“By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it.” – Adam Smith
Capitalism took a beating in the 2016 presidential election. Between the surprising number of Democrats openly adopting the term socialists, and the depressing number of Republicans supporting the anti-free market ideas of Trump, it is unclear how many people even understand the underlying principles of capitalism.
It seems many on the left erroneously conflate capitalism with support for big business, and oppose capitalism for that reason. And, unfortunately, because partisan politics is often defined by simply opposing the other side, the natural reaction for many on the right has been to reflexively support big business. I used to do that, and it’s a tough habit to break. Add to that the populist economics of Trump, and the true defenders of capitalism appear to be few and far between.
Capitalism is not about supporting big businesses; it is not about supporting small businesses; it is not about supporting the owners, managers, workers, or unemployed over other groups. Capitalism is about allowing the free market to balance the needs, wants, and desires of billions of people all around the world. There are over 320 million people in America alone. Despite the President’s best intentions, one man alone cannot possibly know the right allocation of resources for all of us. Neither can the 435 members of Congress. Nor can the nearly three million members of the federal bureaucracy. They don’t know you. They don’t know what you need or what you want, or how much it is worth to you. Only you do. So why should a bureaucrat decide the value of any item? Don’t give that power away to the ignorant.
But the free market is much more than a simple recognition of complexity and diffusion of economic power. Capitalism harnesses the negatives of human nature for the benefit of society. As Gordon Gekko famously said in the movie Wall Street, “greed is good.” Under a free market, for anyone to become wealthy they must provide their fellow man with wanted services at a higher quality and/or lower price than their competitors. You may disagree with what people want, but you have less information than the president, and as mentioned above, not even he can properly allocate resources for hundreds of millions of people.
Now, this is not to say there is no role for the government in capitalism. The free market is dependent upon fair competition, and it is the government’s responsibility to ensure that fair competition exists. The government should prevent monopolies and other anti-competitive systems. But its role is to enforce the rules of the game, not to pick sides. There will always be temporary winners and losers, but in a free market, society as a whole continually advances.
That so many Americans have forgotten that is to the detriment of us all.