FREEDOM AND CAPITALISM
by Dr. Lawrence Wilson
© April 2019, LD Wilson Consultants, Inc.
The following definitions are very important because some people seek to confuse us with false terminology regarding the subject of capitalism:
DEFINITION OF THE FREE ENTERPRISE ECONOMIC SYSTEM OR FREE MARKET ECONOMY
This is an economy characterized by:
1. Private ownership of most of the means of production and distribution of goods and services. Business owners are allowed to set their own prices and compete for business with each other. This is sometimes called economic freedom.
2. Voluntary exchanges between citizens in which people trade goods or services for cash, or for other goods or services (barter), or any other arrangement that buyers and sellers work out together for their mutual benefit or profit.
3. Free and open competition to keep prices low and improve the quality of products and services through innovation, greater efficiency and other means.
4. Minimal barriers to starting and running a business. For examples, there are few fees, little paperwork required, and taxes are not excessive.
5. Open and free markets where people exchange goods and services, private banking, and other institutions that support a market economy.
6. For best results, there must be laws that prevent lying (or fraud), stealing, murder, rape and other crimes. Our laws are firmly based on Judeo-Christian religious values such as the Ten Commandments of Moses that state: Thou shall not steal, Thou shall not murder, and Thou shall not bear false witness or lie.
The free enterprise system is by far the most effective economic system ever devised for lifting people and nations out of poverty.
The role of the government in a free enterprise economic system is to:
1. Act as the referee to maintain a level playing field for all participants.
2. Establish laws against fraud, negligence and misrepresentation, and to prosecute cheaters and liars.
3. Pass laws to validate contracts and prosecutes those who break their contracts.
4. The government does not own or control the means of production and distribution of products and services to any large extent.
Today, there are no fully capitalist nations on earth at this time. America was close to it at her founding, and still is among the most capitalist nations. However, the free enterprise system has been under attack for at least 125 years in America. Special interests, which is another name for socialist and communist forces, do not like the people having the power to run their own economy and nation. They want the control.
One of the recent attacks on the free enterprise system in the USA is Obamacare (The Affordable Care Act of 2010). It basically destroys the private health insurance industry and some of the little free enterprise that was left in the area of health care in America.
However, the free market health care system in America was basically destroyed over 100 years ago in America. For more on this topic, please read the articles on the health care system on this site such as Health Care For The New Millenium, The Case Against Medical Licensing, Why Double Digit Inflation Of Health Care Costs?, and others.
DEFINITION OF CAPITALISM
This word was coined, we believe, by Karl Marx who used it in a derogatory sense to describe a free market or free enterprise economic system.
DEFINITION OF LAISSEZ FAIRE
This is a phrase in the French language used to describe a free market or free enterprise economic system. It roughly means let them do or make what they wish.
THE AUSTRIAN SCHOOL OF ECONOMICS
This is the organized economic school of thought that justifies, supports and explains how and why a free market or free enterprise economic system operates and why it is far superior to socialism or communism.
It began early in the 20th century with the writings and work of an Austrian economist, Ludwig Von Mises. Another of its founders was Frederich Hayek. Eventually, Von Mises moved to the United States, where he continued his research.
It began at a time when communist thugs were taking charge of nations such as the Soviet Union and Eastern Europe. They justified their slaughter of millions of people using communist and socialist rhetoric. Ludwig Von Mises and other free market economists needed to counter these false arguments and show that the communists really just wanted power and little else.
THE CHICAGO SCHOOL OF ECONOMICS
This is another school of economic thought similar to Austrian economics based on the work of Milton Friedman. He was another 20th century economist who worked at the University of Chicago. Hence the name, the Chicago school of economics. It is similar to the Austrian school of economics.
The rest of the definitions below are used to describe an opposing economic system that is popular in the world today:
COMMAND AND CONTROL ECONOMY
This is a general term that describes any nation’s economy that is tightly controlled by a powerful central government. In this type of economy, the government makes most of the important economic decisions.
These often include which goods and services will be produced, how they will be produced and distributed, how much they will cost, how many workers they will employ, what the wages will be, what the working conditions will be, and other economic decisions.
This type of economy was the system used in the former Soviet Union, and still used to a large extent in Russia and other communist-leaning nations. It is very inefficient and does not work well, at all.
Communist China recognized this and allows a Western-style capitalist economic system or market economy to a degree. However, they do not allow Western-style political freedom, so it is a type of hybrid.
COMMUNISM OR MARXISM
This is a theory about the rise and fall of nations proposed in the 19th century by philosopher, Karl Marx. The basic argument is that a class struggle always occurs between the owners of businesses (he calls them the capitalists) and their employees (whom he calls the proletariat). The theory is that this will continue and worsen until the employees overthrow their employers.
This theory has been shown to be false over and over again. However, it supports tyranny and totalitarian or total government control so it is widely taught in colleges and elsewhere as fact.
According to the theory, communist nations have simply skipped the “capitalist period or society” and have moved immediately into the “more advanced” economic state of “worker control” of the economy and nation.
This is pure nonsense. In fact, the workers do not control the governments of these nations and communism is not a more advanced economic system than capitalism. It is far worse!
However, this theory is used over and over as a justification for autocratic, authoritarian, dictatorial, socialist or totalitarian societies.
This word means an economic system characterized by government ownership or control over most or all of the means of production of goods and services in a nation.
Socialism also implies a large, all-powerful central government that rules in a dictatorial way because this is needed to control the economy of a nation.
For example, the word Nazi used by Adolf Hitler in the mid-20th century Germany means national socialist political party.
LIBERALISM (IN AMERICA)
Originally, a classical liberal was a person who supported the concepts of the founders of America such as George Washington, Thomas Jefferson and others. These ideas were basically that a government is there to serve the people, and that it governs only with the consent of the governed. Government’s role must be limited and government must remain small. Its role is to protect the rights and freedoms of the individual, and not to “rule over them” and control their actions.
Today, the word liberal has been taken over by the socialists and communists. It now means those who support socialistic and communistic economic, political and social policies.
We like radio talk show host Dennis Prager. However, he repeatedly confuses his radio audience by saying that liberals are good people and that they are just deceived by the media. He says they are different from progressives and leftists, other terms that most people use to mean the same thing as liberal – namely, supporting socialistic, communistic economic, political and social policies.
This word was coined by the Italian dictator, Benito Mussolini. He ruled Italy in the early part of in the 20th century.
It meant a close alliance between a large, powerful government and major privately-owned businesses. This was the economic system in Hitler Germany, and in Italy under Mussolini. It is also the system in place in Communist China and in Russia today under the dictator, Vladimir Putin.
This word began to be used at the start of the 20th century in America, primarily. It was a justification and description of the growth of the size and scope of government to control a more technological society. Along with this in America came a significant decline in personal freedom and liberty. This describes the Democratic Party in America.
Either one controls one’s own life or the government controls one’s life. The two are absolutely opposed to one another.
Today, progressive and progressivism means the same thing as liberalism and leftism.
Collectivist and collectivism are other words to describe Marxist, communist and socialist economic, political and social policies. It refers any system in which the “collective” is important and the individual is not important.
Its opposite is capitalism, freedom or liberty. Here the rights of each individual are most important and the government must respect them.
THE WELFARE STATE OR REDISTRIBUTIONIST STATE
These terms describe an economic system in which there is a large central government that redistributes wealth. This means it steals money from the wealthy people and gives it to the poor or really it gives it to their friends.
The government of a welfare state also doles out ‘benefits’ to its citizens, usually because there are not enough jobs because socialist economies do not produce enough jobs to sustain the people.
THE REGULATORY STATE
This is a newer word used to describe the growth of government bureaucracies that regulate many areas of human activity and business activity, supposedly to protect the safety and health of the population.
It is important to point out the regulations are not laws passed by the legislative body of the government that is made up of representatives of the people. The regulations are made by bureaucrats who are not elected and who do not answer to the people. This amounts to tyranny.
In the USA, for example, there are about 50 government agencies that routinely issue regulations covering every area of economic life – regulations about cars, washing machines, clothing, and many other products. There are also regulations for factories, farms, offices, and other work and living locations.
The regulatory agencies are at the national level, state level and local levels of government. There are regulations for communication, transportation, product safety, advertising, food, drugs, medical care, education, construction, and most other activities. This has developed over the past 100 years for the most part. In part, this has made the nation safer. However, it is easy for regulations to 1) favor certain industries or practices that are not helpful, 2) to reward “friends” of the government and punish enemies, 3) to stifle innovation and free competition.
Equal justice. This is the condition in which everyone is treated the same under the law, and all must follow the same laws.
Social justice. This is a code word for communism, socialism or Marxism. Under this system, people are treated differently under the law depending on their social class or other factors.
It is not justice, but rather law enforcement by the whim of men.
Economic justice. This is also a code word for communism, socialism or Marxism. Under this doctrine, people are treated differently under the law depending on their economic class or economic condition. This is also not justice, but law enforcement depending on the whim of men.
Environmental Justice. This is also a codeword for communism, socialism or Marxism. Under this doctrine, people, property or businesses may be treated differently under the law depending on where it is, or its environmental impact. This is also not justice, but law enforcement based on the whim of men.
THE IMPORTANCE OF FREEDOM
This is a short philosophical article about the virtues of freedom. The most important quality needed for development of the human being, or for that matter any being, is the ability to think and make decisions on one’s own. This is a basic principle of this article. If you don’t agree, or are not willing to at least entertain this idea, then you probably will not like this article. If you believe that human beings should be coddled to death from cradle to grave by a benign government bureaucracy, then you will not likely appreciate the rest of this article.
However, it is true that if people are told what to do day and night, they do not learn as much. They do not have the opportunity to make mistakes and suffer the consequences, and they generally do not think very much. As a result, they do not develop as fast mentally or spiritually. The reason is that learning to think clearly and carefully, and suffering the consequences of one’s actions and behavior, are critical parts of mental and spiritual development. It is as though the brain is like your muscles. You must use the brain, or lose it, as the saying goes. The brain must be trained to think clearly and practically.
When human beings are treated like animals at the zoo – fed, housed, free health care, free everything, they tend to languish. This is unfortunate, but it is the truth. Many parents learn the hard way that coddling and spoiling their children by giving them everything just does not build character in most children, for example.
It is the same with adults. Coddling, protecting, spoiling, feeling sorry for them at every turn, and providing all of their needs sounds utopian, and is why socialistic thinking is so appealing. In practice, however, a balance is needed. It is important to protect people, but it is also helpful to allow them the freedom to act, and thus to fail, at times, and to suffer a little here and there.
THIS IS WHY FREEDOM WORKS
The above is why freedom works in the world. It and it alone allows people to progress, to think, to make decisions, to fail and then to learn from their mistakes. Nations such as Communist Russia, Cuba, North Korea, Iran and many others that deny people the freedom to think and make decisions usually do not last long.
These nations are very socialistic, which means a large, powerful government makes most of the decisions. The people are treated more like caged animals in a zoo who are given ‘benefits’ by the government. The benefits are supposedly doled out equally to all, even though this is never the case, in reality. In Communist nations, the Communist party members receive more benefits. In religious dictatorships like Iran, the religious leaders get the most benefits, and so on.
In reality, those who have friends in high places get the most benefits, and the society is not egalitarian, even though that is what is claimed. If there is any egalitarianism, it is that most are equally poor because individual initiative is not rewarded or encouraged.
CAPITALISM IS ECONOMIC FREEDOM
Societies that are built around giving people choices often give them choices politically, economically and socially. These are the three major areas of societal life.
In the political realm, freedom of choice means that the people can choose their leaders, usually through democratic elections. This means that the candidate who receives the most votes gets the job. Politically, freedom also means that the government must be restrained in its police power. That is the purpose of a Constitution. It is a contract between the people and their government that sets down what the people may do and what the government may do. It is like any other contract in that it sets down the agreement between the people and their government. Of course, it must be enforced or it is just a stupid piece of paper.
Sadly, in the United States of America, and even worse in other nations, the intent of the Constitution has been twisted and ruined by corruption and self-serving politicians, but at least the intent is still there in the written words of the US Constitution.
CONSTITUTIONAL SAFEGUARDS OF FREEDOM
Some of the safeguards for freedom are the right to speak freely, to write and report freely, to worship freely, to assemble freely (to hold meetings and protest freely), to petition the government for grievances without being arrested, to own weapons freely to defend one’s property freely, and to be safe against unreasonable searches and seizures of property by the government.
Others specified in the US Constitution are to have a trial by jury if accused of a crime, to have a speedy trial so one does not languish in jail, to have an attorney given to one to defend one if accused and one cannot afford an attorney, to travel freely, and to not be forced into a false confession by torture.
Many others, in fact, are in the US Constitution, such as the right to a Republican form of state and local government. This is a critical one. It means free elections and state constitutions that must abide by and be aligned with and of the same form as the federal or US Constitution.
Even many more freedoms were intended by the founders of America and, to some degree, in Great Britain during her better days of the 18th century, though she has declined today somewhat in this area of freedom thanks to growing socialism and the European Union, which is quite socialistic. These are examples of political freedoms.
THE FREEDOM TO CONTRACT WITH OTHERS
Now let us discuss economic freedoms. In the US Constitution it states that no state may enact a law abridging the right to contract. This means that people can make all sorts of agreements or contracts with other people.
This is the main idea of economic freedom. It means that if I need a carton of milk, I can contract with the farmer down the street to pay him or her some money, and in return the farmer will give me some milk.
If I want an automobile, I can contract with General Motors or Toyota, or anyone else I wish who provides automobiles, to purchase a car, lease a car, trade for a car or any other economic arrangement provided both parties agree to the contract. Also, this implies that I can start a car company, or any other type of business I wish.
It means that if the two participants in the contract agree to it, we can barter, we can trade, we can pay cash, we can use credit cards, we can pay for things with silver dollars, or with cigarettes, or any form of money or value can be exchanged to make the deal or swap of goods or services. This is economic freedom at its best.
CAPITALISM IS THE SYSTEM OF ECONOMICS BASED UPON PERSONAL FREEDOM AND THE RIGHT TO CONTRACT VOLUNTARILY
That is all that capitalism is. The word itself, I believe, was used by Karl Marx in a derogatory sense. A better term to describe this type of economic activity is the free enterprise system of economics. It is a system based upon freedom to contract, and the freedom to garner and use your resources, whatever they may be, to own, control and improve the means of production and distribution of goods and services in society.
It is based on the presumption or idea that individuals and groups of individuals working for their own selfish gain, called profit in economic theory, can do a better job of satisfying economic needs of the population than can a centrally-planned economy.
This is to be contrasted with socialism, progressivism, fascism or communism. These vary somewhat, but the essential idea is that most economic resources - including factories, raw materials, land and more - are largely owned or controlled by a large central government that also makes most of the decisions how they will be used.
FREE ENTERPRISE ALSO REQUIRES THE RULE OF LAW, AND IT REQUIRES A VIRTUOUS, JUDEO-CHRISTIAN POPULATION TO WORK CORRECTLY
Integral parts of the free enterprise system is a system of laws to enforce contracts, for example, some willingness by all parties to follow the laws, and a system of equal justice under the law and due process to promote and carry out the laws.
For example, some people say that Hong Kong and perhaps Singapore are today the most capitalistic nations in our world. Indeed, the areas are wealthy. However, this is not true free enterprise, I would say, because there is a lot of crime, rape, filth and other problems in Hong Kong, in particular. Singapore is more of a police state, politically, so this is not exactly a “free society” by any means. The USA is still the primary free enterprise nation, if one considers it from the perspective of political, social and economic freedom to live as one pleases, as long as one does not infringe on the freedom of others.
FREE ENTERPRISE DEVELOPS SOULS AND PLANETS
I submit that the free enterprise system is the system that develops people and entire planets the fastest. It is also a system, I am told, that describes the journey of souls as they mature. This is explained in texts such as the Hebrew and Christian Bibles. This is important because we all are souls at one level.
The free enterprise system seems cruel and unfeeling because it offers souls opportunities for learning, for failing, and for developing itself that can only come with freedom and with the freedom to fail utterly. This is the part of the equation, both economically and spiritually, that the liberals either fail to realize or just find repugnant.
Socialism, communism and progressivism or liberalism are more geared to the body only, not to the soul. The soul yearns for experiences, even if it means disease, failure, rape or death of the body. In contrast, the body prefers comfort, sex, peace, love and dependency on others to do the dirty work, so to speak. This is a description of the promise of socialism, though not the reality because at this time, the earth is not technologically advanced enough to excuse everyone from working.
CAPITALISM OR FREE ENTERPRISE WORKS WELL
Let us be very clear about a fact. Capitalism has helped more people to be lifted out of poverty, slavery and disease than any other economic system in existence. This needs to be taught in school, and not the socialistic nonsense that corporations always abuse poor people, and so on. If abuse occurs, it is because capitalism is not practiced very often.
CRONY CAPITALISM OR FASCISM
In most nations, sadly including the USA these days, true capitalism is gone and it has been replaced, to some degree, with what is called crony capitalism or fascism. This is a corrupt system of economics in which the government passes laws that favor some companies or industries over others, and the government gives special benefits to some, and punishes others – usually it benefits those who give money to the legislator’s election campaigns and punishes those who do not.
However, at times crony capitalism is just a matter of ideology, which is also not capitalism. For example, the government may favor “green energy” companies over others, even if it makes no sense economically and just wastes money. What the legislators fail to understand is that if someone has a wonderful “green energy” idea, it will be developed if businessmen are just allowed to do what they do best - research, invest, and develop new ways to help society. Usually, if it is not developed, such as using water to power our automobiles (which works) it is because the technology is not allowed by someone, such as the energy cartel in this case. It is not a failure of capitalism, as some claim. It is simply that capitalism is not permitted in many areas today.
CAPITALISM IN HEALTH CARE
Nowhere is crony capitalism, corruption and socialistic thinking more evident to me than in the area of health care, for example. Natural healing works very well for many diseases. However, it is simply not permitted in the hospitals, and doctors who deviate from the dictates of their medical boards lose their medical license and cannot even practice medicine, even if they help people. This is not a “market failure”. This is a cartel ruling an industry with an iron fist.
Capitalism is the ability to garner your resources, use your head, make products that other people want, and to barter them, sell them, buy them and contract with others any way that two agree to do it by voluntary means.
Capitalism, by the way, is not just an economic system. It applies to your personal life as well. One could say it is also the freedom to contract with others to get married, have children, learn a career and practice, and so on. The principle is the same. It is the freedom to garner your resources and use your head to make wise decisions for yourself and hopefully for everyone else. This is capitalism, and this needs to be taught in school.
Capitalism works well when properly understood and when cheating is not allowed. When it is corrupted by bad laws, it does not work as well. Here are some ways this happens:
Croney capitalism. This occurs when the government, usually, picks out winners among companies and gives them generous loans that they often know will never be repaid. Usually, the heads of the companies donate money to the president’s or leader’s campaigns to be elected, and then the leaders turn around and give public money – money collected from the people – back to their friends in businesses. This is the classic type of croney capitalism that has ruined America, China and other nations to a degree.
This is simply corruption, by the way. It sometimes goes by names such as fascism, or private-public partnerships, or non-governmental entities like Fannie Mae and Freddie Mac.
Other corporate problems in capitalism. These include simple stealing, lying, cheating, murdering your adversaries, and general corruption such as bribing government officials to pass laws outlawing your competition, forcing them to subsidize your product or service but not the products of other companies, and so on.
These are all serious problems with capitalism, but it is important to note that they are really problems with human behavior. In other words, if you get rid of capitalism, you will not get rid of these problems. In fact, they are usually worse under socialism. Socialism, in its pure form, is government control of the means of production or factories, farms, etc. However, what occurred in the former Soviet Union, and what occurs today in Red China, Russia, and other socialist or communist nations is that the government bureaucrats and technocrats who run the factories and farms are extremely corrupt. They siphon off money for themselves and their friends. They cheat, they lie, they steal, they bribe and they don’t hesitate to kill anyone who interferes with their schemes.
Even worse, the enormous power government bureaucrats and leaders have over the economy and political power in socialist nations leads them to become militaristic in all cases. This is occurring in Red China today. They are becoming the next Hitler. They love the idea of ruling the world, as do all very powerful people. The threat to our world is not the corporations like Monsanto, though I don’t like their genetically modified seeds any more than anyone else. The real threat is socialism and communism – very similar ideas, in Red China. Monsanto is not building nuclear submarines and bombs at an unprecedented pace. Red China is doing this, with help from their North Korean neighbors. It is important to be very clear who is the real problem in the world today.
So the left wing people are mistaken. The college professors are mistaken. The people are ignorant, and this article intends to clear this up.
I want to recommend a book called Conscious Capitalism co-authored by John Mackey, CEO of Whole Foods Company. It explains the above and a new vision for capitalism in excellent and readable terms.
LOVE VERSUS CREATING DEPENDENCY
One may think that love is giving people “benefits”. Indeed, this is a form of love, or perhaps spoiling. But another kind of love is giving people choices and opportunities. This allows them to learn and yes, to fail, at times. It is okay to have private safety nets if people fail, but it is actually more loving to give people choices and freedom.
One of the main problems with Marxism, socialism, communism and fascism is these systems of economics and politics are based on taking people’s power and making them dependent. If one loves others, one allows others to have freedom, individual rights, and the ability to earn money and keep what they earn.
This is the basic difference between Marxism and capitalism at the very deepest level. It is a choice between love of others and a type of fear of the people that causes the leaders of some nations to want to make everyone dependent upon them for everything in life. This is actually a principle that is spiritual at its roots.
THE ROLE OF THE GOVERNMENT
Governments should help their people develop themselves, and this is why freedom in any sphere is ultimately helpful, while slavery, welfare, or servitude in any form is ultimately harmful to a society.
One of the great secrets of America, at least in the past, has been the lack of welfare and the development of the citizen’s own self-reliance. An important part of this has been the allowing of citizens to own land, to operate businesses and to fail if conditions or decisions are incorrect. As explained above, this system of economics is called free enterprise, market capitalism or laissez faire. Our nation was founded upon these principles, and the people have prospered enormously when the principles were adhered to. Let us examine this economic system in more detail.
WHAT IS FREE MARKET CAPITALISM?
Capitalism is the economic system used today to some degree in many nations of the world. Its qualities consists of three major tenets:
1. People are free to own property, even if that is a push cart or a vegetable stand in a marketplace.
2. People are allowed to earn money by making a “profit”. Profit is the difference between what you buy something for and what you sell it for. So if a person has a vegetable stand and they buy carrots for $1.00 a bundle and sell them for $2.00 a bundle, the profit is one dollar per bundle. With this profit, the person pays all the expenses of traveling to the market, buying his products, and other expenses, and hopefully has some leftover with which to buy other goods and services and to live on. This is the essence of capitalism and profit.
3. People are allowed to keep what they earn. They may pay some taxes, but they are generally allowed to keep most of their money.
4. Information about products and services is made available freely, and not censored by the government. This is called a marketplace where people can make rational decisions based on true information.
Other Qualities. Each person is also liable for any problems or illegal activities that arise from their business. Also, all are required to compete with each other for business on an equal footing. In other words, in free market capitalism, the government should not fund one over another, or subsidize anyone, or treat anyone differently than anyone else. Also, the government does not “bail out” anyone, there is no welfare system and people must find their own way, their own employment and their own food and lodging.
In other words, the role of the government in the economic sphere is simply to be a “referee” to maintain a level playing field for all business activity, to make laws to maintain that level playing field, and to catch and bring to justice anyone who violates the basic laws against fraud, misrepresentation, robbery or murder.
The laws are there to protect the right of each person to do his business as he sees fit, as long as each person does not violate the economic and political rights of anyone else. This is very important today to understand that the government can function mainly as a referee and a law enforcer, NOT as a provider of goods, services, welfare, subsidies, favors and other things that are subject to political whim and power groups.
THE WEALTH OF NATIONS
This economic system, though it is more than an economic system, was first elaborated in detail by men such as Adam Smith in his famous book, The Wealth Of Nations. Dr. Smith studied the most successful nations and realized that all shared these basic principles of commerce. He put the whole thing together and coined a lot of the terms we take for granted today in economics.
One of the most famous of his ideas was that of the “hidden hand of the market”. It is actually quite brilliant. It is the idea that if there is any good or service that is needed in society, people will pay more for it and this will attract people he called entrepreneurs into this business, no matter what it is. It could be garbage collection or dishwashing, for example. But if it is needed, the price will go up and more people will begin to offer the service, until the price comes down and then others will not do this, but will choose another line of work where the demand is greater.
The concept of the hidden hand of the marketplace means more than this, however. It is a simple phrase to describe the entire self-regulating quality of a marketplace and its ability to balance itself and work for the good of all. It is actually a whole systems concept in which the whole is greater than the sum of the parts. It means that one cannot predict the behavior of the marketplace, even if one knows all the players. (This same principle is used in nutritional balancing science, which is another whole system approach to living.)
This concept works beautifully, but some people have trouble trusting it, or simply do not like it because they cannot control it. Governments, in particular, often like to meddle in the marketplace by favoring certain industries or certain companies. This always causes problems, but governments persist in this because they, or their friends in industry or academia or elsewhere, want to control the nation for their own gain, rather than allow the economy to work for the good of the people.
In this regard, capitalism is a very complex, self-regulating economic system. Few people understand this, so they are always trying to meddle and ‘fix’ what seem to by ‘symptoms’ of problems with it, such as how to care for the poor or ill, or what to do about pollution, for example. Let us discuss these problems with capitalism.
THE SEEMING HARSHNESS OF CAPITALISM
Seemingly exploiting the workers. Karl Marx wrote his thesis, Das Capital, based on what he believed was the “exploitation of the workers” by the capitalist bosses. They rode around in fancy carriages, while the workers toiled in the factories for low wages. This is one aspect of the harshness of capitalism. Of course, what Marx did not understand is that the workers had few other choices. In other words, they could work just as hard or harder on the farms, perhaps, for even less money, or they could be beggars and have an even worse life. He did not understand that human progress is slow, and the factory life, while certainly not ideal, offered the working people more, so they flocked to it by the millions and are still doing so all over the world for exactly the same reasons.
The harshness of allowing a business to fail. It seems so harsh, so inhuman, some would say, to allow a business to fail. It puts thousands or more out of work, for example. The resources must be sold off at auction prices and sometimes the creditors of the business are the seeming victims as well. They may not get paid for their services and they might fail as well.
The public seems to lose out, too, if an important type of business like a bank or General Motors fails. Depositors at the bank may lose their money, for example. People who have bought General Motors cars might now be able to have them serviced properly if the company fails. This is one seeming type of harshness and inhumanity of free market capitalism.
The response to this criticism must be understood clearly. It is that 1) all economic activity has risk. One cannot simply deny the risk by bailing out every failure. If one does this, failure becomes the new standard and no one will try very hard to succeed. This is exactly what has happened with our banks, today, and with General Motors today. They have much less incentive to try hard to do a good job and earn money because they believe they will be bailed out, also called ‘too big to fail’. This is, in fact, nothing but corruption at high levels of government.
In a free enterprise economy, if banks or anyone cannot act responsibly, they should fail and others would buy up their assets at bargain prices and do a better job. That is the way things are done in market economies, and it works well if one leaves the system alone. Only corruption causes bailouts. I am familiar with the arguments that our national security and all depend on big banks and big car companies. I reject all of this. I think these are lies told to the public. Once again, the principle works that if one company fails, others will buy up their assets and continue their production, if it is economically viable. If it is not viable, then it should fail because why produce products and services that no one wants?
Another criticism of capitalism is that it causes irresponsible pollution of the air, water and everything else. This is completely untrue. First, in true capitalism, companies are totally responsible for their property and any damage they do the property of others. Thus, if they pollute the air, water or land, they are totally responsible. They would be sued out of business for polluting the property of others. Sadly, environmental laws have been passed that exempt corporations from this responsibility, in many cases. As a result, companies are allowed to dump a certain amount of waste products, for example, without consequence. This is one cause of pollution in many cases, and is the result of corruption, not capitalism.
Another aspect of pollution is the fact that in a capitalist nation, new technology that is cleaner will always win out over older, polluting technology, providing it is cost effective. This does not happen enough in America and everywhere else because too many laws protect the old technologies. For example, the internal combustion engine probably would be on the scrapheap of history except for the fact that laws actually protect its use in automobiles, mainly. I know of a man who was running his car on other fuels and was arrested and told he could not use his alternative system. These laws, of which there are many, such as oil depletion allowances and others, are the product of corruption and the oil cartel, among other groups. This is not capitalism, but corruption and cartel politics.
It is incorrect to blame capitalism, when the very people who are punished by these laws are often the entepreneurs or capitalists, and the ones who punish them are the cartel or monopolists, who are basically socialists in disguise because they are people who want total control of the oil or health or some other marketplace, so they pass licensing and other restrictive laws that the car companies and everyone else must abide by or go to jail. There is nothing like this allowed in a capitalist society.
UNEVEN DISTRIBUTION OF WEALTH
This is another criticism of free market capitalism. Some become very rich, while others remain or it seems, are made poor by the system. This is the main objection of the socialists to capitalism.
On the surface, this criticism seems valid. Pure capitalism seems like a totally selfish system in which one looks out for oneself to get whatever one can financially. However, this is not true. The reason is that in a capitalist system, the only way one gets paid is to offer a product or service that others want and therefore are willing to pay for. This is a great secret of business that is sometimes expressed as “the customer is always right”. In other words, one must look out for others, not just for oneself. This fact is overlooked by the socialists.
As a result, in fact, in socialist nations the people are much worse off because the leaders, who claim to want to do for the people, do not know and often do not care what the people really want. Instead, they give the people what they, the leaders, think the people want or should have, and not what the people really want. In other words, free enterprise economies are usually much less “selfish” and narrow-minded than socialized or command economies in which a central authority dictates which products and services will exist and their prices.
Now, it is true that in capitalist nations, some become much wealthier than others. However, the reason for this are important to consider. An important reason this occurs is that some are willing to work harder. Socialist systems favor laziness, in contrast. The willingness to work hard is a great benefit for society, so it would make sense that these people are paid more for their efforts.
One must not just work harder to make more money. One must also work in a way that satisfies people’s needs. In a capitalist system, working hard at building products that no one wants does not make one money, in other words. One must also use one’s brain and other abilities in a way that satisfies the needs of the people. This, too, is a benefit, in general, so it makes sense these people would receive more compensation.
What occurs today, however, is often due to corruption. For example, certain industries have passed laws that exclude others or give themselves special tax breaks. These include the oil industry, the real estate industry, the medical industry and others. So people who work in these industries often make a lot of money even if they don’t work hard or satisfy people’s real needs. However, this is not a problem with capitalism, but a problem with human integrity and not allowing pure capitalism to exist in America and elsewhere because the government tinkers with it for various reasons.
CARING FOR THE POOR AND THOSE WHO ARE DISABLED, OLD OR CANNOT WORK FOR SOME REASON
This is another criticism of capitalism. It takes the attitude that if you don’t work, you don’t eat. This is true. Capitalism is about the production of goods and services in the most efficient manner. It must be coupled with a moral code, such as that in the bible, that commands people to love their neighbors as themselves, and to care for others. What occurs in pure capitalist nations, and used to occur more in America when capitalism was purer, is the development of private welfare.
Whether organized by churches or other civic groups and associations, groups spring up everywhere to care for the poor, the sick, the old, the disabled and other who cannot produce economically. This fact is not taught in schools, but is the absolute truth. The idea that the poor will just languish on the streets without government intervention is a complete lie that is repeated endlessly on television and in the universities today.
In fact, private welfare, private hospital care and private old age care tend to assist people to develop themselves spiritually much more than the entitlement mentality of a so-called right to health care and welfare that many believe in today. This is discussed in another article on this website called What is Compassion? What is Charity?
The moral and soul dimension of human beings is the most important one, as stated earlier. Free enterprise or capitalism, for all its seeming harshness, in fact helps people develop themselves. Thus it is a helpful system, much moreso that the welfare state concept, for example, and far more than slavery, feudalism and other systems that have been used in the near and distant past in many civilizations.
The more that each person’s activities are pre-determined or controlled by laws, rules, regulations, prohibitions or mandates, the less each person is able to exercise moral judgment and the less he or she is responsible for behavior. As a result, freedom is an absolute requirement for moral behavior and development.