Humankind has trialled many types of societal systems throughout its history. The most enduring is perhaps the most simple – capitalism. You have a product or service you wish to sell. I am sure of its quality and wish to purchase it. We agree on a price denominated by a store of value, whether it’s pigs, coconuts, shells, or silver coins, and we complete the transaction. Under true capitalism, no other parties need to be involved. I inspect the goods, am happy with their veracity, and you trust that I’m not providing sick pigs or fake silver coins.
The major weakness of capitalism is that it creates winners and losers, and inevitably leads to inequality. Humans are not born with equal abilities. Some abilities are more highly prized than others, so under a capitalist system, some players will end up more pigs than others. This is not eternally sustainable as a group of starving people is bound to look over the fence of the man who has hundreds of surplus pigs and decide that by killing the rich man they can feast on his livestock. It is therefore in everyone’s interest for some type of distribution of wealth to occur.
The inequality produced by a capitalist system has become very unfashionable of late. Billionaires have been branded a class of greedy criminals who are never satisfied and relentlessly exploit the rest of society. The notion of any type of inequality is like a red flag to those on the left side of politics.
Their shrill voices increasingly demand equality of outcome. That, after a classroom full of students have sat an exam, those that have performed the worst need to be graded as equal to those who have performed the best. Under such thinking, those at the bottom of the bell-curve have presumably suffered some type of injustice that held them back, while high performers have probably been aided by some type of privilege, and therefore to give one student an A, and another an F is a gross injustice. That one student might have studied harder is not considered.
Those that are concerned with social justice would be better served by focussing their attention on equality of opportunity. Under such a principle, all students would receive the same pencil, the same textbook, and access to the same quality of teaching, and it is up to them to take advantage of their opportunity. Different students will have different strengths, and while a student may get a C in maths, they may shine elsewhere and score an A in woodwork, or physical education.
The other weakness of true capitalism manifests when it interacts with governments of almost any kind. Governments exist to interfere, and they serve to distort markets through regulations, red tape, tariffs, and contracts with selected manufacturers. The military industrial complex comes to exert undue influence over the running of the government, it captures and owns its foreign policy for example and bribes and blackmails its ministers.
The reason that capitalism has endured is that it is the only system that creates wealth. Socialist models are based on redistributing wealth, but not creating it. There are only a handful of countries attempting the socialist model and all are failing badly. In Cuba, most of the population survive on very meagre government hand-outs. The old age pension is roughly US$12 per month, and almost every recipient is doomed to scrape through life lacking the very basics of soap and sufficient food. Health care is free, but there is no social or economic development. The country is a snapshot of a poor nation in 1950 – decrepit cars and buses, crumbling roads and other infrastructure, poor plumbing, and sporadic electricity. There is simply no incentive for anyone to innovate, compounded by the reality that most are living hand to mouth.
Money may be the root of all evil, but is also the root of all enterprise and initiative. Without excess capital, there is no possibility of investment, no research and development, no striving for a better life. With no economic ladder to climb, people become stagnant and lazy, resentful, and apathetic.
In Venezuela, another socialist stronghold, roughly 30% of the population is malnourished, and horror stories of citizens resorting to the consumption of stray dogs have emerged in recent times. This is a country blessed with the globe’s largest oil reserves. The nation should be a beacon of hope to the rest of South America. Extremely poor governance and political chaos have destroyed what should be a prosperous nation. Socialist policies have destroyed the economy. Socialism appropriates wealth from the successful and inevitably fails when there is nothing left to appropriate.
Capitalism also results in freedom. Anyone can buy a lawnmower, print some advertising leaflets, drop them into letterboxes, work hard, and build a gardening empire. Anyone can charge clients for their services, be they a book-keeper, graphic designer, or carpet cleaner. Socialism relies on excessive legislation and control. Fealty is to the all powerful state, which is trusted to do everything and cannot be questioned or criticized. Socialism leads to inevitable tyranny. The individual and his or her rights count for nothing. Socialism always creates a ruling elite and offers little chance of joining its ranks. It rewards based on political connection and chicanery rather than competence and merit.
Western societies have strayed from true capitalism. We live wrapped in legislative red tape and nanny-state-sponsored cotton wool. Our freedoms to generate income can be removed by flimsy medical arguments in an instant. Governments and central banks distort markets and intervene when they should stand clear and allow commerce to do its thing.
If everything falls into a spectacular heap one day, only true capitalism will lift humanity out of the ruins.