Government, although not perfect, helps correct and protect us from the deficiencies of capitalism. Markets are prone to fail and unregulated markets lead to speculative bubbles. The thought is thought an economic evolution, the paradigm of free-market capitalism will yield to the managed economy.
For example, the government saved us during the Great Depression and the 2008 crisis. It helps to curb and in some cases correct injustices, particularly inequality, by giving the underdog the same opportunities as the rich and entitled.
This trend is politically seen in the rise of Alexandria Ocasio-Cortez and Bernie Sanders.
I understand 100% of the discontent with capitalism. From my perspective, big pharmaceuticals have created an opiate crisis, military spending on undeclared wars takes advantages of people’s patriotism. Inequality is perpetuated as the rich get richer and the poor, even with money spend, seem to get poor, by any measure including the Gini coefficient.
I am American and European and in Europe, the general consciousness is the government should promote the greater good. Look at countries like Norway or Sweden, they have a mixed market and social economy, yet they seem to do well.
- So the question is, has a history not proven that capitalism is an ideology, that is less socially optimal than a mixed market economy?
- My answer is unequivocally Capitalism leads to prosperity and equality and any honest researcher would check the facts of history will see the evidence.
Arguments for Capitalism
It will look at this question mostly from the perspective of a moral issue in society, as I believe the war waged for and against capitalism is largely fueled by people’s moral sentiment. When you clarify this issue, the answer to the question is capitalism over will be clear.
Here are some arguments for Capitalism people ignore:
- If you look at the here: freedom index or here: freedom index map there is a strong statistical correlation between freedom and wealth. In fact, it is perhaps the strongest indicator. There is a reason for that.
- The government created and worsened the Great Depression and the Great Recession. If you understand that FDR and the new dedal helped and eventually WWII got us out of the Depression, you should check your facts. If it was not for government action, we would have been better off. The Depression would not have been a decade but could have been two years, which was the average length of the business cycle before Fiscal and Federal Reserve action.
- Fiat currency and the Federal Reserve are responsible for much of the inequalities created because there are always first and last receivers of money. Big banks and government get the money first and the people get it last. This exacerbates the Gini coefficient. Note the increase after we went off the gold standard.
- Government spending makes us poorer
- Norway, they got rich because of oil, not socialism, and Sweden escaped the damage of WWII by supplying the Germans with strategic metals. There is always more to the story than simply saying, look at this country or that.
- Ireland got rich because of free markets.
- When people take advantage of the system it is the example rather than the rule. This is what people look to. Capitalism with all its shortcomings better than social engineering.
- The Grand Failure by Zbigniew Brzezinski details the loss of 100 million lives from humanity’s experiment with planned economies in the 20th century. When you see people as inputs in your design, the intention is paradoxically nullified by the practical implication of the system. How can you argue with that?
What is capitalism
Capitalism is the free movement of labor and capital where goods and services are exchanged at an arm-length transaction on both sides to satisfy needs and both parties derived utility from the exchange and greater happiness. Productive and allocative efficiency results.
Would you want postal employees running Google?
People meet other people to trade something they have to something they want. What people can trade is not only physical tangible goods but intangibles goods. This includes intellectual goods and services and work. I go to work someone gives me something for this.
The name Capitalism comes from the word capital. There is intellectual capital and physical capital. You as a free human can choose to trade in either.
An unintended consequence of individual action will result in an optimal equilibrium than a planned economy.
Is Capitalism from God
No. Many people connect America, God, and capitalism as closely related ideas. Capitalism is just the way people trade goods and services. It has nothing to do with Christianity or religion. In fact, the Puritans came to America to set up a Utopian commonwealth where the wealth was shared based on Christian values. So to mix these ideas of capitalism, God and America will alienate some people for do not believe in one of those three.
For example, I am Catholic and I am generally a capitalist. However, my friend is a non-believer and a capitalist. Another friend of mine is a believer, but more socialistic. Therefore, to try to connect capitalism with God in my mind is wrong. God is about transforming your life to be a light for others in this world, not about some abstract economic theory in the aggregate.
Further, Politicians that mix these two ideas in my mind are wrong. When a Politician says ‘God bless you all’ for me it is selling God for votes. If a Politician wants to quietly pray for others this is fine but to broadcast it to get votes is low. If people want to know what a Politician believes they can find it out.
Many Politics on the right and the left try to equate some economics system with values as a whole. They imply that free markets are somehow close to capitalism, republicans do this. Democrats somehow connect capitalism with an evil to be limited. I do not like it. Economics and religion do not mix.
Economics is the study of markets that is it. Capitalism is the system of free movement of labor and capital. Since God himself has not proclaimed one system of economics or politics better than the other, it is we humans that need to determine for our time and society which type of political economy we choose. Therefore, economics does have a social value component, like politics does, but it is not always clear which is optimal for social well being.
What is the free market about
Adam Smith, in fact, was a moral philosopher. He wanted to describe a system of government and the economy, which is the political economy that would result in the optimal happiness for society as a whole. In his mind that was free-market capitalism.
If you try to restrict people from acting on their own enlightened self-interest, society as a whole will be harmed. Further, the converse is true. That is if a government can facilitate people to act on their own enlightened self-interest society as a whole will benefit.
The problem with capitalism – The problem with capitalism is people do not act on in an enlightened way and greed rules over social values.
The problem with restricting capitalism- Governments and politicians are worst than a few greedy bad individuals.
Is capitalism over in the world
No. It is just the beginning. Between the abuse of governments as seen in the history (I live in post-communist Poland, destroyed by national socialism and communist socialism) compared to greedy individuals in corporate America, I think the latter is an exception rather than the rule and the lesser of two evils.
Most people are enlightened. Most people in my experience are hard-working moral people. Do not watch CNN, but look at your neighbors and yourself. Most people are moral and do act on enlightened self-interest. Most people would like to simply work and be free.
Globalization and capitalism China and India are not becoming world players. There is no way they will give up capitalism. It is too efficient. Anything the government does, the free market will do more efficiently. The USA can give up capitalism (it would be foolish in a world economy), with its 240 million people, but the 2.4 billion Chinese and Indians are not going to any time soon. They need it to enrich their people.
Therefore, capitalism is not over. It is just the beginning. People in the USA and the world will stop all the CNN fueled hysteria that we are all doomed because of capitalism. Capitalism is not over and you should just focus on how you can be of value to others personally, rather than hoping for social engineering and the fall of this system as described by Adam Smith.