Capitalism is good for you

April 30, 2019

Jacinda Ardern had only just become Prime Minister when she declared capitalism a blatant failure.

But as Thomas Gordon says, you may not like it, you may not be good at it, but capitalism is good for you:

. . . Numerous politicians are reminding people that some individuals are doing very well with capitalism and that the vast majority of us haven’t been as successful as them. A system that rewards some people more than others may strike you as inherently unfair. Competitive capitalism, where some people try and fail and businesses go bankrupt and have to lay off their employees, seems stressful and unnecessary to some.

Stressful yes, unnecessary maybe, but what’s the sustainable and viable alternative?

But I’m going to ask you to take a step back from thinking about who has what right now and think longer term about the things in your life that make you better off. Think about the possibility that capitalism puts life-saving, game-changing, incredibly convenient products and services in your life whether you participate directly in working on those innovations or not. Some are arguing that the average person in today’s advanced countries wouldn’t trade places with a billionaire 100 years ago. Napoleon and George Washington would be very jealous of your ability to instantaneously text people thousands of miles away.

In the past, very rich and powerful people had to watch relatives die if they got certain kinds of bacterial infections. Now, you can easily go out and procure antibiotics. The richest person in Rome couldn’t have his or her favorite perishable dish until their servants prepared it, and now you simply take your favorite dish out of the refrigerator and put it in the microwave. Progress has become so profound and pervasive that some are arguing that the average person in today’s advanced countries wouldn’t trade places with a billionaire 100 years ago.

It is important to mention that successful innovation yields very high societal returns. A successful innovation improves the lives of every human being using that innovation for the rest of humanity. Someone invented the wheel, and now billions of people have driven vehicles that use that wheel.

The person who invented malaria pills that would have kept President Teddy Roosevelt from getting the disease benefited all those hundreds of millions of people who live/will live in or travel to tropical zones where malaria is a problem. I would argue that if an innovator lives a little better lifestyle than the rest of us during their lifetime, that’s a small price to pay for all the future advantages their innovation brings to humanity. And by the way, not all innovators are fabulously wealthy people.

If innovators are earning more, it’s rarely, if ever, through luck alone. There might be some luck involved but it’s almost always because they’ve also taken risks, made investments and worked very hard.

Capitalism is very good at rewarding progress, and over time, a great deal of progress has been accomplished by capitalism. Some accomplishments of capitalism are game-changing, such as vaccines and the commercialization of the internet . . .  Some innovations are more humble, such as the successful start-up of a restaurant with a good location or the right cuisine in a medium-sized town.

All around you, people are paying attention and trying to improve our world in ways big and small. Hundreds of years ago, someone invented a flathead screw for joining wood or metal together. In your lifetime, an impact driver was invented that now makes it easy to drive that screw with a handheld tool, and this process has replaced most nails. Disk drives used to be the size of a rugby ball, and you placed those drives into a device the size of a washing machine. Now you can hold the storage of a thousand of those drives in a smartphone in the palm of your hand.

Dentistry started out as a painful process with drilling that used soft metals such as gold to fill cavities. More recently, some fillings require no drilling at all. The bonding material is so good that the filling is just added to the tooth and cured. All this progress makes products and services cheaper for all income groups in society—not just the well-off.

Innovative methods and products might cost more at the start, but one of the benefits of commercialisation is that prices usually drop.

Our first microwave cost $1000. That was 36 years ago, now you can get one for less than $100.

Capitalism is responsible for almost all progress, not socialism or communism. Socialist and communist societies have very poor reputations for innovation in every realm except the military. I can think of only two innovations that came out of socialist/communist societies that were superior to capitalist products: Lasik and the Rubik’s cube. The Lasik procedure was developed because someone cut their eye in a bar fight in the Soviet Union, and a doctor was paying attention. The Rubik’s cube was invented in Eastern Europe but commercialized in the West.

Capitalism has many individuals, small businesses, and corporations working on improvements; the good ideas rise to the top, while the bad ideas fail. Those resources quickly go elsewhere. The probability that a huge government bureaucracy with competing agendas could pick the successful ideas out of thousands of candidates and implement them to the customers that want them is very low.

All this happens naturally and easily in a capitalist system. Ask yourself how long the world would wait for the smartphone if Cuba or North Korea had been relied upon to invent it. It could be that we would never get a smartphone because the chief of internal security wouldn’t want people communicating that way and would cancel the project. The smartphone was developed in Silicon Valley in about 20 years.

Capitalism gives power to people. Governments have the power under alternative systems.

So the choice is yours. There are plenty of politicians out there to vote for who are willing to take nearly all the income a capitalist system generates and reallocate it the way they (you?) think it should be. Most experience shows that this taking kills or severely restrains innovation. Or you can have a sense of humor and stick with the system that, though messy, has made your life much better the last ten, hundred, and thousand years and will make the life of future generations better in ways we can’t even now imagine.

Capitalism isn’t perfect. There is a role for government and its agencies in building and maintaining some infrastructure, providing some services and helping the most vulnerable.

But to do all that, governments needs money and they will get more money from individuals and businesses operating in a capitalist system than if they were operating under socialist or communist regimes.


Socialism big lie of 20th century

February 19, 2014

Mark J Perry explains why socialism failed:

Socialism is the Big Lie of the twentieth century. While it promised prosperity, equality, and security, it delivered poverty, misery, and tyranny. Equality was achieved only in the sense that everyone was equal in his or her misery.

In the same way that a Ponzi scheme or chain letter initially succeeds but eventually collapses, socialism may show early signs of success. But any accomplishments quickly fade as the fundamental deficiencies of central planning emerge. It is the initial illusion of success that gives government intervention its pernicious, seductive appeal. In the long run, socialism has always proven to be a formula for tyranny and misery.

A pyramid scheme is ultimately unsustainable because it is based on faulty principles. Likewise, collectivism is unsustainable in the long run because it is a flawed theory. Socialism does not work because it is not consistent with fundamental principles of human behaviour. The failure of socialism in countries around the world can be traced to one critical defect: it is a system that ignores incentives. .

In a capitalist economy, incentives are of the utmost importance. Market prices, the profit-and-loss system of accounting, and private property rights provide an efficient, interrelated system of incentives to guide and direct economic behavior. Capitalism is based on the theory that incentives matter!

Under socialism, incentives either play a minimal role or are ignored totally. A centrally planned economy without market prices or profits, where property is owned by the state, is a system without an effective incentive mechanism to direct economic activity. By failing to emphasize incentives, socialism is a theory inconsistent with human nature and is therefore doomed to fail. Socialism is based on the theory that incentives don’t matter!

The failure of the car industry in Venezuela provides a very good example of why socialism and the central planning which goes with it fails.

Leonardo Hernandez had hoped to buy a new car this year, ending nearly two years of waiting on various lists at different dealerships throughout the country.

Those hopes were dashed last week when Toyota Motor Co. said it would shut down its assembly operations in Venezuela due to the government’s foreign exchange controls that have crippled imports and made it impossible to bring in parts needed to build its vehicles.

The country’s other car manufacturers, including General Motors and Ford, haven’t even started operations this year, while waiting for needed parts to arrive. . .

 

Yes, Prime Minister


Left won’t accept socialism failed

October 18, 2013

Quote of the day:

The big, bad thing is that large parts of the Left have never faced up to the failure of socialism. The nicer Leftists, often very belatedly, deplored Stalin and Mao – the purges, the Gulags, the famines, the invasions. The more intelligent ones detected certain (let us put it gently) problems with state ownership of the means of production, distribution and exchange. Yet when, in 1989, the Berlin Wall was knocked down by the citizens in whose name it had been erected, few could admit that this was a defeat for socialism as fundamental as that of Nazism in 1945. Charles Moore.

Would it be too much to hope that the Labour and Green parties could admit this and drop the socialist policies which are doomed to fail in the future as they have in the past?


Unequally wealthy better than equally poor

May 20, 2013

Inequality has become  another of the left’s causes de jour.

The easiest way to close the gap between rich and poor is to make the rich poorer.

That wouldn’t help anyone because it’s not who has how much that matters, but whether everyone has enough.

Determining how much is enough, whose responsibility it is to ensure everyone has it, how they get it and who pays for it raise questions for which there are no simple answers.

But it would help if we ruled out those which have been proved not to work, among which are attempts to get economic equality which result in everyone getting poorer.

A society which is unequally wealthy might not be perfect but it’s still a long way better than one in which everyone is equally poor and miserable.
@[188355460514:274:Capitalism] is Freedom.

Hat tip for picture to Capitalism.


Capitalism vs Socialism

May 14, 2013

This could also be used as evidence that economic freedom is more important than oil which would confound red greens who want more regulation but less oil.

Hat tip: Capitalism


Classroom socialism

November 23, 2011

This story of socialism in the classroom is doing the email rounds:

An economics professor had never failed a single student, but recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equaliser.

The professor then said, “OK, we will have an experiment in this class on Obama’s plan. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.”

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

If socialism doesn’t work and isn’t fair in the classroom, why would it be any better in the economy?

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Incentives work in the classroom and the world.

If people have incentives to help themselves they’re more likely to do it.

If they have incentives to be dependent they’re less likely to help themselves.

 


Picking pockets

November 6, 2008

 

Hat Tip: Anti Dismal


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