The Merits of Capitalism

Reading Time: 12 minutes
Publisher’s Note

Throughout the United States’ brief history, capitalism has been a stalwart. The ideals of Adam Smith have been the blood which courses through the veins of the American experiment. Yet, there has been a surge of socialist sentiment which have arisen in America today. Our contributors do a commendable job highlighting the merits of their respected sides.


The Faireway Staff

Against Capitalism

Alex Breckenridge, University of Pennsylvania

America’s economy is, ostensibly, doing better than ever. Unemployment is down, to the extent that jobs are available without enough candidates to fill them. Yet, the U.S. remains one of the only developed nations with more than 15% of its population living below the poverty line. When compared with states like France and the United Kingdom, the U.S. fails miserably in other important metrics of socio-economic wellbeing: rates of literacy, infant mortality, childhood malnutrition and obesity, and homelessness are all disproportionately worse in the U.S. than in countries with similar institutional capacities and levels of wealth. So, what is America’s particular problem? I argue that it is this nation’s unique unwillingness to utilise the exorbitant wealth of the few to protect the wellbeing of the many.

Working-class Americans face far greater barriers to upward mobility than workers in most other developed nations. With the decline in power of America’s unions over the past few decades, workers are much more vulnerable today than they were in the ‘70s and ‘80s. In addition to losing the power to collectively bargain and mobilize political interests, working-class Americans also have to reckon with the increasingly large gap between their salaries and the salaries of those in “high-skilled” positions in the same companies.

As Piketty shows us in Capital In The 21st Century, under free-market capitalism, the rich are accumulating wealth more rapidly than the economy itself is growing. Where r (i.e. the net rate of returns from capital) is greater than g (i.e. the growth rate of economic output), it becomes increasingly difficult for people — besides, perhaps, the very uppermost middle class — to attain any of the most basic markers of wellbeing: things like home ownership, healthcare coverage, and the capacity to retire at a reasonable age.

The creation of more jobs is almost certainly not the solution to this problem, despite politicians’ protests to the contrary. There are barely any unemployed Americans, but there are many, many Americans struggling to make ends meet. Both high and low skilled groups are affected, with teachers and McDonald’s workers alike rapidly losing the quality of life promised to them by America’s founding texts. While the reasons for this reality are too complicated for me to explicate fully in this article, remedies exist which are simple and easily identifiable.

America ought to adopt, with immediate effect, high income and inheritance taxes for the top 1% in addition to welfare-state programs in the likes of Britain and France. It is, frankly, vulgar for a nation as wealthy as the United States to lack a free, national health system, paid parental leave, state-subsidized child care, and federally standardized protections for people living in poverty. Equally as vulgar is the ability of this nation’s rich to profit off of the labor and purchasing power of its working class without the state making any meaningful demands of them.

If workers can rely on the state’s positive provision of basic human liberties, the most debasing effects of capitalism’s generation of inequality can be averted. With heavier taxation on capital gains, the gap between America’s richest and poorest cannot grow as rapidly as it is currently, and the promise of upward mobility might again become a believable one. Most importantly, however, these protections would shield people from the otherwise all-powerful, profit-maximising hunger of corporations under capitalism.

Even those unbothered by teachers working multiple jobs to pay their bills while hedge-fund frat bros holiday in Ibiza might care about American economic policy being principally inconsistent with the aims of its founding fathers. Capitalism is justified by the earliest American jurists on the basis of its ability to maximise economic and political freedoms. Some inequality, it was posited, is acceptable in the face of maximising liberties for the many.

This claim can no longer be said to be true about American capitalism. Corporations in this country (and the world – for America shapes capitalism globally) are enormously more powerful than those envisaged by its founding fathers. These corporations feed off of class inequality; indeed, the greater the wealth gap between their senior employees and the workers sweeping company floors, the more their gains on capital and labour are. If corporate power is left unchecked, the liberties of the few will soon utterly supercede the basic needs of the many.

Most arguments against attempts to regulate the rampant inequalities supported by corporations can be reduced to a single, unambitious premise: “well, that didn’t work when X tried it.” The problems with this assertion are twofold: first, that it’s always cowardly and misguided to dismiss ideas because they are difficult to realize, and second, because socialist policies have worked in many places, and have the capacity to be even more effective today than they were in the past. America’s institutions are powerful and exorbitantly rich. If money and energy were channelled away from violent, amoral wars and towards the provision of positive liberties for the vulnerable, socialist policies which have worked in Europe for decades could flourish here.

The American promise of liberty and upward mobility has demonstrated itself to be a lie — albeit an enormously persuasive one. Meaningful attempts to pursue economic and political liberties for all — ideals supposedly valued by liberals and conservatives alike — have largely been abandoned by both sides of the debate. America could be great, even exemplary, if it were brave enough to defend its people against the engines of capitalist accumulation. It’s unclear, right now, if it ever will.

Pro Capitalism

Nathaniel Beach, Denison University

On college campuses today, it seems almost second nature to read the Communist Manifesto by Karl Marx in a philosophy class, or sit in an intro political science class and listen to the merits of socialism from professors who try very little to hide their true political beliefs within the classroom. As a college student, there has been little discussion on capitalism, with a few philosophical texts being used from Adam Smith.

With this lack of instruction on capitalism, it makes socialism and other forms of economic structures to appear extremely appealing to young students, hungry for knowledge, when it’s the only thing being taught. However, no matter what is said in class, no matter how many students in Che Guevara t-shirts come up trying to convince you that socialism is what the United States should start adopting, capitalism will always be the economic system that works. Capitalism is the only sustainable economic system, and it’s because of this that have allowed for the United States to continue being a world leader in capitalist economies, despite the fight to socialize the nation.

So why does capitalism work? Capitalism works because of its primary purpose – to have a free economy. We pride ourselves as Americans as being the land of the free. The United States Constitution is in place to ensure this stays true. The most basic freedom is the freedom to make choices. Capitalism promotes choice. It promotes the ability of people to decide what they want to buy, how much they want to buy, where they want to live, where they want to work, and so on.  With other economic forms such as socialism, choices are limited. The government decides, for example, what kind of healthcare is available and doesn’t allow for the people to decide on their own what they want. The removal of choice reduces freedom. The removal of all choices is slavery. The direction of socialism, communism, and statism is towards slavery. The direction of capitalism is towards freedom.

In addition to this, the reason capitalism has and will work for hundreds of years is because it is sustained solely on the idea of consent. In order to make a purchase, the buyer and the seller must agree on a price. The buyer must consent to the seller’s price and the seller must consent to to the buyer’s demand. For example, if a car dealership is selling cars at too high of a price, buyer’s won’t consent to purchase these cars and will look for cheaper options. But if buyer’s see that the cars are being sold at a price they can agree with, that the seller’s determine can still give them profit, they’ll make the purchase. Meanwhile, in other economic systems, the government has a say in the price of goods and services, which takes away the consent out of purchases. This at its very core, is immoral to do. If the people are truly free, as democratic Western societies like to think, then eliminating or at the very least limiting consent is completely contradictory to that.

So where does this consent come from? What if the vendor just wants to have high prices to force the buyer’s to pay too high of a price for goods? Well this is nearly impossible in a capitalist society. The reason consent is the basis of capitalism is due to competition. Unlike any other form of economy, capitalism works because of competition. In a capitalist society, there are numerous vendors selling products to the people. Because of this, vendors try to innovate and create better and unique goods to draw consumers in, while lowering the price to undercut one another. This creates low prices for consumers and better goods and services. The same can’t be said in state-run economies.

One of the biggest complaints statists have towards capitalism and the trigger-words that get thrown around by Democratic politicians and within college classes is that capitalism leads to a wealth-gap and hurts the poor of a nation. However, this is incredibly backwards because capitalism has done nothing but raise the standard of living and help the poor out of relative poverty. For example, the number of people living in poverty today is nearly half of what it was in 1990. The biggest contributors to this are China and India after they started opening up their markets and becoming more capitalistic.

Today’s capitalist societies include the likes of The United States of America, Canada, Chile, Germany, The United Kingdom, Japan, South Korea, and Bangladesh. While some such as Canada and the UK have shifted towards more statist policies, they still remain capitalistic. Even countries such as Finland, Norway, and Sweden are considered by economists as more “compassionate capitalists” as to socialist. Meanwhile, the countries that tried socialism include the Soviet Union – which failed, China – which is becoming increasingly more capitalist, Cambodia – considered one of the poorest nations in Asia, East Germany – which was under USSR influence, North Korea – one of the poorest nations in the modern world, and Venezuela – which is currently dealing with one of the worst economic crisis’ in history. Socialism and Communism has historically failed, yet capitalism has prevailed throughout history. To say otherwise is discounting history itself.

Ultimately, capitalism is what allows for Americans to thrive. The iPhone or Macbook you’re probably reading this on is the result of capitalism. The clothes you are wearing is the result of capitalism. The internet you are using to read this article is the result of capitalism. Capitalism is what allows for us to live our lives. It strives to better the people, it strives to help, it strives to sustain itself. Other economic theories can not say the same. Capitalism is the truly successful economic theory and in the words of the late great philosopher Ayn Rand, “Capitalism demands the best of every man—his rationality—and rewards him accordingly. It leaves every man free to choose the work he likes, to specialize in it, to trade his product for the products of others, and to go as far on the road of achievement as his ability and ambition will carry him.”

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1 Comment

  1. Alex states in his anti capitalism piece , “Americans of high and low skilled status are losing the ‘ quality of life promised them by the founders writings’. ” . The founders writings , nor the Constitution ,guarantees a ‘ quality ‘ of life ! We are offered “equal opportunity ” , not results .
    And poverty for most under socialism is far beneath a free market overall wealth that raises all , even those that don’t succeed .

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