Capitalism is a bad word and a bad economic system – if you listen to socialists. Representative Alexandria Occasion-Cortez (D-New York) made the following complaint: “No one ever makes a billion dollars. You take a billion dollars.” She obviously believes that capitalists get rich because they take money from other people. This is far from true.
Someone once described the economy
as a pie with everyone getting a piece. Some people think that there has to be
someone who loses “pie” if anyone gets a bigger piece. This is not how the
economy works. As the economy gets stronger, the “pie” gets bigger. Therefore,
everyone’s piece of “pie” is larger.
The problem with understanding the American
economy is that there are so many myths about capitalism – what it is and how
it works. John Stossel published two articles debunking the myths about
capitalism. The first article can be found at this site, and the second one can be found at
this site. Stossel debunks seven
myths about the economy – three in the first article and four in the second.
Here are his seven myths:
Myth #1: There is a finite amount of money
in the world – when one person wins, someone else must lose.
Free markets increase total wealth.
Competition encourages entrepreneurs to find new ways to release more value
from both people and resources.
Because capitalism is voluntary and
consumers have choices, the only way capitalists can get rich is to offer us
something that we believe is better than we had before.
That creates new wealth…
Myth #2: The rich are getting richer,
while the poor get poorer.
… Research shows that entrepreneurs only
keep 2.2% of the additional wealth they generate. “In other words, the rest of
us captured almost 98% of the benefits,” says economist Dan Mitchell of the
Center for Freedom and Prosperity.
“I hope that we get 100 new super billionaires,”
he adds, “Because that means 100 new people have figured out was to make the
rest of our lives better off….
… Yes, the rich got lots richer, but the
poor and middle class got richer, too.
“The economic pie grows,” says Mitchell. “We
are much richer than our grandparents, and our grandparents were much richer
than their grandparents.”
For thousands of years, the world had
almost no wealth creation. Only when some countries tried capitalism did GDP
grow.
Capitalists helped everyone, including the
poor….
Myth #3: The middle class is in decline.
It’s true, Mitchell points out. “Its
shrinking because more people move into upper-income quintiles! The rich get
richer in a capitalist society. But guess what? The rest of us get richer as
well.”
Myth #4: Capitalism creates unsafe
workspaces.
… It’s logical to assume that government
regulation saves lives. Workplace deaths dropped after the Occupational Safety
and Health Administration was created. Government officials like showing a
graph of the decline.
But if you bother to also look at data
from before the agency’s creation, you see that deaths fell at the same rate
before regulation began. Why?
“As we become richer, we become safer,”
says Dan Mitchell of the Center for Freedom and Prosperity.
Wealth created by capitalism lets us
afford safety devices and build machines to do dangerous work. The Occupational
Safety and Health Administration is like someone jumping in front of a parade
and claiming he led the parade.
“We need more capitalism because when people
get rich, they can afford more safety,” adds Mitchell.
Myth #5: “Unfettered” capitalism created
evil “robber barons” who got rich by “exploiting” workers and consumers.
It’s true that more than 100 years ago, a
few entrepreneurs, such as John D. Rockefeller, amassed a huge amount of
wealth.
But Rockefeller was neither robber nor
baron. He was not born rich, and he didn’t rob. He got rich by offering
consumers better deals.
Rockefeller developed ways to deliver oil
for less. He won customers by lowering the price of kerosene from 26 cents per
gallon to about 6 cents.
For the first time, average people could
afford fuel for lanterns so they could read after dark. Rockefeller may have
even “saved the whales” by making oil so cheap that killing whales to get whale
oil was no longer practical….
Cornelius Vanderbilt was also born poor. At
age 11, he quit school to work on boats.
Then he invented ways to make travel
cheaper. He cut the New York-Hartford fare from $5 to $1.
Because of capitalists like them, Mitchell
points out, “We went from agricultural poverty to a country characterized by
middle-class prosperity.”
Myth #6: Even if capitalism
brings us cheaper or better products, it just isn’t “good for us.”
Of course, capitalism can breed nasty
materialism…
Mitchell responds, “We’re not buy iPhones
and plastic garbage unless we think it’s better for us than the dollars that we
have!”
That’s a very important point. No
capitalist gets our money unless we voluntarily choose to exchange it for whatever
he’s selling. As Mitchell puts it, “Capitalism is the only system that gives
people the liberty to make their own choices.”
Myth #7: Capitalism’s pursuit of profit
drives businesses to create robots that will eventually take away most everyone’s
job.
It could happen. Artificial intelligence
is powerful. Maybe this time is different.
But again and again, experts predicted
that employment was about to decline – and again and again, they’ve been wrong.
Some people do lose jobs. Capitalism
promotes creative destruction.
It’s terrible for the fired employee.
But it’s good for most everyone else. It’s what allows for innovation.
Mitchell points out, “The computer
destroyed the typewriter builder’s job, electricity took candlemakers’ jobs,”
but those jobs were soon replaced with better ones.
Capitalism has continually generated more
jobs. When America began, 90% of workers worked on farms. Now fewer than 2% do.
And there are millions more of us.
“As long as our economy has the dynamism
that free markets allow,” says Mitchell, “we’re going to see more job creation
and higher income levels. That’s what makes the children and grandchildren of
typewriter makers so much better off. No other system anywhere in the world has
ever come close to capitalism’s ability to generate mass prosperity.”
Here is a video where AEI President
Arthur Brooks explains how capitalism is the single greatest force to pull
people out of poverty. The
Case for Capitalism | The Daily Signal - YouTube
I have an example capitalistic
success within my own family. My son became an entrepreneur with an idea that could
help other people. His company grew, so he hired his sister and divided his
workload. The company continued to grow,
so he hired another sister and divided more of the workload. He split the
ownership of the company with his wife and brought her on board with some of
the responsibilities. There are at least three or four other people working for
him. He has become rich on his idea and work, but he has also increased the
wealth of several other families. I know that capitalism works and is a good
thing!
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