By Stephen Buller
Capitalism is under attack by many even though it is the economic system that has brought us more prosperity than any other. Why, then? Because, at a time when the wealth divide is vast and daily expenses are stretching budgets to the limit, “capitalism” doesn’t seem to be working for most Americans.
It’s easy (and right) to blame our government for high taxes and irresponsible spending. The mistake is in thinking government can solve that problem if only it has more employees, more tax revenue, more power.
You don’t hire a serial arsonist to put out a fire.
Government is an important part of society, but it should not be viewed as an entity which creates prosperity. It should be viewed as a necessary expense to protect the rights of its citizens. The more we look to government to solve our economic problems, the more the government will create a host of new ones.
I’ll argue that Americans are struggling right now not because of capitalism, but in spite of it. I think affordability problems stem from irresponsible government spending, which is only possible through a terrible monetary system that has been a bane on the world for more than half a century.
The Federal Reserve manipulates the price of everything by dictating interest rates, and they facilitate unpopular or unsustainable social programs by inflating the currency supply. No one likes taxes, but they’re necessary to fund government. Inflating the currency supply is far worse because it is abstract, a stealth tax that most citizens are completely unaware of.
Let’s look at the good of capitalism by recalling its full name, “free market capitalism.” The beauty of capitalism is a free market where two parties can voluntarily engage in commerce and come away from the transaction better for it.
Government should regulate commerce so no one sells dangerous products or otherwise infringes on others’ rights, but should otherwise allow individuals to transact freely. Today, you can’t buy a candy bar without paying a special “sin tax,” and you can’t complete many simple projects on your own property without six months’ wait and thousands of dollars of permitting.
I believe the free market is one of the most powerful tools humans have for raising prosperity for all. It allows people to specialize in their area of expertise, capture greater overall value than if they generalized, and trade the difference to acquire other wants and needs. It allows people to respond to the demands of their communities and solve problems.
But there’s one, big kicker: The only way an individual can capture the value of their labor is through sound money such as gold and silver, a medium of exchange which is also a store of value – unlike the US dollar and all fiat currencies that, by design, lose value over time.
In addition to facilitating individual freedom in the vocation you choose and the products you purchase, a free market is more efficient than any governor, lobby, or committee. A free market puts people and capital to work in the areas of highest demand through a process called “price discovery,” the process of finding the best price for a product through many people buying and selling it.
One bureaucrat trying to set the perfect price for a product – or a wage – across hundreds of millions of people is impossible. But one person deciding whether a gallon of gas is worth $6.50 on any given day is easy. When millions of people make billions of decisions every day regarding how to spend their money, the basic economic principle of supply and demand goes to work.
Each person acts in the marketplace as best serves their individual needs, and if the demand for a particular product drives the price up, entrepreneurs will enter the market, increase supply, and prices will drop. If prices drop too low to earn a profit, supply will decrease, and prices will adjust.
But shouldn’t the government do something to “stimulate” the economy in down times? I would argue no, and that this always makes it worse in the long run. When the government regulates markets and manipulates money, prices are warped, bubbles are blown, and recession is inevitable.
Our government knows it can’t tax us for all its fraud and waste, so it prints dollars and expands the currency supply further through financial derivatives. We should care that they steal our purchasing power through inflation to fund unpopular programs. And we should recognize this is much harder to do under a sound money system, such as a gold standard.
Above all, we should recognize the brilliance and value of a free market. It allows us to choose our vocation and what we purchase with the fruits of our labor and facilitates the most efficient and prosperous society possible. We should fight for freer markets instead of blaming them for our woes, and we should move to sound money, so individuals can save and invest for the future without fear of the value of their labor eroding over time.
