What Are Some of the Myths about Capitalism?

            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!