jodell said...

The problem with Dell os what is plaguing the American corporate mindset: it os too big to fail and too big to care. The corporate obsession with immediate and ongoing profit at any cost is undermining business ethics, business loyalty, and business responsibility. Corporations have become malevolent and malignant entities that are destroying this country and the world. Their lust for profit makes them destroy everything in their path, including themselves in the process.

Manifesto Joe said...

I just now remembered "The Dell Dude." You know, the one who got busted for marijuana possession. Somebody needs to get that dude back: "Dude -- you're gettin' a cell!"

Jack Jodell said...


Omnipotent Poobah said...

The governing principle for modern business is this: You only have to suck marginally less than your competitors to look good.

Anonymous said...

Jack's comment reminded me of the old Laugh In Lily Tomlin bit with her as the phone operator and the tag line was along the lines of "We're the phone company. We don't care. We don't have to." It seems many business have decided to use that as their mission statement.

Marc McDonald said...

There are corporations that are deemed too big to fail. Boeing is one example. For national security reasons, the U.S. government would never allow Boeing to go under.
However, I don't think Dell is among the corporations deemed too big to fail.
The reason is that (despite its own self-portrayal as a "high-tech" company) Dell is nothing of the sort.
All Dell does is import components from East Asia and snap them together, to create PCs.
There are thousands of hobbyists across the U.S. who do the same thing. The only thing that makes Dell different is that it does it on a big scale.
But what Dell does is not high-tech or sophisticated, or even particularly important. Really, Dell is nothing more than a services company, not an manufacturing company.
If Dell vanished tomorrow, there are many other PC companies who'd immediate step in to replicate what Dell does.
Incidentally, PCs themselves are not particularly high-tech products, by today's standards.
Products like a Sony PlayStation, or any modern smartphone, are actually far more sophisticated (and more difficult to build) than a personal computer.
The final irony is that even though a company like Boeing is deemed vital by the U.S. goverment, the fact is that Boeing itself has already outsourced nearly all of its most sophisticated manufacturing.
Boeing's new 787 plane, for example, is actually more of a Japanese product than an American one.
All Boeing is doing is (like Dell), importing components from East Asia and snapping them together.
The real heavy-lifting is done by Japan, which is making the ultra-sophisticated composite wings.

Tim McGaha said...


Good point about Dell being basically expendable. If they get in serious trouble, no one's going to bail them out. (That said, my Dells have never given me trouble.)

I'd dispute the comment on Boeing, though. Subcontractors are assembling parts according to designs and specifications given by Boeing's engineers. I think it's a bad idea to outsource do much heavy industry, but I think that the preliminary work in aerodynamics, vehicle design, and such is fairly important and substantial work in it's own right.