Why Capitalism?

Someone asked me in my Ask.fm account: Why Capitalism? This is my answer.

Wow. Where should I begin? I'd have to write a whole book's-worth of words to explain the merits of Capitalism. But I'll try my best to give a summary. I guess I should start by defining Capitalism for what it truly is.

Capitalism or Laissez-faire Capitalism (laissez-faire: let them be, leave it alone) is in essence an economic system that is based on private ownership of the means of production and capital goods, and the production of goods and services for profit in a market economy. It is an economic system where the government does not possess the power to regulate or intervene with the economy. By regulation, I mean price control, subsidies, legislation, nationalization of properties, creation of artificial demand, regulation of supply, redistribution of wealth, welfare state, unemployment compensation, etc. In an "ideal" Capitalist system, the only rational function of the government is to hold a monopoly on making laws—but not just any arbitrary laws. These laws should solely be aimed at the protection of each person's individual rights, nothing more. In addition, the government will not have the power to enforce taxes on people. So, by virtue, private entities will have all the freedom to do what they wish in order to function competitively in the free market. That is the true essence of Capitalism. However, Capitalism is often misconceived as Corporatism. There is a big difference between the two. The easiest way to explain it is this: In Corporatism, oligarchs walk hand-in-hand with government, in Capitalism, everybody competes for a share in the market without the help from the government. Corporatism invites corruption and monopoly, Capitalism invites wealth and prosperity through hard work.

By now, you must be asking: Who will build the roads? Who will regulate the economy in times of recession? Who will stop the prices from skyrocketing without regulation? Who will implement these laws if there is no police force? Who will fund the court houses? Who will fund the army? Who will keep the criminals in jail? Who will help the poor people stand up on their feet? Who will stop these private entities from becoming corrupt market bigwigs? Where will the government receive its funding? And other common questions faced by a Capitalist.

I will not try to go around and answer all of these questions mentioned above, because honestly, there are too many and will make this answer too long as it already is. Maybe you can figure out the answers to some on your own as you go through this article. Maybe you can ask me another question related to Capitalism. Or maybe you can also find the answer to some of the questions by researching more about Capitalism. I think other sources are more comprehensive about explaining how Capitalism works than me with my own words and perspective.  My recommended reads are: Economic books by Ludwig von Mises, books, letters, interviews, and articles by Ayn Rand, and Online blogs such as The Objective Standard (http://www.theobjectivestandard.com/) and The Vincenton Post (http://vincenton.wordpress.com/). However, I will try to answer some of the questions.

Without the government, who will build the roads? Who indeed? I have a question before I answer this question. If you look at our current road system, the type of materials used in our roads, and the excruciatingly slow time frame to which these public roads are built—to you, are our roads really satisfactory? The materials are substandard. The paint used is not as vibrant as it should be to serve its purpose. The road signs are leaning when they shouldn’t be and are covered in vandals. Potholes that are older than me are a commonplace. Roads that were made just a few months earlier have already shown signs of fatigue and damage. Worst part is that they try to fix these damages with some kind of hot liquid that kind of act like glue. It’s like a sad messed up artwork that had gone horribly wrong—a sheer sign of incompetence. Now take a look at Cebu IT Park—a decent stretch of land with private roads, clean, well maintained, purely magnificent. When people think of private roads, they always have it embedded in their minds that going through that road will have some kind of fee, but not Cebu IT Park. It is an example that we do not need the government to build roads. Just think outside the box.

Without the government, who will stop these private entities from raising their prices and in turn earning a higher profit margin and in turn become corrupt market bigwigs? That’s simple—their competitors. As a consumer, from who would you rather buy? From a stupid brand who decided to raise their prices through the roof because of the lack of regulation? Or from another brand which is just as good but at a more reasonable price? I’d pick the latter obviously. You see, this is the most amazing thing about Capitalism and the focal point of its essence—competition. In a Capitalist system, competition is the greatest equalizer. It is not just applicable to goods competing against other goods as one might usually think. It can also be applied to competing for better and more capable employees. For example; if you are a top notch student who graduated with honors and has numerous experiences as an intern, which company would you apply to? To the one who offers menial salary? Or to the one who offers greater benefits and a promise of tenure in the future? Again, I’d pick the latter. Was there any DOLE involved in the example? No. Did your employer benefit from your skill? Of course. And it’s not just limited to that. Competition can be applied to almost all aspects in the free market, such as business reputation, easiness of doing business, quality of work, price range, you name it.

Another good thing about Capitalism is that it will never break down and will never create a monopoly. Just as what Miss Ayn Rand said in an interview, “Under a free system, no one could acquire a monopoly on anything. If you look at economics and economic history, you will discover that all monopolies have been established with government help, with the help of franchises, subsidies, or any kind of government privileges. In free competition, no one could corner the market on a needed product.” “Study economics. A free economy will not break down. All depressions are caused by government interference and the cure is always offered so far to take more of the poison that caused the disaster. Depressions are not a result of a free economy.” The facts are evident.

Capitalism has created the highest standard of living known to earth. You asked me: Why Capitalism? Because Capitalism requires the best in people. It frees our creative mind from the clutches of a parasitic statist mindset and encourages us to do actual work and to stop relying on the government to help us survive in the world. It encourages us to create, to innovate, to progress towards the future. It does not offer serfdom, it does not offer slavery, it does not offer silent obedience, it does not offer laziness, it does not offer you an easy way out, and it does not force you to do anything. It only offers you a choice: To do, or not to do.