Tuesday, October 25, 2011

In Defense of Capitalism

I hate to tell the Occupy Wall Street group (OWS) this, but not only do they not understand capitalism, they aren’t even the trendsetters of anti-capitalism. For years, American culture and tax policy has been at odds with the values of capitalism. It’s a pity, but it’s true and one can trace the majority of our current economic problems to that fact.

"View in Wall Street from Corner of Broad...
Wall Street, 1867
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The basis of capitalism is self-denial; the intentional delay of gratification for the chance of a greater reward later. If you think this is still the core of our country’s values, then you haven’t been paying attention.

In order to generate capital, individuals have to consume fewer resources than they have available, meaning that they save rather than consume. Then those individuals must be willing to risk those savings to acquire the tools necessary to provide desired goods. If the individuals make poor decisions, or as our Commander-in-Chief calls them “bets”, then they will lose their investments. This means that their sacrifices were in vain, except for some new knowledge of what fails.

Capitalism is what people do when left alone. Anything other than capitalism is because of a government that restricts what people freely do. Even simple barter requires a saving of resources and an investment to obtain other goods. Simple farming was also capitalism long before tractors and center-pivot irrigation systems. Early farmers sacrificed the consumption of seeds in order to invest them in next year’s crop.

Is capitalism good? It rewards innovation and efficiency. It creates job opportunities and allows families to
climb the ranks and through savings and investing to become capitalists and potentially wealthy. Compare the lives of the poor in the early 21st century with the lives of the wealthy in the 17th century. Decide for yourself who had a better quality of life and more choices.

If capitalism were outlawed, what type of economy would we have? Without capitalism, individuals would no longer make the decisions. Government would choose what to produce and in what quantities. Productivity would decline because there would be no incentive for workers to be more efficient or to earn more income by working overtime. They could not invest the additional money and there would be limited products from which to choose.

For those who hate capitalism and love government social programs, remember that without capitalism governments could not afford to fund those programs. All wealth derives from the creation of goods and services and that cannot happen without rewarding people who have ideas and take risks. It’s also something that government bureaucrats cannot do, but can only make more difficult.

In its overwhelming arrogance, government seeks to tell business how to operate, mandating behavior that is expensive and interferes with the function of business - to make a profit. The US tax code is at the heart of many of our economic problems.

Government has long sought to use tax policy to force businesses to follow its whims. It also uses tax policy to help favored businesses or industries and to harm those it does not like. That is the main reason we need to scrap the tax dinosaur, the real T. Rex. It's time to free the economy and put the chains on a tax policy that is America's biggest economic threat.

by Ken Carroll

For additional commentary, visit www.PeachPundit.com.

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