Why Capitalism?

by Alex Burwasser 

Leftists have made a cottage industry out of making the term “capitalism” (a term invented by Karl Marx) a pejorative, even to the point where some wobbly conservatives have become afraid to stand on their principles and affirm their preference for capitalism. The purpose of this short essay is to put this matter into perspective and encourage conservatives to find their backbone on this important issue and stop letting leftists define the conversation. 

Capitalism is easy to dislike, especially by those who don’t understanding it and even more so by those who don’t understand its alternatives. So let’s begin the conversation by introducing capitalism’s more descriptive synonym, free enterprise, which more accurately conveys the fundamental definition of capitalism as an economic system based on the free and voluntary exchange of goods and services. This more descriptive definition accurately illuminates the reality that capitalism is fundamentally an economic liberty. 

Leftists demonize capitalism as a predatory system whereby greedy wealthy people (i.e., the hard-working entrepreneurs who take risks, create jobs, and pay taxes) exploit people of lesser means. While this simplistic jingoism may be a catchy campaign slogan and talking point for shrill leftist politicians and commentators, it’s just sophistry with no intellectual heft. The reality is that capitalism is amoral. The leftist argument that capitalism is immoral due to its excesses is like claiming that food is similarly immoral because some people overeat. 

No economic system is perfect. Winston Churchill elegantly made this point with the following statement: “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” To reword this sentiment with a harder edge, he recognized that socialism is wealth destruction disguised as wealth redistribution. As Margaret Thatcher stated even more forcefully, “under socialism the many are made poorer so that the few are prevented from becoming richer.” 

It’s true that capitalism results in unequal wealth distribution. Even so, the intellectually honest among us understand that some people are more talented than others, or work harder, or take more risks, or take better advantage of their educational and other opportunities. Even a socialist would find it hard to claim with a straight face that a meter maid and a brain surgeon should earn the same, and even Nancy Pelosi would be very reluctant to go to a brain surgeon who is paid a meter maid’s wage… 

A more intellectually honest criticism of capitalism is that there is a tendency for some with greater concentrations of wealth to rig the system to their benefit at the expense of people of lesser means. This unfortunately is the case, but it is not an inherent flaw of capitalism. Rather, it is a result of corruption and non-transparency in the political process whereby unscrupulous people with large financial resources bribe corrupt politicians to pass special interest laws. The real culprit then is not some inherent flaw in capitalism, but a breakdown in transparency and the rule of law (i.e., corruption and lawlessness). As is the case for all freedoms, capitalism (i.e., an economic freedom) must be constrained by rule of law. This is really no different than recognizing that our right to drive a car is constrained by traffic signals and speed limits. 

It is ironic that leftists favor socialism as an economic system that eliminates the “greed” of capitalism. The fact is that those who push socialism on us are mostly people who are greedy for the immense power (and the resulting wealth) that the socialist elite gain over the subordinate citizenry. Likewise, those citizens who accept socialism are greedy (as well as selfish) in that they naively believe socialism gives them “free” benefits (which is really to say that it allows them to live off the means of others). In other words, socialism appeals to the most contemptible instincts – greed, selfishness, and lust for power. 

The fact is that entrepreneurship (the workhorse of capitalism) has lifted far more people out of poverty than any government program or charity. In this respect, capitalism has the clear moral advantage over socialism on any objective results-based morality scale. 

An argument often made by leftists is that socialism has the moral advantage in that the welfare state better takes care of the destitute. Although this argument has a certain smell of truth, the reality is that socialism inevitably creates a large and growing dependency class of able-bodied people who would rather collect food stamps, Obama-phones, and welfare than earn pay checks. “Compassion” that is not balanced by individual responsibility is actually modern day serfdom, and creating an inter-generational welfare clientele to buy votes is the height of immorality. In this respect, socialism not only destroys wealth, but it also destroys the work ethic, national cohesiveness, people, and ultimately entire societies. 

Americans have traditional helped the truly poor by means of private charities and a public safety net. Unfortunately, this safety net has devolved, first into a safety hammock and now into a safety featherbed. A proper public safety net is not an entitlement – it is a gift that should be frugal, means-tested, and limited to American citizens only. People who truly need it should use it and then move on to productive work. Those able-bodied people who truly cannot find employment should be required to do public service both to earn their benefits and encourage them to find paying jobs. Being on welfare (i.e., living off the means of others) should never have been elevated to the status of an acceptable “alternative life style.” 

Socialism is an economic Ponzi scheme. Gullible voters get conned into voting for glib politicians who convince them that they can have “free” benefits. Selfishly, these voters never think much about the hard reality that wealth is produced only in the private sector and whatever government gives them must first be taken from someone else. They brush aside the unconscionable reality that this “someone else” ultimately has to be their fellow citizens and future generations. They rationalize this by allowing themselves to be convinced by these same glib politicians that this largess can be confiscated from “the rich” (i.e., hard-working people who create wealth and jobs) by punitive taxation. Further, they pretend not to understand the hard reality that punitive taxation on the wealth producers can only result in less wealth produced (i.e., that wealth redistribution can lead only to wealth destruction). 

The sad reality is that socialism is degenerative and always self-destructs. Because socialism embraces wealth destruction and creates too many incentives for people to become net tax eaters (free-riders) rather than net tax payers, there is never enough tax revenue to fund the welfare state. Worse, these incentives and the resulting wealth destruction require that the welfare state must continually expand to absorb the ever increasing number of people falling into poverty as a result. This in turn creates a downward spiral of yet more wealth destruction and more welfare state expansion. To keep the welfare state alive and to stay in power, the government must resort to money-printing (inflation), interest rate haircuts, and ultimately de facto confiscation of citizens’ savings and retirement accounts. The hard reality of over-taxation is that the state cannot over-tax the rich without also pillaging the middle-class and especially the poor (although the statists are clever at disguising such inconvenient truths). 

Even worse are the human costs of socialism. In addition to eroding the work ethic, socialism also destroys personal responsibility, charitable giving, national cohesiveness, national values, and ultimately entire nations. It has always amazed me that while those who push socialism on us are mostly educated and intelligent people, they seem to be completely unburdened by any understanding of history, economics, and human nature. 

Socialism has failed badly everywhere it has been tried, in many cases with staggering losses of life. (The number of Chinese and Russian citizens murdered under Mao and Stalin exceeds the combined losses of all wars fought throughout history.) This debate should have ended in 1991 with the worldwide collapse of communism, but here we are once again on the verge of ignoring history with the result that we will pay a very high price for this foolishness. 

2 thoughts on “Why Capitalism?

  1. Karl Marx did NOT invent the term Capitalism. It predates Marx by over 200 years.The Hollandische Mercurius uses it in 1633 and 1654 to refer to owners of capital. Arthur Young used the term capitalist in his work Travels in France (1792). David Ricardo, in his Principles of Political Economy and Taxation (1817), referred to "the capitalist" many times.The first usage of the term SOCIOLOGY in America predated Marx and was in fact part of a series of writings by the first real American Socialist – George Fitzhugh who coined it in his pamphlets starting in 1848. It was Fitzhugh who first created the principles for defining the "benevolent" Nanny State .

  2. The author, Alex Burwasser, has this response to Mr Palmer: "My information is different than Mr. Palmer's but I'll interpret his inputas being constructive if he really believes that this is an importantissue."

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