Is Capitalism the Real Problem?

I think it is a given that our country is clearly split almost exactly in two over how we want to move forward.  But, forward from what?  That is a question that we seem to have skipped examining.

Many argue that we must give up on capitalism because it is a total failure.  But is it? 

While I think most would agree that the mobility both up and down the economic scale that is the promise of capitalism for all has become far less a reality in this country than it once was, I think that we ignore asking and answering why that is or whether it can be corrected.  Instead about half the country would just dump our capitalist system completely and “move forward.”

Let’s just briefly remind ourselves what capitalism is. Capitalism is an economic system where individuals and firms have considerable freedom to decide what to produce and how to produce. It is an economy dominated by free markets, private property and limited government regulation.

In our capitalist democratic republic, which does not have official caste or class systems that prevent upward mobility, true capitalism allows individuals, based on their talents, individual motivations, and a bit of luck to move both up and down.  That mobility includes an amount of risk and uncertainty, but it also includes the hope and promise of a better life for all.

Critics of capitalism will assert that capitalism ignores peoples' needs, results in wealth inequality, and does not promote equal opportunity. They argue that capitalism also encourages mass consumption, is unsustainable, and provides an incentive for business owners to harm the environment or cause other external harm for monetary gain.

These are to some extent legitimate criticisms.  Capitalism will never result in everyone being in the same position – the equity that is all the rage on the Left these days.  Let’s remind ourselves, however, that equity is not equality; to achieve equity requires taking away equality from those individuals who are in a position that is considered superior.  Equity, along with its colleague “fairness,” actually requires a lack of fairness – a lack of equal treatment – to achieve certain state mandated results.  Demanding equity belies one of our core values that all people are created equal and deserve equal treatment. 

Instead of equity, ideally capitalism provides everyone with the opportunity to use their own skills and desires to get to where they want to be.  That is the ideal and, like any ideal, it will never be achieved.  And, at times, even when the opportunities are entirely equal,  the outcomes may appear or actually be unfair. 

But capitalism creates possibilities, the taking of which vary in risk-factor as well as perhaps the need for luck.  It does not guarantee that any particular actions or inactions will or will not result in a particular end.  And, when results are not guaranteed, there is uncertainty.  Uncertainty is often uncomfortable.

Today it does seem that too many individuals are not finding the desired and sometimes even necessary results.  One cannot ignore that we have far too many people with food or home insecurity despite working two and three jobs.  But the reaction to this seems to be the singular:  Capitalism doesn’t work, dump it and move to a different system with socialism being that system of choice.

I ask that we step back.  Let us ask why is it that capitalism is not working.  Is it truly a failed system, or is it just flawed in its current practice?  What does capitalism need to succeed and is that the environment of our capitalism today?  Is it the fault of capitalism or is it the fact that we actually now have a significant number of socialistic regulations and programs interwoven with our capitalism?  I suggest these are things worth examining before simply perhaps throwing out the baby with the bathwater.

Let’s look at our first major socialist program – social security.  We have all become dependent on it, we expect to receive it when we retire.  It is a clear piece of certainty (security) in our otherwise uncertain lives.  And it is a socialistic government (social) program that is paid for by the taxes of others.  Overall, it is probably a decent program successfully providing everyone who worked at least a minimal income upon retirement. 

But imagine if instead of government collecting the social security tax from your paycheck each month you had that money to yourself determine how to spend.  You could develop your own retirement plan that might net you far better retirement income.   But that does not have the certainty that social security does.  You might just as easily spend that money on frivolities and have nothing for retirement.  You might make a risky investment and end up with far less.  So, to make sure that everyone has something, we give up our personal freedom and decision-making and allow the government to provide us the secure and certain amount that it determines is appropriate for us.

Government regulations which become more and more inclusive have a huge effect on the free market and hence on the capitalist system.  Remember, capitalism needs limited government intervention to thrive.  When the government, its taxes and regulations, encourages businesses and their jobs to go overseas, when excessively high minimum wages force small businesses to collapse, when government programs deflate individual initiative and encourage a hopelessness of existence dependent upon government help, then it becomes very difficult for capitalism to survive. 

When, due to big government, individuals relinquish their belief in the mobility of capitalism and trade it for the certainty of position, no matter how less than or hopeless that certainty may be, then we really do not have a true capitalist system to evaluate or to throw out.

The more the government provides certainty, the more that we become less willing to take the risks of innovation and self-determination that capitalism requires.  We become accustomed to certainty – to security, to social security not just for retirement, but for life itself.  And when the government does not provide enough, we ask for (demand) more.  That is not really the way capitalism works and so perhaps we should not be blaming capitalism for the inequity that we see around us today.

So, rather than jump ahead to the solution of throwing out capitalism, I suggest that we pause and really examine why capitalism is not working particularly well currently.  Is it the fault of capitalism itself, or is it that it has been infused with too many socialist elements that are the direct antithesis of capitalism and which work to prevent the effectiveness of the capitalist system?  Is there something we can do to put capitalism back on track, or is the only possible solution to completely give it up? These are serious and crucial questions that need to be answered before deciding on the best path forward.

I think that many of the problems with our society are concerns to both sides of our warring populace.  The catch is that half of that populace has already made the decision to move forward with socialism without a full examination and understanding of what is actually causing the problems.

I believe we owe it to ourselves, our country, and our future generations to consider whether we can make corrections to our capitalist system that will address many of the problems with which we are faced.  I think it is at the very least worth a try.

Socialism on the other hand is usually a snake-oil cure.  If we are as a nation to decide to take the path of socialism I would like to see that decision made with a full understanding of what socialism really is and where it leads.  I do not think that many of those leading or following the charge away from capitalism and toward socialism have taken a complete and honest look at either the problems or their proposed solution.

Entitlement

We throw this word around a lot, so perhaps we should examine it a little more thoroughly.  First, entitlement is defined simply as: “the fact of having a right to something.”  There are many people who feel they have this right to many different things.   There are people who can perhaps trace their ancestry back to the Mayflower who may believe they are entitled to be among the ruling class.  Yet, there are also likely some of the same heritage who live in trailer parks or worse and who are primarily concerned with the roof over their heads and how they will eat tomorrow.  Similarly, there are some people who are descendants of slaves who may live today in wealthy and tony areas of cities or suburbs while other such descendants may live in poverty and curse that birth right while believing they are entitled to what others born into better situations seem to have.

Who of the above is entitled to what?    Another word we like to use without any depth of examination is “fairness.”  Is it fair to provide entitlements to a wealthy person of color while denying the same to an impoverished white?  That is what happens when we base programs and entitlements on ethnicity, color, or race.  Is it fair that a white child is denied access to college scholarships or a young entrepreneur be denied access to grants and funding simply because of the color of their skin, even when without such aid it is difficult at best that the white child will find a way to attend college or to develop her business?  Is it fair that a wealthy person of color can apply for and perhaps receive aid, grants, and similar assistance denied to the white simply because of the color of their skin? And, if entitlements are based on ethnicity, how does that work in this age of ancestry DNA tests that can determine the racial mix of nearly all Americans?  A person seen as white may have a significant percentage of DNA belonging to non-white races; does that mean that person may claim that ethnicity and entitlements that go along with it?  What percentage will be enough? 

Beyond the above, there is a deeper, more sinister problem with entitlements, especially when entitlements become a way of life that is handed down from one generation to the next.  The definition of entitlements is “the act of entitling” or “the state of being entitled.”  (Interestingly, this word first appeared here in the early 1800s; was there no sense of entitlement prior to that time?)  The problem with entitlements is that they can become a way of destroying the human spirit or at least a way of creating an underclass of people who will be dependent on someone else’s power rather than their own for their well-being and perhaps their very existence.  When one is provided with what one wants, there is little incentive for working for that something.  With the expectation that one will receive one’s wishes with little or no effort on their own one is likely to lose respect for the things provided as well as for those who work to provide it.  And one will become dependent on those who provide the entitlements.  As a class of people they will become beholden to the power class that provides the entitlements.  This provides a way for that power class to remain in power and reduces the likelihood that the power class will receive challenges from those whom they are entitling.  It also has the potential to reduce the spirt of those being entitled.  It is a way of signaling that one is not capable of taking care of oneself, a concept that is in the end demeaning and a way of signaling that the entitled class is somehow less than the class doing the entitling.

A third problem with entitlements is that sooner or later everyone wants their piece of the pie.  Some tend to forget that the entitlements are ultimately funded by people like themselves.  Yet, if people are less industrious due to entitlements they will have less to contribute, via taxes or otherwise, to the entitlement fund.  And, as taxes increase to fund entitlements and the tax burden becomes greater and greater, more and more people will feel the need for entitlements just to survive.  Ultimately, the system must collapse. 

This is not a post that argues to completely eliminate programs that are designed to help people in a variety of difficult situations.  Nor does this post not acknowledge that each one of us is born into a different place and situation and that the situation of one’s birth may seem to place one in a more or less advantageous circumstance to begin life.  But, so do the differences in one’s intelligence and innate talents.  And the ways that one will be raised.  No two birth situations are the same and some are far better than others.  That is likely to never change; it is simply a fact of life.  What is important is that we not view or treat all people born in one type of situation differently than how we treat those born or placed in other situations.

What this blog does intend to suggest is that entitlements, especially those based on race, ethnicity or similar identity factors are unwise, unfair, and likely destructive.  It is also contrary to the values underlying our democracy and the American Dream.  While these “bourgeois values” have come under attack lately, the qualities of hard word, drive, individual responsibility, and the belief that one, with one’s own effort, can become the best one can be, are the values that have brought many to this country and that have allowed many to succeed in their dreams.  Is it really fair is to consider some people entitled just because they do not have everything that they wish for without consideration of the effort they themselves have contributed? Is it really fair to condemn some people’s successes, achieved through their own hard work, just because of their color or station in life?  What is fair, far fairer than identity entitlements, is to simply give each citizen the same opportunities and let them do with those opportunities what they will.  The results are likely to be different for everyone, but that is not a lack of fairness; rather, it is a difference in each individual’s talents, skills, motivation, values, etc.   Such results, while individually diverse, are fair and moreover will not create an underclass of people dependent on entitlements and someone else’s power for their existence.