Recently, I have been observing a terrifying trend. Socialism and “Social Justice” has been on the rise, with people tending to forget that Socialism has already shown itself to be an abject failure, and more and more people have been calling for an end to the Capitalist system. A recent march on the JSE by our resident Stalinists stated that “Capitalism sucks…Down with Capitalism!” and proceeded to make demands that the JSE give over 51% of their businesses to workers and that each JSE company must pay for this current free education idea.
We spend quite a lot of time refuting the claims of our opponents. We’ve dealt with the idea of expropriation and forcing businesses to do stuff. We’ve established time and time again why it’s a bad idea. For this article, I’d like to do something different and provide a little bit of positive matter. I’d like to address the claim that “Capitalism Sucks” and show that it, very much, does not suck.
Capitalism is Effective
The hasty industrialisation of the Soviet Union and the Asian Tigers are usually cited as reasons why Socialism is effective. Yet, the Soviet Union is no more and the Asian Tigers are either heavily Capitalist now or collapsing. The fact of the matter is that Capitalism is the most effective economic model. Growth is not a prime goal. While it is important, a successful economy needs to be stable and sustainable. It’s no use growing to be the largest economy in the world if a debt crisis or recession sends you back to the bottom again.
Look at Switzerland – it isn’t the largest economy on the planet and by far not the most industrialised. It has identified its comparative advantage and maintained its dominance over its chosen sector for centuries. And it’s no surprise that it repeatedly scores high on the Economic Freedom Index. When one thinks of prosperity, one tends not to think of the giants like China. One thinks of Switzerland.
While China’s economy may be larger, it has to rely on its enormous population and repeated monetary manipulation to retain its position. Switzerland doesn’t care. It stays relative to the top and will do so as long as it retains its rational free market policies.
We can also look historically for the success of Capitalism. Capitalism oversaw the Industrial Revolution, which led to modern medicine, mega production, additional free time and the prerequisite for modern society that we take for granted today. While the Industrial Revolution is constantly characterised in the Oliver Twist style of exploitation, it was much preferable than the previous Malthusian Trap.
Workers found themselves genuinely able to be uplifted. Unions formed to protect worker rights, not as a function of Socialist regulation, but as voluntary organisations forming in a free market. Free markets are the tools of the employee and the employer as both are needed for the functioning of the economy.
Even countries which are not purely capitalist, but still maintain some semblance of success, are fruitful due to their slight Capitalist leanings: the United States for their property rights, Germany due to its business and trade freedom, China due to its reliance on Hong Kong and it basically acting as a corporation within a free global market.
Capitalism is Rational
In his seminal essay, ‘I, Pencil’ Leonard Read managed to formulate all the complexities of Capitalism into an easy to read and inspiring parable. The essay deals with the fact that every item and every product is the result of countless stages of production, all of which no entity could do alone. While the Soviet Union could produce, it relied on the idea of the Capitalist division of labour. True Communism wouldn’t rely on incentive or labour division. It would expect people to act righteously intrinsically. Capitalism recognises that that is impossible. A simple pencil requires an infinite cycle of production to produce, yet Capitalism makes it so easy. The fact that controlled economies are almost always out-produced by freer economies is a testament to the rationality of Capitalist production.
Capitalism allows competition to serve the masses. While Socialism expects the masses to serve themselves and the state, the Capitalist system of competition sees companies begging for the consumer to deal with them. Consumers are not the only kings, however. Companies want good workers, so compete with worker privileges. Companies want to be sustainable, so will look after the environment. Companies want order, so will aid the justice system in retaining order.
Competition drives innovation. We owe the Information era to Capitalism and the companies desperately shrinking and growing their phones and hardware capabilities in order to be the next big thing.
Capitalism is the only system which efficiently regards the price mechanism. Socialism tries to ignore it. Mixed economies try to manipulate it. Both result in failed economies such as pre-Reform West Germany and the late Soviet Union. Prices are symbols of human desire and need. There is nothing more complex made so simple by the virtue of a free market where individuals are allowed to conduct trade freely.
Capitalism is moral
In a free market, all actions are voluntary. While Marxists may call our reliance on currency exploitative and oppressive, this reliance is no different than our need to breathe or eat. Currency is just a means of showing the value we have inputted into the system.
In order to encourage value, Capitalism has the profit motive but that’s not the only motivation. Whole Foods CEO, John Mackey, argued that businesses can and do exist for more than just profit. They voluntarily commit to charity, for good PR or for their conscience. Bill Gates is an excellent example of a charitable businessman, using Capitalism to help the world.
The greatest aspect of Capitalism, however, is that it does not require coercion. People act because they want to, either due to a desire for the cause or a possible reward. Capitalism is simply a system which allows individuals to choose, work and cooperate in a manner in which they feel will benefit themselves and their desired recipients.
All in all, Capitalism is wonderful. It brings prosperity, it acts on reason and it is freedom.