Capitalism is the reason for our prosperity. Yet today, it is under attack for various reasons.
Since I very strongly believe in capitalism, I’ve had some very strong arguments with people who have disparaged it. Usually I start by addressing whether they understand what capitalism actually is, because sometimes they are confusing it with something else such as oligarchy, or attaching things to it that do not belong. If I determine that they do, in fact, understand what it is, then I move on to asking them what they’d replace it with. Wikipedia has some excellent wording for these, so let me use theirs:
Capitalism is an economic system…There is general agreement that elements of capitalism include private ownership of the means of production, creation of goods or services for profit or income, the accumulation of capital, competitive markets, voluntary exchange and wage labor.
Oligarchy is a form of power structure in which power effectively rests with a small number of people. These people could be distinguished by royalty, wealth, family ties, corporate, or military control. Such states are often controlled by a few prominent families who pass their influence from one generation to the next.
Assuming agreement that these definitions are reasonable, it is evident that they are very different things. Capitalism is not a form of government, though it has a heavy influence on how any government is formed and operates. You could have a capitalist democracy, a capitalist republic (such as the USA), a capitalist oligarchy, or even a capitalist monarchy. Perhaps you can also see why many people confuse the two, because in any system of economics or any form of government there will always be greedy, evil people who have little or no compassion and therefore will attempt to use whatever system is in place to exploit others. People see exploitation in capitalism, and they assume that because capitalism is only about economics, it somehow sanctions or even encourages exploitive or ruthless behavior. But examine again the definition above. Pure capitalism says that:
- I can own private property, such as clothing, houses, cars, or piles of gold.
- I can own a business, direct that business, and make a profit from that business.
- Money is a system of exchange. I can accumulate and own sums of it.
- I cannot be forced to buy or sell – it is my right to choose whether or not to.
- If I perform labor for others, I am paid for it. The amount of pay is negotiated between me and the payer.
There’s nothing in pure capitalism that creates a government or sets policies on almost any aspect of life except establishing money and certain rights that we have to our own life and property. Is there anything in that list that is immoral in any way? Surely no one thinks that private property is immoral or that using money as a form of exchange is immoral. Usually at this point someone says something like, “Well, capitalism doesn’t contain anything about charity! What about my disabled neighbor?” My response is to reiterate that it is an economic system, not a system of government. Charity is not an economic function — it is for individuals first, charitable organizations second, and finally for government. I will say more on this later.
An oligarchy, on the other hand, means that a small number of people who have acquired power — usually by making money — make the rules, and control others’ lives. Some claim that the USA is moving towards becoming an oligarchy, and while we can argue about the degree to which this is happening, it can’t be denied that having large amounts of money does constitute a significant political advantage, especially since election campaigns are so dependent upon large streams of financial contributions. Most full-time politicians can only pursue a career in politics because they have enough money, and it is unusual for anyone of limited means to make a serious entry into politics today. That wasn’t so true in Abraham Lincoln’s time, but it certainly is today, enough so that in my opinion it can be called a form of corruption. It’s a fairly significant flaw in our current form of government, which is a republic, and some fixes to push back on it are desperately needed. The problem is that so many people assume that this corruption is a natural end of capitalism, when in fact corruption is only a natural end of ambition. While it is true that capitalism has facilitated this flavor of it, every society we’ve seen in history has had some form of it from monarchies to communist states where no one owns any private property. Capitalism is not a license to do harm; it’s a blueprint for economic exchange that promotes competition. Competition is a necessary component of a stable, sustainable economic system among humans, and history has proven this to be true over and over again. Even if one denies human nature, the same thing is true in the animal kingdom. Animals compete with each other. I believe that competition is inseparable from the desire to live and thrive that is a necessary component of any living being. Competition, however, does not mean ruthlessness. Ever see a sports game where someone cheats or behaves poorly to win at any price? That kind of play does not bring respect or adulation and no one can reasonably claim that the competitive nature of sports makes such bad behavior necessary. Properly framed, business can be called a sport, and one can play with good sportsmanship or poor sportsmanship. One can play honestly, or one can cheat. The bad behavior is not caused by the nature of the game — it is caused by degrees of evil in the heart of certain players.
In the same way as there are good and bad sports players, there are good capitalists and there are bad capitalists. Good capitalists treat their employees fairly, compete honestly, and win by making the best products or services for consumers. Bad capitalists exploit their workers, lie, cheat, steal, and win by sabotaging others or taking shortcuts such as knowingly putting out unsafe products or services. Both good and bad behavior are possible in capitalism because it’s just a system of economics. It’s not a comprehensive moral code and wasn’t meant to be.
Now let’s examine what we use as other systems of government. When we revoke some of the tenets I’ve laid out above, you get socialism or communism. Again, from Wikipedia:
Socialism is an economic system characterized by social ownership or control of the means of production and cooperative management of the economy, and a political philosophy advocating such a system.
At least part of the right to own private property is still retained, but you can no longer truly own a business to make profits from that business. You can be forced to buy or sell, and government sets prices and wages. This can sound very attractive to people, and socialists are able to paint a lovely picture of it. They point to abuses of bad capitalists and explain that those will be a thing of the past as government will set the terms of employment, wages, and prices, ensuring that everyone will be treated well. They point to the rich, and by exploiting people’s inherent jealousy, convince people that it’s unfair that anyone is rich. It’s a seductive path, but here comes an old quote: “The road to hell is paved with good intentions.” What you’ve done here is reduced competition, and with it, the motivation to do well. Even worse is what I said to someone recently:
The problem with capitalism is that when it is totally unrestrained, human nature causes it to overrun government and it becomes a de-facto government where one group controls most the capital and the much of power to make laws. Justice is denied and the business owners become a ruling class, exploiting the workers.
The problem with socialism is that, by giving away power over business, one group controls most of the capital and all of the power to make laws. Justice is denied and the government becomes a ruling class, exploiting the citizens even more mercilessly than any capitalist society ever could.
Communism is even worse – all of the personal rights above are abolished. From Wikipedia:
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, stateless and socialist society structured upon common ownership of the means of production.
So by some means it is decided what everyone’s portion of everything should be, and in theory, everyone gets that portion. It doesn’t matter what they do, or don’t do. Everyone gets the same quality of housing, everyone gets the same quality of food, everyone gets the same quality of furniture. It should be fairly easy to see how this can’t possibly work. People differ too much. They differ in their abilities. They differ in their ambitions. They even differ in their needs! What do you do in such a system when one person has more food than they feel they need, but less housing than they’d like? With so much freedom of choice gone, no one can feel satisfied. A black market starts up. Even worse, what motivates anyone to excel? If you would make the same money being a sculptor — whether you were good at it, or bad — as an assembly line worker, which would most people choose? I’ve had people refer to “Plato’s Republic” and tell me that the way to fix the job assignment problem is for people to take tests for the purpose of assigning them to the job they are best at. What happens when you’re not good enough at anything you actually want to do? Even if you get a job you want, what motivates you to produce? We’ve seen the effects of these and other problems in communist Russia. When they began to privatize farms, the private farms were out producing the public ones by more than a factor of ten. Some might not regard this as a problem, but then they’re not seeing the big picture. The level of efficiency drops to the point where things don’t work out well for anyone, and the only reason they work at all is because government takes on increasing amounts of power to force people into producing. This ends up being called fascism.
F.A. Hayek wrote an excellent book called “The Road to Serfdom” which discusses capitalism and competition versus socialism or communism, which always devolve into fascism. I also really like the quote from JFK in Berlin:
“Freedom has many difficulties, and democracy is not perfect. But we have never had to put a wall up to keep our people in!
No socialist or communist society in history can say the same. Central planning can never be as anywhere near as efficient as the free market. When you set price floors or ceilings, you get shortages and black markets pop up – vestiges of capitalism that leak in because capitalism is far more true to human nature. Reduced competition causes a lack of motivation to innovate or even to produce. The quality of life in general degrades, and the only way to fight the degradation is for government to step in and issue orders. For example, workers end up with demands for minimum levels of production regardless of pay, and are punished for failure. More and more power leaks into the government and eventually, society drags on the bottom with a general feeling of hopelessness as the only way to be empowered is to worm your way into the government. My favorite way to show the difference is to say:
In a capitalist society, there are rich and poor. In a socialist or communist society, there are only the poor.
It’s at this point that I’ve heard people say things like, “ ‘Star Trek: The Next Generation’ has a society that doesn’t use money and everyone is happy! That’s not communism or socialism.” Well, sure, it’s a television show. They can leave out all sorts of details, and pretend that things work that cannot possibly work, just like having transporters or time travel. If there were no money, how would goods and services be exchanged? What would motivate anyone to work in any capacity? Even then, the no money society in the Star Trek universe has episodes where the Enterprise motivates people by paying them in “gold-pressed latinum bars”, or “dilythium crystals”. Even the show’s writers couldn’t deny that people sometimes need to be paid to do things.
Another objection I often hear people raise is when they point to extreme cases of evil behavior and imply that they are an integral part of capitalism. A great example of this is the infamous incident where a memo was found detailing the cost of lawsuits from wrongful deaths due to a known defect in a manufactured automobile and comparing them to the cost of doing a recall, and recommending that since the lawsuits were cheaper, that the company not do the recall. This isn’t capitalism at all – this is evil. There’s nothing about owning private property or being able to create a profitable business or have money that means that it’s OK to allow people to die out of greed. Capitalism is an economic system, not a system of philosophy, and it does not include tenets such as, “Profit is the only consideration that matters and even human life doesn’t.” Sure, there are those who assign such tenets to capitalism because they see bad things happen and they see others misuse capitalism as a defense of their terrible actions. “Well, I was only trying to make a profit!”, a greedy murderer might say. Of the major religions in the world today, I can think of none that include a sanction for murder, yet there have been many murderers in history who have (unsuccessfully) tried to use their religion as a justification. It is the same for intolerance – look no further than Fred Phelps and his despicable church invading the funerals of gay people and holding up signs with hateful anti-gay slogans. It would be easy to use him as an example of why Christianity is bad, but then, such an example would be fallacious because it’s not the religion that is at fault. It’s Mr. Phelps and his followers and the evil in their hearts. Certainly, other systems of economics have also had their share of evil behavior. Evil exists, and always will. No system of government can prevent evil, but government can and does provide a means with which to redress it. For example, punitive damages were introduced into lawsuits to respond to cases like allowing deaths rather than doing an automobile recall because the deaths were cheaper. Punitive damages meant that each case of death could be more expensive than the recall. Justice is not always obtained, but then, no society is perfect. I think we get it right more than any historical examples I’ve seen.
Finally, there’s the issue of charity that I promised to get back to. Recently, a friend posted a graphic on Facebook by someone named Stephen Colbert that said:
If this is going to be a Christian nation that doesn’t help the poor, either we have to pretend that Jesus was just as selfish as we are, or we’ve got to acknowledge that He commanded us to love the poor and serve the needy without condition and then admit that we just don’t want to do it.
I find this disingenuous almost beyond belief, and it’s an example of why I deleted my Facebook account. “Doesn’t help the poor?” We spend massive amounts on social programs and charities aimed at helping the poor and needy. “selfish…without condition”? So does this mean that I am being selfish unless I give everything I own away, like a Franciscan Monk does? Do we even agree on who the poor and needy are? If I have less than you, or perhaps if I don’t have everything that I want, does that make me poor and needy? How do we define what poor means, or what needy means? What levels of assistance are appropriate? Most importantly, at what point does personal responsibility kick in? When there are people who are suffering due to circumstances that they caused themselves, perhaps even repeatedly, how much of a right do they have to their neighbors’ income or goods?
All of these are vital questions. Charity cannot be an economic function because of the complexity of the decisions involved. “Who deserves what?” is a very personal question and involves answers that are social and even spiritual in nature. Socialism and communism’s attraction are that they attempt to force the economy into a state where need is eliminated. They fail because human nature doesn’t work that way. No two people are likely to completely agree on an appropriate level of charity, and so we use whatever form of government we have to try to come to agreements on it. It’s a huge part of who we choose to vote for. Some might vote for Democrats because they perceive them as more charitable to the poor. Others might vote for Republicans because they believe that excessive charity drives bad behavior. Charitable organizations supplement this and individuals do, too. One could debate endlessly on what the right level of charity is, what the right methods of disbursing charity are, who deserves it, who doesn’t, and all the other characteristics of charity. The important fact is that it cannot be part of the system of economics without disastrous results. Indicting capitalism for not being charitable is a bit like criticizing a hammer for not being good at playing music CDs. We have a separate tool do to that. Same with this case; our government, which is also not part of the economic system, comes to disastrous results when it is forced to be part of it. Too much power in one group is always a mistake. Government’s entire function is the well-being of its people, and it can coexist quite well with capitalism via mechanisms such as taxation. We can disagree on how much taxes should be collected, and for what purposes, but that’s the beauty of being in a free society. We can choose to vote according to the candidates that seem to best fit our principles.
To those who are attacking capitalism: When we forget and abandon the values and methods that made us prosperous, we will ultimately lose that prosperity.
