Opinion: Capitalism is not the problem

Shawn Mercer

Shawn Mercer

Shawn Mercer is a sophomore integrated life sciences major and columnist for the Daily Kent Stater. Contact him at [email protected].

In response to the weak economy, I often hear people complaining about the failure of the free market. This seems strange to me, because the very success of our country has depended on a capitalistic, free market system.

Free market capitalism allows for the voluntary exchange of goods and services. This system uses money as an intermediary to make this operation run more smoothly due to its ability to be saved up. This system rewards people who improve the quality and lower the price of the goods and services they provide. Those who produce overpriced and low-quality goods are allowed to fail. To succeed in this system, one has to provide goods and services that are desired. The result of this is innovation and increasing efficiency, which sustains wealth creation and a steady increase in the standard of living.

The problem is not capitalism. The problem is government interference with capitalism.

What I believe people are truly complaining about is crony capitalism, or “crapitalism.” When government becomes sufficiently large enough to advantage or disadvantage a business, it becomes in that business’ best interest to lobby the government for laws that put it on the positive side of this equation.

This means that a business in this position may actually be against a free market. If sufficient laws and regulations put into place by the government can run its competition out of business, it has less of an incentive to produce higher-quality and lower-priced goods and services.

The role of government in this equation should be to leave the economy alone in order to preserve the free market. If no advantage can be garnered from government, businesses will be held accountable primarily by their customers. If they do not deliver on what the customer wants, they will fail. They will receive no bailouts, subsidies or advantageous laws and regulations to keep their unproductive enterprise going.

In this sense, failure is a good thing; it is capitalism working. Before compressors chilled refrigerators, families had to purchase blocks of ice regularly. Upon the addition of compressors to refrigerators, the person selling the ice was out of work, and this is a good thing. Now that person is incentivized to provide other goods and services, like the repair of the new compressors.

The same holds true when a car manufacturer makes poor decisions and is facing bankruptcy; let it go bankrupt. Anything valuable will be bought up, and its proverbial ice blocks will be allowed to melt because they are no longer needed.

Ultimately, when a dollar is taxed and reinvested by the government into an enterprise of its choosing, there is a net loss of wealth by everybody. This is due to the unseen cost of not allowing that dollar to be invested by individuals on the free market. The free market rights itself by allowing failure to occur, whereas government perpetuates such failure. This problem is inherent when a government participates in any level of economic meddling.