In Defense of Capitalism

Right now, capitalism is a hot topic in the political sphere. But capitalism is about economics, not politics. It is an economic theory, or system, or whatever, that operates on a set of loose rules: if more people want iPods than Apple can make, the prices go up; if consumers are knowledgeable then a merchant who sells crappy goods won't last very long... etc.

It bothers me when I hear about how capitalism is evil, or that the poverty in this country is due to "the free market." Capitalism isn't a faith, or a lifestyle, or a person--it's a description of how a system works. Capitalism isn't bad; greed and selfishness are bad. And for some reason, people who support some sort of hybrid socialistic capitalism think that greed and selfishness will go away if we have enough regulation. Does that really make any sense to anyone? Greed and selfishness only go away if people learn to be kind and loving, and if everyone in the world was kind and loving, it really wouldn't matter what economic system a country used.

Okay, I'll admit it: capitalism doesn't make everyone rich. I'll also admit that "poor" has to exist in order for "rich" to exist. Honestly, "rich" is always defined in relation to something else. And what we consider to be poor now would have been a luxurious lifestyle a few centuries ago. Capitalists generally understand that results aren't going to be even... but capitalists also understand most people would give up guaranteed mediocrity in exchange for nearly endless opportunity. And so we enter the classic debate of free markets vs. government.

Those who oppose free markets are quick to point out the underprivileged people who are left behind. The rich have better schools and better health care. Millions of Americans are uninsured, and millions more lost half of their retirement because of the free market. "If we just provide proper regulation and more government support, millions of Americans will have better lives." Well I think that's fantastic. I think everyone should have health care and everyone should have a great education. We can argue all day over whether the government or consumers would do a better job of deciding where money should go, but that's really not the point. The true issue concerns the future status of all of the amazing things the markets and capitalism have done. Almost every modern convenience you have in your lives was brought about by competing companies fighting for dollars. Universities in this country are generally regarded as the best in this world, and that is largely due to the fact that they have to compete for prestige and the best students. We need to address the 10% of the economy that isn't working very well, but we cannot do it at the expense of the other 90%.

Now, this isn't an argument against redistribution of wealth, this is an argument against the government getting in the way of freedom, innovation, and creativity. Every dollar the government spends is one dollar that someone else doesn't get to decide how to spend.


Adam said...

Nice post Jonathan,
I have always thought the same thing about the way capitalism works. It is greed that runs us into trouble more than any other thing in the business world. After all, nobody I've ever known has said "I have enough money." People are always wanting more, are never satisfied, and will often do anything they can to get it. Thus, the government steps in to regulate when regular businessmen take it too far. I often wonder what it would be like if the government no longer had to intervene because no such thing existed. Would the market fall into true equilibrium? I don't think we will ever know.

Thomas said...

I also agree. However, I am of the opinion that if everybody thought the same way and got along, Communism, true economic Communism, would be a great system. The problem is that that's not how it works and, like you said, everybody is jealous of what everyone else has and we always want more.

While we might not be in some of the messes that we are right now, such as being dependent on foreign oil, our capitalist society is enabling us to effect change and work through these problems to
"find the cure", so to say. Capitalism breeds innovation which is what made our country great.

Governmental regulation is, in my opinion, always bad. There is always politics involved and politicians do stupid things for money, just like a lot of us do.

Dr. Tufte said...

What does this have to do with Chapters 1-3 of the text?