On Capitalism...

I recently stumbled upon a read by Steve Forbes called How Capitalism Will Save Us. It is an incredible book looking at the problems of our current social and economic condition with eloquent and demonstrative explanations on just how the free market and "real world" sense will save us from an ultimate and untimely demise.



The book takes a stand against the common "raps" on the notorious perils of capitalism, combating our major political and economic dilemmas with what he terms "real world" examples on how capitalism is the best solution in any situation.



For example, Forbes retorts against the rap that "capitalism is a dog-eat-dog system founded on greed and survival of the fittest" with the fact that "capitalism is the world's most humane economic system, promoting the democratic values of a free and open society: hard work, cooperation, generosity, charity, and devotion to the rule of law." He supports this claim with the classic example of the baker and the buyer. A bread maker provides a service for the client - making bread. Bread is demanded by the consumer, to which he is provided so long as just compensation is provided as due. The bread maker sells the client bread in exchange for money. Yes, the bread maker is probably only concerned with turning a profit and benefiting from the transaction, most likely self-interested in gaining from the transaction. But the consumer needs to eat; therefore, if the terms of the agreement are fair (i.e., the bread is a fair price) then the transaction occurs.



This simple demonstration exemplifies that instead of greed, this transaction is based on trust. The shopper is willing to pay, so long as he receives a benefit that fulfills his needs. Without trust, money will not be exchanged for a good or service.



And this further demonstrates the beauty of a free market. If, for example, the bread was drastically overpriced, or by some other means not up to par, the consumer has the option of bringing his business elsewhere. Trust is the essential component: without trust, a transaction will not occur - not greed which only serves self-interest through individual pursuit.



Forbes goes on to discuss why capitalism has remained so prevalent in the first place, and why it is essential to innovation. An entrepreneur will succeed by correctly fulfilling a need. Where there is need, there is a market. Take for instance, the ipod. Forbes describes an "ipod" economy which classically illustrates how innovation has revolutionized the industry yet again. People perceived a need to consolidate and make their music transportable; Steve Jobs took on the job to eventually produce one of the most recognizable and trusted MP3 players in the world. This type of innovation does not come out of the US for no apparent reason. Our free-market and pro-modernization economic climate has proved unsurpassed by any other nation of the world.

In terms of equality, capitalism seeks to promote the interests of the individual by allowing economic freedom, or the ability to spend personal funds as is desired. Other systems that define equality in economic terms posit that equality only comes from government imposing strict conditions wherein each citizen is promised a mean level of income - a guarantee into the middle class, with no prospect of extreme poverty or extreme wealth.

Capitalism rewards innovation and hard work by allowing those born into unfavorable conditions the chance to climb into the middle or upper class. Forbes asks, then, which system is more moral?

I have long been asking myself this very question, and I concur with Forbes when he deems capitalism morally superior to any other economic system. It is about freedom. As Milton Friedman described, political freedom comes only after economic freedom is first established. When people have the ability to vote with their money and choose when to spend and when to save, then people change their overarching views on freedom in general. I believe in freedom, and that crosses every aspect of my life - from how I spend my money, to what stocks I buy, to what technology I choose to consume. All these choices demonstrate not only my economic freedoms, but also my political freedoms in that no authoritarian regime can control what I do and what I believe.

Another topic I found interesting in this book is big business. As a business mogul, Steve Forbes knows well the bounties of wealth to be created through hard work and innovation. But many people perceive such an empire as greedy and only benefiting those at the top. I ask, then, how do you account for the oftentimes thousands of workers employed? Forbes says that savvy business people create opportunity for not only employees, but also consumers by building corporations satisfying a need (or many needs) of the citizenry.

Look at Steve Jobs and the Apple revolution that has swept not only the U.S., but also the entire world. Jobs took an idea and expanded on it, ultimately creating some of the most reliable and recognizable pieces of technology in the world. And it is without a doubt that Steve Jobs is not the only one benefiting in this empire - Apple now employs 40,000 people! The free market in combination with innovation and hard work creates jobs and therefore wealth - government does not.

It is no wonder that goods like ipods, personal computers, and cars all came out of the United States. Our entrepreneurial citizen base is what boomed our economy to the top in the first place. Less government restriction, less red tape and corporate regulation, and more privatization are the best answers to creating jobs, wealth, and innovation. I am proud to live under such a system, which is why I cringe at the prospect of government takeover and intervention of private industry. If a company fails, it is merely an opportunity for restructure or for other private entities to buy out and takeover corporations. Government has no place in private industry, and to think that our only solution is regulation and government takeover seriously undermines the creative thinking and innovation that occurs here so much more often than anywhere else in the world.