Freedom and Capitalism
THE IMPORTANCE OF FREEDOM
This is a short philosophical article about the virtues of freedom. The most important quality needed for development of the human being, or for that matter any being, is the ability to think and make decisions on one’s own. This is a basic principle of this article. If you don’t agree, or are not willing to at least entertain this idea, then you probably will not like this article. If you believe that human beings should be coddled to death from cradle to grave by a benign government bureaucracy, then you will not likely appreciate the rest of this article.
However, it is true that if people are told what to do day and night, they do not learn as much. They do not have the opportunity to make mistakes and suffer the consequences, and they generally do not think very much. As a result, they do not develop as fast mentally or spiritually. The reason is that learning to think clearly and carefully, and suffering the consequences of one’s actions and behavior, are critical parts of mental and spiritual development. It is as though the brain is like your muscles. You must use the brain, or lose it, as the saying goes. The brain must be trained to think clearly and practically.
When human beings are treated like animals at the zoo – fed, housed, free health care, free everything, they tend to languish. This is unfortunate, but it is the truth. Many parents learn the hard way that coddling and spoiling their children by giving them everything just does not build character in most children, for example.
It is the same with adults. Coddling, protecting, spoiling, feeling sorry for them at every turn, and providing all of their needs sounds utopian, and is why socialistic thinking is so appealing. In practice, however, a balance is needed (yin and yang). It is important to protect people, but it is also helpful to allow them the freedom to act, and thus to fail, at times, and to suffer a little here and there.
THIS IS WHY FREEDOM WORKS
The above is why freedom works in the world. It and it alone allows people to progress, to think, to make decisions, to fail and then to learn from their mistakes. Nations such as Communist Russia, Cuba, North Korea, Iran and many others that deny people the freedom to think and make decisions usually do not last long.
These nations are very socialistic, which means a large, powerful government makes most of the decisions. The people are treated more like caged animals in a zoo who are given ‘benefits’ by the government. The benefits are supposedly doled out equally to all, even though this is never the case, in reality. In Communist nations, the Communist party members receive more benefits. In religious dictatorships like Iran, the religious leaders get the most benefits, and so on.
In reality, those who have friends in high places get the most benefits, and the society is not egalitarian, even though that is what is claimed.
CAPITALISM IS ECONOMIC FREEDOM
Societies that are built around giving people choices often give them choices politically, economically and socially. These are the three major areas of societal life.
In the political realm, freedom of choice means that the people can choose their leaders, usually through democratic elections. This means that the candidate who receives the most votes gets the job. Politically, freedom also means that the government must be restrained in its police power. That is the purpose of a Constitution. It is a contract between the people and their government that sets down what the people may do and what the government may do. It is like any other contract in that it sets down the agreement between the people and their government. Of course, it must be enforced or it is just a silly piece of paper. Sadly, in the United States of America, and even worse in other nations, the intent of the Constitution has been twisted and ruined by corruption and self-serving politicians, but at least the intent is still there in the written words of the US Constitution.
CONSTITUTIONAL SAFEGUARDS OF FREEDOM
Some of the safeguards for freedom are the right to speak freely, to write and report freely, to worship freely, to assemble freely (to hold meetings and protest freely), to petition the government for grievances without being arrested, to own weapons freely to defend one’s property freely, and to be safe against unreasonable searches and seizures of property by the government.
Others specified in the US Constitution are to have a trial by jury if accused of a crime, to have a speedy trial so one does not languish in jail, to have an attorney given to one to defend one if accused and one cannot afford an attorney, to travel freely, to not be forced into a false confession by torture.
Many others, in fact, are in the US Constitution, such as the right to a Republican form of state and local government. This is a critical one. It means free elections and state constitutions that must abide by and be aligned with and of the same form as the federal or US Constitution.
Even many more freedoms were intended by the founders of America and, to some degree, in Great Britain during her better days of the 18th century, though she has declined today somewhat in this area of freedom thanks to growing socialism and the European Union, which is quite socialistic. These are examples of political freedoms.
THE FREEDOM TO CONTRACT WITH OTHERS
Now let us discuss economic freedoms. In the US Constitution it states that no state may enact a law abridging the right to contract. This means that people can make all sorts of agreements or contracts with other people. In fact, they should be able to contract with those of other nations, as well as those within the nation.
This is the main idea of economic freedom. It means that if I need a bottle of milk, I can contract with the farmer down the street to pay him or her some money, and in return the farmer will give me some milk.
If I want an automobile, I can contract with General Motors or Toyota, or anyone else I wish, to purchase a car, lease a car, trade for a car or any other economic arrangement provided both parties agree to the contract.
It means that if the two participants in the contract agree to it, we can barter, we can trade, we can pay cash, we can use credit cards, we can pay for things with silver dollars, or with cigarettes or any form of money or value can be exchanged to make the deal or swap of goods or services. This is economic freedom at its best.
CAPITALISM IS THE SYSTEM OF ECONOMICS BASED UPON PERSONAL FREEDOM AND THE RIGHT TO CONTRACT VOLUNTARILY
Let us be very clear about this. Capitalism has helped more people to be lifted out of poverty, slavery and disease than any other economic system in existence. This needs to be taught in school, and not the socialistic nonsense that corporations always abuse poor people, and so on. If this occurs, it is because capitalism is not practiced very often.
Most often, in most nations, sadly including the USA these days, true capitalism is gone and it has been replaced, to some degree, with what is called crony capitalism or fascism. This is a corrupt system of economics in which the government passes laws that favor some companies or industries over others, and the government gives special benefits to some, and punishes others – usually it benefits those who give money to the legislator’s election campaigns and punishes those who do not.
However, at times crony capitalism is just a matter of ideology, which is also not capitalism. For example, the government may favor “green energy” companies over others, even if it makes no sense economically and just wastes money. What the legislators fail to understand is that if someone has a wonderful “green energy” idea, it will be developed if businessmen are just allowed to do what they do best, research, invest, and develop new ways to help society. Usually, if it is not developed, such as using water to power our automobiles (which works) it is because the technology is not allowed by someone, such as the energy cartel in this case. It is not a failure of capitalism, as some claim, it is simply that capitalism is not permitted in many areas today.
Nowhere is this more evident to me than in the area of health care, for example. Natural healing works very well for many diseases. However, it is simply not permitted in the hospitals, and doctors who deviate from the dictates of their medical boards lose their medical license and cannot even practice medicine, even if they help people. This is not a “market failure”. This is a cartel ruling an industry with an iron fist.
Capitalism is the ability to garner your resources, use your head, make products that other people want, and to barter them, sell them, buy them and contract with others any way that two agree to do it by voluntary means.
Capitalism, by the way, is not just an economic system. It applies to your personal life as well. One could say it is also the freedom to contract with others to get married, have children, learn a career and practice, and so on. The principle is the same. It is the freedom to garner your resources and use your head to make wise decisions for yourself and hopefully for everyone else. This is capitalism, and this needs to be taught in school.
Capitalism works well when properly understood and when cheating is not allowed. When it is corrupted by bad laws, it does not work as well. Here are some ways this happens:
This occurs when the government, usually, picks out winners among companies and gives them generous loans that they often know will never be repaid. Usually, the heads of the companies donate money to the president’s or leader’s campaigns to be elected, and then the leaders turn around and give public money – money collected from the people – back to their friends in businesses. This is the classic type of croney capitalism that has ruined America, China and other nations to a degree.
This is simply corruption, by the way. It sometimes goes by names such as fascism, or private-public partnerships, or non-governmental entities like Fannie Mae and Freddie Mac.
Other Corporate Problems in Capitalism
These include simple stealing, lying, cheating, murdering your adversaries, and general corruption like bribing government officials to pass laws outlawing your competition, forcing them to subsidize your product or service, and not others, and so on.
These are all serious problems with capitalism, but it is important to note that they are really problems with human behavior. In other words, if you get rid of capitalism, you will not get rid of these problems. In fact, they often get worse under socialism. Socialism, in its pure form, is government control of the means of production or factories, farms, etc. However, what occurred in the former Soviet Union, and what occurs today in Red China, Japan, Europe and other nations is that the government bureaucrats and technocrats who run the factories and farms are extremely corrupt. They siphon off money for themselves and their friends. They cheat, they lie, they steal, they bribe and they don’t hesitate to kill anyone who interferes with their schemes.
Even worse, the enormous power government bureaucrats and leaders have over the economy and political power in socialist nations leads them to become militaristic in all cases. This is occurring in Red China today. They are becoming the next Hitler. They love the idea of ruling the world, as do all very powerful people. The threat to our world is not the corporations like Monsanto, though I don’t like their genetically modified seeds any more than anyone else. The real threat is socialism and communism – very similar ideas, in Red China. Monsanto is not building nuclear submarines and bombs at an unprecedented pace. Red China is doing this, with help from their North Korean neighbors. It is important to be very clear who is the real problem in the world today.
The beer and cigarette companies, Toyota, the drug giants like Merck – they are not building the bombs. It is the socialistic and communistic countries like Iran, Russia, and Red China that are doing this. So the left wing people are mistaken. The college professors are mistaken. The people are ignorant, and this article intends to clear this up...
LOVE VERSUS CREATING DEPENDENCY
One may think that love is giving people all of their “benefits”. Indeed, this is a form of love, or perhaps spoiling. But another kind of love is giving people choices and allowing them to learn and fail, at times. It is okay to have private safety nets if people fail, but it is actually more loving to give people choices and freedom.
One of the main problems with Marxism, socialism, communism and fascism is these systems of economics and politics are based on taking people’s power and making them dependent, not on love. If one loves others, one allows others to have freedom, individual rights, and the ability to earn money and keep what they earn.
This is the basic difference between Marxism and capitalism at the very deepest level. It is a choice between love of others and a type of fear of the people that causes the leaders of some nations to want to make everyone dependent upon them for everything in life. This is actually a principle that is spiritual at its roots.
THE ROLE OF THE GOVERNMENT
Governments should help their people develop themselves, and this is why freedom in any sphere is ultimately helpful, while slavery, welfare, or servitude in any form is ultimately harmful to a society.
One of the great secrets of America, at least in the past, has been the lack of welfare and the development of the citizen’s own self-reliance. An important part of this has been the allowing of citizens to own land, to operate businesses and to fail if conditions or decisions are incorrect. This system of economics is called free market capitalism. Our nation was founded with these principles, and the people have prospered enormously when the principles were adhered to. Let us examine this economic system in more detail.
WHAT IS FREE MARKET CAPITALISM?
Capitalism is the economic system used today to some degree in many nations of the world. Its qualities consists of three major tenets:
1. People are free to own property, even if that is a push cart or a vegetable stand in a marketplace.
2. People are allowed to earn money by making a “profit”. Profit is the difference between what you buy something for and what you sell it for. So if a person has a vegetable stand and they buy carrots for $1.00 a bundle and sell them for $2.00 a bundle, the profit is one dollar per bundle. With this profit, the person pays all the expenses of traveling to the market, buying his products, and other expenses, and hopefully has some leftover with which to buy other goods and services. This is the essence of capitalism and profit.
3. People are allowed to keep what they earn. They may pay taxes, but they are generally allowed to keep most of their money.
4. Information about products and services is made available freely, and not censored by the government. This is called a marketplace where people can make rational decisions based on true information.
Each person is also liable for any problems or illegal activities that arise from their business. Also, all are required to compete with each other for business on an equal footing. In other words, in free market capitalism, the government should not fund or subsidize or treat anyone differently than anyone else. Also, the government does not “bail out” anyone, there is no welfare system and people must find their own way, their own employment and their own food and lodging.
In other words, the role of the government in the economic sphere is simply to be a “referee” to maintain a level playing field for all business activity, to make laws to maintain that level playing field, and to catch and bring to justice anyone who violates those laws, such as thieves, liars, murderers, those who steal ideas that are trade marked or copyrighted, and so on. The laws are there to protect the right of each person to do his business as he sees fit, as long as each person does not violate the economic and political rights of anyone else. This is very important today to understand that the government can function mainly as a referee and a law enforcer, NOT as a provider of goods, services, welfare, subsidies, favors and other things that are subject to political whim and power groups.
This economic system, though it is more than an economic system, was first elaborated in detail by men such as Adam Smith in his famous book, The Wealth Of Nations. Dr. Smith studied the most successful nations and realized that all shared these basic principles of commerce. He put the whole thing together and coined a lot of the terms we take for granted today in economics.
One of the most famous was the “hidden hand of the market”. It is actually quite brilliant. It is the idea that if there is any good or service that is needed in society, people will pay more for it and this will attract people he called entrepreneurs into this business, no matter what it is. It could be garbage collection or dishwashing, for example. But if it is needed, the price will go up and more people will begin to offer the service, until the price comes down and then others will not do this, but will choose another line of work where the demand is greater.
This concept works in practice, but most people have trouble trusting it. Government, in particular, often like to meddle in the marketplace by favoring certain industries or certain companies. This always causes problems, but governments persist in this because special interests, as they are called, often influence the congress of all nations to favor or oppose, at times even outlawing, certain industries.
In this regard, capitalism is a very complex, self-regulating economic system. Few people understand this, so they are always trying to meddle and ‘fix’ what seem to by ‘symptoms’ of problems with it, such as how to care for the poor or ill, or what to do about pollution, for example. Let us discuss these problems with capitalism.
THE SEEMING HARSHNESS OF CAPITALISM
Seemingly Exploiting The Workers
Karl Marx wrote his thesis, Das Capital, based on what he believed was the “exploitation of the workers” by the capitalist bosses. They rode around in fancy carriages, while the workers toiled in the factories for low wages. This is one aspect of the harshness of capitalism. Of course, what Marx did not understand is that the workers had few other choices. In other words, they could work just as hard or harder on the farms, perhaps, for even less money, or they could be beggars and have an even worse life. He did not understand that human progress is slow, and the factory life, while certainly not ideal, offered the working people more, so they flocked to it by the millions and are still doing so all over the world for exactly the same reasons.
The Harshness of Allowing a Business to Fail
It seems so harsh, so inhuman, some would say, to allow a business to fail. It puts thousands or more out of work, for example. The resources must be sold off at auction prices and sometimes the creditors of the business are the seeming victims as well. They may not get paid for their services and they might fail as well.
The public seems to lose out, too, if an important type of business like a bank or General Motors fails. Depositors at the bank may lose their money, for example. People who have bought General Motors cars might now be able to have them serviced properly if the company fails. This is one seeming type of harshness and inhumanity of free market capitalism.
The response to this criticism must be understood clearly. It is that 1) all economic activity has risk. One cannot simply deny the risk by bailing out every failure. If one does this, failure becomes the new standard and no one will try very hard to succeed. This is exactly what has happened with our banks, today, and with General Motors today( being subsidized by the Feds). They have much less incentive to try hard to do a good job and earn money because they believe they will be bailed out, also called ‘too big to fail’. This is, in fact, nothing but corruption at high levels of government. If banks or anyone cannot act responsibly, they should fail and others would buy up their assets at bargain prices and do a better job. That is the way things are done in market economies, and it works well if one leaves the system alone. Only corruption causes bailouts.
I am familiar with the arguments that our national security and all depend on big banks and big car companies. I reject all of this. I think these are lies told to the public. Once again, the principle works that if one company fails, others will buy up their assets and continue their production, if it is economically viable. If it is not viable, then it should fail because why produce products and services that no one wants?
Another criticism of capitalism is that it causes irresponsible pollution of the air, water and everything else. This is completely untrue. First, in true capitalism, companies are totally responsible for their property and any damage they do the property of others. Thus, if they pollute the air, water or land, they are totally responsible. They would be sued out of business for polluting the property of others. Sadly, environmental laws have been passed that exempt corporations from this responsibility in many cases. As a result, companies are allowed to dump a certain amount of waste products, for example, without consequence. This is one cause of pollution in many cases, and is the result of corruption, not capitalism.
Another aspect of pollution is the fact that in a capitalist nation, new technology that is cleaner will always win out over older, polluting technology, providing it is cost effective. This does not happen enough in America and everywhere else because too many laws protect the old technologies. For example, the internal combustion engine probably would be on the scrapheap of history except for the fact that laws actually protect its use in automobiles, mainly. I know of a man who was running his car on other fuels and was arrested and told he could not use his alternative system. These laws, of which there are many, such as oil depletion allowances and others, are the product of corruption and the oil cartel, among other groups. This is not capitalism, but corruption and cartel politics.
It is incorrect to blame capitalism, when the very people who are punished by these laws are often the entepreneurs or capitalists, and the ones who punish them are the cartel or monopolists, who are basically socialists in disguise because they are people who want total control of the oil or health or some other marketplace, so they pass licensing and other restrictive laws that the car companies and everyone else must abide by or go to jail. There is nothing like this allowed in a capitalist society.
UNEVEN DISTRIBUTION OF WEALTH
This is another criticism of free market capitalism. Some become very rich, while others remain or it seems, are made poor by the system. This is the main objection of the socialists to capitalism.
On the surface, this criticism seems valid. Pure capitalism seems like a totally selfish system in which one looks out for oneself to get whatever one can financially. However, this is not true. The reason is that in a capitalist system, the only way one gets paid is to offer a product or service that others want and therefore are willing to pay for. This is a great secret of business that is sometimes expressed as “the customer is always right”. In other words, one must look out for others, not just for oneself. This fact is overlooked by the socialists. As a result, in fact, in socialist nations the people are much worse off because the leaders, who claim to want to do for the people, do not know and often do not care what the people really want. Instead, they give the people what they, the leaders, think the people want or should have, and not what the people really want. In other words, capitalism is usually must less selfish and narrow-minded than socialized or command economies in which a central authority dictates which products and services will exist and their prices.
Now, it is true that in capitalist nations, some become much wealthier than others. However, the reason for this are important to consider. An important reason this occurs is that some are willing to work harder. Socialist systems favor laziness, in contrast. The willingness to work hard is a great benefit for society, so it would make sense that these people are paid more for their efforts.
One Must Not Just Work Harder To Make More Money
One must also work in a way that satisfies people’s needs. In a capitalist system, working hard at building products that no one wants does not make one money, in other words. One must also use one’s brain and other abilities in a way that satisfies the needs of the people. This, too, is a benefit, in general, so it makes sense these people would receive more compensation.
What occurs today, however, is often due to corruption. For example, certain industries have passed laws that exclude others or give themselves special tax breaks. These include the oil industry, the real estate industry, the medical industry and others. So people who work in these industries often make a lot of money even if they don’t work hard or satisfy people’s real needs. However, this is not a problem with capitalism, but a problem with human integrity and not allowing pure capitalism to exist in America and elsewhere because the government tinkers with it for various reasons.
WHAT ABOUT CARING FOR THE POOR AND THOSE WHO ARE DISABLED OR OLD OR CANNOT WORK FOR SOME REASON?
This is another criticism of capitalism. It takes the attitude that if you don’t work, you don’t eat. This is true. Capitalism is about the production of goods and services in the most efficient manner. It must be coupled with a moral code, such as that in the bible that commands people to love their neighbors as themselves, and to care for others. What occurs in pure capitalist nations, and used to occur more in America when capitalism was purer, is the development of private welfare.
Whether organized by churches or other civic groups and associations, groups spring up everywhere to care for the poor, the sick, the old, the disabled and other who cannot produce economically. This fact is not taught in schools, but is the absolute truth. The idea that the poor will just languish on the streets without government intervention is a complete lie that is repeated endlessly on television and in the universities today.
In fact, private welfare, private hospital care and private old age care tend to assist people to develop themselves spiritually much more than the entitlement mentality of a so-called right to health care and welfare that many believe in today. This is discussed in another article on this website called What is Compassion? What is Charity?
The moral dimension of human beings is the most important one, as stated earlier. Capitalism, for all its seeming harshness, in fact helps people develop themselves. Thus it is a helpful system, much more so that the welfare state concept, for example, and far more than slavery, feudalism and other systems that have been used in the near and distant past in many civilizations.
The more that each person’s activities are pre-determined or controlled by laws, rules, regulations, prohibitions or mandates, the less each person is able to exercise moral judgment and the less he or she is responsible for behavior. As a result, freedom is an absolute requirement for moral behavior and development.
Sources: Lawrence Wilson MD The Center for Development