The Case for Capitalism

Having returned from my week-long seminar on free-market economics, it feels like a good time to address a question that seems to be at the forefront of the public mind—is Capitalism helping or hurting our society?  Those who pose this question are typically concerned that in an economic system where human actions are motivated by profits, the businessmen will always cheat, the wealthy will always win, and everyone else will spend their lives trying to keep their heads above water and have a decent life. There is also a deep concern for the poor, who—without the means to “pay up”—will be marginalized and forgotten. And, of course, we recognize the unattractiveness of incessant advertising and self-gratification, envisioning a future world similar to the one depicted in Pixar’s WALL-E, in which overweight and ignorant pseudo-humanoids are carted around a corporate space-city while the earth lies rotting from over-consumption.

Fear not, my friends—that world will only exist in a movie script. Capitalism certainly has its drawbacks, but as I hope to explain, it is the most effective and least dangerous method of human progress known to man.

WHAT IS CAPITALISM?
Free trade, free enterprise, free markets… they all mean the same thing: voluntary exchange. It’s the idea that each person has the right to save, invest or spend their resources in whatever manner they see fit. You could put this under the “pursuit of happiness” column, but we have to recognize that “happiness” (quality of life) is completely subjective. Given limited choices, one person might prefer ice cream over cake, while another prefers cake over ice cream. For some, the choices are less luxurious, as they must decide between clean water and bread. Nevertheless, we exchange our time, talents, energy and goods for the things we value at any given moment. The freedom to do this without government regulation is the essence of Capitalism.

THE ECONOMIC ARGUMENT
Imagine two farmers. Person A has a goat, and person B has a donkey. They are both useful, but for different things. It just so happens that they each have what the other needs, so they trade. The word “trade” tends to connote an even exchange; one thing for another thing of equal value. But this is false. People don’t trade if they see absolutely zero benefit. Rather, they exchange for something more valuable to them than what they had to begin with. Trade—whether farm animals or standardized currency—always results in both parties gaining something. The end result is a net increase in wealth/happiness/quality of life/standard of living.

The very fact that trade has this effect makes people want to participate, but trade is impossible without something to offer. Therefore, the opportunity to pursue trade without limitation provides a valuable incentive to be productive—to labor and create. When millions of people are striving to do this, there is real growth in the economy, and an increase in the standard of living for all who participate (imagine a system where that incentive does not exist). Thus, one might ask, “what about those who don’t, or can’t, participate?” They benefit too, since as goods become more available, they also become more affordable. This is only one of several ways the poor actually end up better off.

THE MORAL ARGUMENT
The moral aspect of capitalism is apparent on at least two fronts: one in its cause, and the other in its effect. While the driving force of free trade is ultimately to improve one’s own life, it is inherently and entirely dependent on service to others. If you intend to make an exchange, the good or service you offer must be of some value to the other person. That’s just common sense. Therefore, the only way to acquire wealth—outside of inheritance or gambling—is by looking for ways to meet the needs of others in such a way the makes an exchange mutually beneficial. This requires the businessman to know what his customers are willing to pay, and keep his costs down below that mark. Thus, the wealthy CEO can get his burger for $20 at the best place in town, and the janitor can get his for $1 at the fast-food joint. You can look at this with disdain because the wealthy get to live so much “better”, but you can also look at this with thanks because the hungry are eating burgers instead of cornmeal. The opportunity and competition provided in a free market results in more people having more things at lower prices—not just the wealthy.

For those that are so unproductive that they cannot acquire even the essentials of life, it is feared that they must be left to government assistance through tax dollars. But in a world where goods are cheap, economic mobility is wide open, and massive wealth can be achieved by more individuals, the old, sick and/or destitute can be supported by voluntary gifts. Thousands of hospitals, libraries, schools, food pantries, shelters and other services are provided every day through the generous donations of wealthy and many middle-class individuals. Private organizations range from neighborhood community groups and centers to nation-wide entities like the Red Cross, Salvation Army and YMCA. This type of charity giving is only prevalent in a capitalist economy where financial growth is a constant and personal responsibility is the cornerstone. The private “market” has been far better at addressing the issues of disease and poverty than any government agency. Just look at the Texas Medical Center, here in Houston—where people come from all over the world to receive the very best treatment available, and new methods are being developed every year. The situation for the poor would be immensely better if government regulation had not already impeded advancements in many areas.

THE LIBERTY ARGUMENT
There is but one alternative to a system where choices are made by the individual, and that is a system where choices are given to the individual. And who is the giver? To say “government” is too ambiguous, so we can be more specific by saying “people who are elected or appointed to public office, who are paid in taxes, and who have many different interests and influencing pressures.” That seems a bit more accurate. So the idea behind placing government in charge of economic activity is that politicians and bureaucrats are better equipped to judge the what, when, where and how of everyone else’s needs and wants. That’s both insane and dangerous.

“But,” the advocates of government regulation say, “someone’s got to stop companies from doing harmful things!” And this is true. But the proper judge of good or bad business is the consumer—not government. Why must we trade a power that is temporary and voluntary for one that is permanent and requisite? All that is done by placing government over business is the trading of one selfish interest for a greater one—denying the rights of buyers and sellers, while increasing the power of politicians and the associations which influence them.

Did the Federal agency who examined the BP well prevent the explosion and subsequent leak?  Has the Department of Education improved U.S. schools?  Has the War on Drugs or the War on Poverty reduced either one of these in the last 30 years?  Not at all. For reasons that need not be included here, government agencies are both expensive and ineffective—especially when compared to the private market. This isn’t an epiphany. Washington D.C. is widely criticized for its corruption and deal-making. If all of this is true, then where does the demand for more government control come from? Well, we can name at least one place: Washington D.C.

Liberty is a precious and valuable thing that is easily taken for granted. There is a constant temptation to use the tool of law and regulation to achieve the changes we want to see in society, but we must be extremely careful about what keys we choose to hand to political authorities. Eventually we will find that we are the ones inside the cell, at which point it will be too late.

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A special keynote/discussion titled “Is Capitalism Worth Saving?” will be held on June 30th at Houston Baptist University and will include Dr. Arthur C. Brooks, President of the American Enterprise Institute, and Dr. Paul Bonicelli, HBU Provost. Go here for more info.

Special thanks to BureauCrash.com for the “Enjoy Capitalism” image.


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