Capitalism
It is too bad that the pioneers of the free market and industrial revolution didn’t come up with a better name. Capitalism is so easy to demonize. Capital = money = greed = oppression of the working class! Some alternatives might have been: “market magic”, “efficient allocation of resources” or “escape from the prison of a zero sum economy”. However, the effort would probably have been wasted. The intellectual class (whose wheelhouse is words) were almost certain to win the battle of the narrative over the business class (whose wheelhouse is deeds). Markets almost always work if allowed to do so, but not necessarily immediately, and there are almost invariably winners and losers. Expressing concern (often feigned, in my view) for the losers sells books and buys votes. CEO pay and layoffs and shoddy products make great targets.
That is not to say that everywhere and always the free market generates a perfect outcome. In an ideal world, intervention by government or unpunished manipulation by interested parties should be a rarity, but not non-existent. A free market will not solve every problem. There are situations where efficiency is not the appropriate criterion. Unchained innovation and free trade should be revered, but it should not be a religion.
It should also be noted that we have never experienced full blown capitalism. We came close a few times in Hong Kong, but nowhere else that I can recall. Mucking about in the market by governments and interest groups and monopolists abounds in every society on earth, and has since the dawn of the industrial revolution. It’s a spectrum from totalitarian control to pseudo capitalism.
Is should also be said that a free market does not mean the absence of government. A thriving capitalist economy requires a robust military to insure peace; an effective police force to insure physical safety; a court system to protect property rights, punish criminals, settle disputes and punish fraud; and regulators to enforce a level playing field.
Our earliest ancestors apparently survived by evading predators, preying on other mammals, and gathering roots/nuts/fruit. About 10,000 years ago, they started to cultivate crops. Until a relatively few years ago, virtually every member of our species lived a short life, focused almost entirely on physical survival. Besides struggling mightily to get enough to eat and stored for a long winter, most had a portion of the sweat of their brow seized by those with military power. It was a zero sum world. The only way to get rich was to take something away from another human being or dig it out of the ground (usually with slave labor).
Capitalism was a secular miracle. It allowed for wealth creation, neither stealing nor digging required. As a result, roughly 5 billion of the 7+ billion people on this planet today live a decent life, from a material perspective. Two billion of them are downright rich. If the other two billion had decent governance, they could join the ranks of the relatively affluent. And all of this happened with half-assed Capitalism poking up like hardy grass through the pavement of self-interested (or ideologically driven) market intervention. Imagine how prosperous we’d be if we really gave Capitalism a chance.
All of the factual evidence of the efficacy of innovation and trade have not made much of a dent in our thinking. The dream of Socialism is almost 200 years old and it is coming back with a vengeance. Calling yourself a Socialist was once a kiss of death on the American political scene. Bernie Sanders might well have been President if Hillary and Debbie had not stacked the deck. China is moving toward a totalitarian model at a rapid clip, and successfully selling its system as the wave of the future. The Religion of Green is actively campaigning against economic growth. This trend is dangerous.
I believe that the demonetization of the capitalist model is based on false assumptions. The assumptions are that it’s all about profit and competition. Certainly, the average person who starts a business spends his/her business life trying to make a profit, and has a wary eye on competitors each and every day. As it should be. Almost every human being is, at least to some extent, a lazy liar. If others will do the work, we will tend to sit on our ass and watch. When confronted with an embarrassing truth, we will lie (usually under cover of rationalization). Competition gets us out of bed in the morning; transparency discourages lying. An ideal capitalist economy would feature full transparency and a level playing field.
However, the heart of the system is elsewhere. There are lots of socialist organizations that make a profit. This is often because the government that created them also created a monopoly environment in which to sell their products. Socialist organizations also compete. China is richly supporting its state run enterprises so that they can overwhelm competitors around the world.
The key to capitalism is not profit; it’s bankruptcy. If your product becomes obsolete or your organization becomes dysfunctional, you get a chance to visit the judge. In a proper bankruptcy system, you get a chance to start over if bad luck or an unforeseen quirk in the market dynamic have wiped you out. The point is that failure is punished. Socialist organizations are almost never bankrupted. They were created for political reasons and they endure for political reasons, no matter how inefficient. The U.S. Postal Service, TVA and the current air traffic control system have long since outlived their usefulness. They’re still with us.
It is certainly appropriate for a society to decide to offer some help to those who get hurt by the operation of the market. Temporary income support. Training for a new skill. But is is no service to keep organizations afloat which have long outlived their usefulness. A robust defense of Capitalism with a human face is certainly worth undertaking.
