Famous investor Warren Buffet, in a recent article New York Times in the entitled: “Warren Buffett’s Case for Capitalism”, claims a capitalistic society is the best system for America. “I’m a card carrying capitalist” said Buffett.
In recent years, capitalism at least in some circles has been blamed for income inequality, the rise of excessive corporate greed and the plight of the American worker.
On the surface, the negatives to our capitalistic system seem valid. The average worker is finding it harder and harder to make ends meet as the stock market hits all-time highs. The polarization of the two seems clear and it’s easy to draw the cause and effect conclusion that one has led to the other.
That would hold true if our system was truly capitalistic. And although the American economy does retain some aspects of a capitalistic system sadly, many of the most important checks and balances of capitalism have been removed or compromised by meddling governments over the decades.
Those hating on capitalism largely get their information from the many news media outlets, most of which also don’t understand capitalism and hence don’t report on the important aspects that are missing in today’s America. Without such education and hence media exposure, Americans are left to only misinformation about their economy, and hence push unknowingly to destroy it.
Capitalism is not synonymous with corporation greed and income inequality. In fact, capitalism will correct most of both corporate greed and income inequality as well as many of the other negatives we see in today’s American economy.
To begin to understand these concepts, know that at its roots, capitalism is nothing more than someone going to the store and buying something with their own money at the price they find acceptable and from someone who is willing to sell that something for a price that is acceptable to them.
Everything else the economy functions on are just offshoots of this basic premise. Some of the basic concepts of capitalism include free choice, the right to private property, the right to work and the right to negotiation. Sounds logical, and it is.
Left alone capitalism allows for and protects these basic premises. Start tweaking capitalism and distortions arise. Think of a tire that is perfectly round and each tweak of capitalism adds a lump in the tire. The tire now starts to wobble and its efficiency wanes. The more you tweak it (add more lumps) the worse it rolls.
Such is the result of the interference in capitalism, which is usually caused by a central government.
Capitalism isn’t perfect. No system is. But it is the best system. All others are worse, and some economically fatal.
But in the imperfection that mankind and our world is by nature, some think they can improve on this reality.
Of all the imperfections that is our physical world, the economic reality with the most effect is economic truth known as scarcity.
Simply put, there is not enough to go around for everyone to have everything they want. That some won’t accept this fact is delusionary. It’s a fact, and no amount of hoping, wishing or economic manipulation will change that fact.
Enter Capitalism, the most efficient method for distributing the inherent scarcity of goods. It’s not a perfect system, but it’s proven to be the best there is. A perfect system would have to eliminate the reality of scarcity, but scarcity is an economic fact and it cannot be eliminated.
To accomplish the distribution of scarcity in the fairest way possible, free will must be maintained. Only the voluntary construction of goods for an agreeable exchange allows the continuance of the economy.
Introduce mandate or remove incentive and the system eventually collapses. Incentive is simply the reason people work and hence produce. Remove the incentive and forced labor by some means is the only alternative. Either that or starvation, neither of which is an improvement over scarcity. Scarcity isn’t perfect, nor is it always comfortable, but it is a fact. There will always be scarcity. And instigating any system that removes incentive will lead to more scarcity. For without incentive, some will not work, and hence not produce.
Capitalism maintains incentive at its highest and therefore allows for the most production of goods and services, which minimizes scarcity the most over other economic systems.
It’s the best we have.
Specifically, in capitalism, excessive profits are throttled by competition (without cost to entry which is usually increased by government), and although owners will always make more than workers (there’s that incentive we talked about to start a business) income inequality is reasonable by maintaining sound money where as unsound money (inflation) which increases income inequality, is brought about by government.
Reasonable employment opportunity is maintained by the healthy economy brought about by the previous two mentions and maintained by incentive (if thou shall not work, thou shall not eat). Again we find government at contributory fault as government has a tendency to remove incentive through taxation and entitlement programs (free money). Criminality is punished in a capitalistic system unlike today where our lobby system and the big money get-out-of-jail card is fostered by and encouraged by government and their cronies.
The few holes in the capitalistic system (environmental and monopolies) can be easily monitored by a minimal (MINIMAL mind you) central government.
Capitalism is not a perfect system, but it’s the best we have.
Its premise is liberty, which is free will and the right to perform, or not perform, as the choice may be.
You have the right to do what you want, as long as it doesn’t infringe on the rights of another. Pretty simple stuff. All the other systems they’re proposing are merely pipedreams.
Not surprising considering what they’re allowed to smoke nowadays.
Marc Cuniberti hosts “Money Matters” on KVMR FM aired on 65 radio stations nationwide. He is a financial columnist for a variety of publications. Marc holds a BA in Economics from SDU with honors 1979. His website is moneymanagementradio.com and he can be reached at (530) 559-1214. Visit him on Facebook (FB) under Marc Cuniberti and also on the "Money Matters” and “Money Matters Investing in Community" FB pages. The views expressed are opinions only.