In this series I will be talking about a lot of things, especially those of an economic and systemic nature that have gone awry in this country and globally. To head off this series, it seems only appropriate that we start with the economic framework under which we in the U.S. live: capitalism.
Capitalism is getting a lot of flak these days. Especially here in the U.S. it’s coming under attack as being more and more a system of the “haves and have nots” as we see the middle class disappearing and those few who control a lot of wealth accrue even more.
First, let’s look at our options. Not so long ago and still in present day in certain parts of the world, monarchies were a dominant system of rulership. To qualify as a leader, you simply had to have the luck to be born into it, usually on the patrilineal side as the eldest son. If you were so lucky, it was taken as a decree by God that you were the chosen one to rule. It sounds ridiculous, but for much of current civilization, this was the system most lived under. The House of Saud in Saudi Arabia is one such current example in real life of where this is still happening.
One framework that’s getting a lot of attention lately is the idea of socialism. The underlying principle is sound: Everyone is even Steven, where the workers essentially “own the means of production” instead of a small group of private (wealthy) owners. Wealth is distributed equitably, with everyone paid the same wage regardless of their position and what they do.
The largest problem created by Socialism is that it takes away the incentive for skilled people to work more, to be more creative and innovative. While we are all born equal as human beings, we are not born equal in height or ability to contribute. If there was no incentive for Bill Gates to drop out of Harvard, he would likely have become an academic instead of working his ass off to start his own company that now employs tens of thousands of people and has made society more productive. Those leading the socialist charge would tell you that everyone will work just as hard and that you can be your best creative self. But as a small business owner, if I was paid the same, there is no way I would have taken on the risk and put in all the extra effort if we all made the same. Ask the citizens of Russia, Turkey and Venezuela if they are getting the chance to be their most creative self.
Want a quick glimpse into socialism? Talk to someone who pays a hefty Home Owners Associated fee every month. Ask them how they feel about shared ownership of space and check out the shared spaces. This is socialism at work, where, since everyone owns a part, no one feels a personal need to take care of everything. The HOA will take care of it all = we will all pay more for this shared space than it should cost because we have to pay for others to take care of our shared space.
Turn the socialist dial up a notch and that brings us to communism. The idea is great: no one owns anything! Everyone owns everything! But where it breaks down is in the idea that really, the government actually owns everything and decides who gets what. It also means they decide who does what in terms of vocation, and basically doles out whatever resources available in whatever way they see fit.
Ask yourself this question: what does the government do really well? What program that you have involvement with is run as efficiently as possible? All you need to do is pick up the paper and you can read about veterans not receiving adequate care, a raging war on drugs (only the ones Big Pharma can’t make money on) that destroys lives daily, and a medical system based on prescriptions and not healing. So we want government in charge of everything and that is going to lead us to more prosperity?
In communism, the absence of a leader creates a vacuum of power. What ultimately happens is one ambitious person seizes power and doesn’t let go, i.e, Vladimir Putin in Russia, Erdogen in Turkey or Xi in China. Once these people get into power its impossible to get them out as they fear all their enemies will jail or kill them (and they are right).
And that’s when communism turns into fascism, where there is one person heading a regime, making the laws and doing whatever he can to hold onto his power. This results in the people of that country essentially becoming economic slaves so as to increase the wealth of the few.
This creates an economy where the government decides what gets made, instead of allowing the forces of the free market dictate what people want to buy. Essentially, the government now decides everything for its citizens and you end up with regimes like North Korea.
So, if we are looking through the lens of economy, capitalism by far presents the best option for a free market where you are free to buy what you want and have whatever career it is or path of study you’d like. A free market allows the people to decide what goods and services it wants. It creates competition, where companies compete on quality and cost, and consumers have personal choice as to what it is they want to buy.
One of the downsides to capitalism is that there are few controls in place that prevent the rampant cronyism prevalent today. Governments are being elected by companies and the wealthy instead of the people.
Laissez-faire capitalism represents this economic framework in its true form, where the market plays out however it will without the interference of government. Under this structure, the role of government is only to enforce the rule of law and protect property. But very few people argue that laissez-faire capitalism is what we want. Instead, we do need government to protect citizens rights, protect the environment and put controls in place to prevent abuse and create a fair playing field for all.
Unfortunately, we can see that the government has not done a very good job in any of its roles, and in fact it has created many of the crises we struggle with today. Pick a problem and I’m happy to tell you the government’s unfortunate role:
Banking - “too big to fail” is simply too big. Your government’s response - they all got bigger!
Law and prisons - we are all criminals because the government has made way too many laws, including many based on morality and in many parts of the country used them as discrimination (80% of cocaine is used by white people, 80% of people in jail on cocaine charges are not white).
Prescription drug addiction - our medical system isn’t fixing people, its just turned doctors into pill pushers. People want to know why their drug prices keep going up and I want to know why so many people are on prescription drugs, especially the addictive ones that - oh yeah, the FDA is in charge of regulating. The opioid crisis is completely self created.
Competitive marketplace - they broke up all the telecom companies to let them all just merge back together again. Three or four options is not a competitive marketplace.
Fair taxation - Warren Buffet pays a lower tax rate then his secretary? You can’t convince him or me that this is fair.
In an advanced economy like ours, the government role should be promoting fairness and preventing monopolies and oligopolies. Obviously, they are failing at this and we need to get corporate money out of our politics.
I believe the main reason people are even discussing socialism is because of crony capitalism, where businesses thrive not as a result of their own efforts and risk, but through the help of politicians, which skews the market and gives those favored an upper hand against competitors. When the government officials pockets are lined by money from lobbyists, one can no longer call it a “free market”. When families are allowed to create empires where money will last for generations, none of us feel as though the system is fair.
It’s not capitalism that is broken, but the execution of capitalism in this country, and since we live in this “democracy”, our power lies in voting our leaders out.
No one who wrote any of the manifesto’s of capitalism, socialism or even the writers of the constitution could have foreseen the world we live in today. It requires changes to the way we are governed to make the world a more fair place for all of us. That said, having government in charge of everything frightens me more than anything because that has never worked out well long term for citizens.