I have heard a lot of criticisms of capitalism lately. Those evil capitalists are exploiting the masses.
All they care about is profit.
All they care about is profit.
For those who criticize capitalism, I wonder if they know what capitalism is, and what the alternatives are. Dictionary.com defines capitalism as: an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
Capitalism can also be described as free enterprise, free market, private enterprise. In this system, people who own things can use those things as they choose. They can use their property to produce something. Land can be used to produce food and fiber. Buildings can be used to store goods. Ships and trucks can be used to transport goods. Equipment can be used to manufacture goods. (And of course there is the exchange of information and services as well as goods.)
When people own things, they have the right to use those things to produce something worth selling. That's freedom. The theory of free enterprise was spelled out in The Wealth of Nations, by Adam Smith, published 1776. He goes into great detail about specialization of labor, means of production, and the labor force. Many European governments operated as monarchies at the time, so Smith advocated for a system driven by the marketplace, not the whims of a king.
One alternative to capitalism is socialism, as defined by Dictionary.com, a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. Typically in a socialist system the government makes all the business plans, determining what will be made, when, where, and by whom. It is all done for the common good, so everyone has to get with the plan to make it all work. Socialism tends to limit personal incentive to work, as the fruits of one's labor simply go into the collective pile of everything made by everyone.
I found a list of other alternatives to capitalism, and they are esoteric and complex. Really, they are more like philosophies than economic systems. So, when people criticize capitalism, I wonder what they really want instead.
We need to rethink the way capitalism works here today.
Government interference in the marketplace distorts the market.
Lawmakers work with big industry to enhance private sector profits, favoring large corporations over small businesses. Small farms, for example, are squeezed out of existence as U.S. farm bills subsidize grain production.
- Subsidies create artificially high prices, which keep farmers growing grain.
- Struggling farmers, of whom there are many, seek to plant more and more grain, knowing they can turn a profit, thanks to the government.
- Government policy explicitly encourages large operations, giving the message, "Get big, or get out."
- Large farm operations buy up the smaller ones and work their farms with huge, expensive equipment.
- Farm equipment manufacturers gladly sell bigger and bigger tractors and combines.
- Production of grain keeps increasing, yielding an overabundance of grain.
- Meanwhile, the food industry has a growing, cheap supply of grain, which is processed into all sorts of food products.
This crony capitalism forces small farmers out of business, results in a glut of grain, and allows food producers to create cheap processed foods. Cheap, abundant, unhealthy food then creates an obese, sickly population.
The pursuit of the dollar above all else harms society.
Disregarding the health of the population, private industry markets foods that harm consumers. At some point, food companies need to consider public health above higher profit.
- Food companies give grants to universities to do food studies. Over and over, these studies find that people need to consume more of the foods produced by food companies. Ever wonder why the base of the government food pyramid is grain? Follow the money.
- The health issues resulting from the American unhealthy diet provide great opportunities for the pharmaceutical industry. They make pills that fix the ills of unhealthy eating.
- The public pays the price for the profits of big industry with diabetes, high blood pressure, chronic pain, and autoimmune diseases.
Today, capitalism in America is missing a key ingredient, emphasized by Adam Smith: morality. The free market system only functions well when capitalists care about consumers, when factory owners care about workers, when marketers care about truth.
I’m not ready to throw out capitalism. But it can do a whole lot better than this.