Capitalism is Good in Theory and in Practice

Upon hearing an argument for capitalism, many respond, “That is good in theory, but it would never work in real life.” Such a statement is wrong in both theory and in practice. (And it is actually an example of a fundamental philosophical error–the mind/body dichotomy.)

What is a theory? Merriam-Webster defines a theory as “a belief, policy, or procedure proposed or followed as the basis of action.” And how to we judge whether a theory is good or bad, practical or impractical? By the results that we attain when/if we act on that belief, policy, or procedure. A theory is good if it achieves the predicted results. (In this context, “good” does not mean that the results are proper or moral.) A theory that achieves something different from its stated objective is not a very good theory.

For example, Marxists have long theorized that “from each according to his ability, to each according to his need” would lead to a worker’s paradise. In reality, the results have been economic regression, misery, and death on unimaginable scales. Marxism, in any of its variants, doesn’t work in practice because it is flawed in theory.

Unfortunately, capitalism as I advocate has never existed. Capitalism means a complete separation of government and economics. It means no public roads, no government schools, no FDA, and no IRS. It means no regulations, no coercive taxation, and no government “entitlement” programs.

In a capitalist society, government is limited to the protection of individual rights—the freedom of each individual to act as he judges best, as long as he recognizes the mutual rights of others.

Since such a society has never existed, though America came closest in the nineteenth century, how do we know that it will work? How can we determine if capitalism really is good in theory?

The answer is: by looking at isolated segments of the economy. We can look at education prior to the Civil War and see that Americans were well educated without government schools. We can examine the private mail companies of the 1840s and 1850s and learn that they delivered the mail more efficiently than the postal service. We can look at the oil industry in the late nineteenth century and discover that, free from government intervention, oil companies made everyone’s life better and became fabulously wealthy in the process.

We can look at those companies today, such as those in technology industries, and witness the amazing new gadgets that enhance our lives—smart phones, flat screen televisions, and the Internet. And the examples do not stop there. There are thousands of examples of free individuals producing the products and services that others want and need. These examples span centuries, they cross international borders, and they occur in virtually every field of production. (My book provides dozens of such examples.)

Capitalism and freedom work in every realm of human life. Capitalism is good in practice because it is good in theory.

  • Norak

    I disagree. Capitalism doesn’t work in practice. In a capitalist country, the capitalists become exceedingly wealthy and use this wealth to bribe government to set up monopoly, regulation, bailouts, and so forth so that only these capitalists benefit. The greatest enemy of capitalism are the capitalists themselves. Hence capitalism leads to no capitalism. Capitalism doesn’t work.

    What does work? A free market that allows businesses to produce good and services for citizens but is restrained by the power of government representing the people and trade unions representing workers.

    Sure communism leads to a dictatorship of the proletariat, but capitalism leads to a dictatorship of the rich (fascism). The answer is in the middle. Workers and businesses have equal power.

    The worker and the employer are like a married couple. They both need each other. In order to prevent abuse of power, both need equal power.

  • Lucas

    Norak, did you even read the article?

    What you missed:
    “…Unfortunately, capitalism as I advocate has never existed. Capitalism means a complete separation of government and economics….. In a capitalist society, government is limited to the protection of individual rights…”

    In this society there is no point in bribing the government, the government doesn’t have any power over the economy. No power to set up monopolies, no regulations, and no bailouts.

  • Nicholas Bodine

    In a true capitalist system, the companies would not have to bribe the government, because the companies would have the freedom to proper without government help. Ayn Rand in Capitalism: the Unknown Ideal, that James Jerome Hill built the Great Northern Railroad without a penny on government support. And he prospered, whereas his competition with government aid failed, hence the Credit Mobiler scandal of the 1870s. And the Vanderbilts had to bribe the New York Legislature in the 1840s because the politicians held control over licenses in the state. The politicians backstabbed Vanderbilt, and Vanderbilt struck back, buy buying up his railroad stock, and bankrupting city aldermen. Vanderbilt only bribed the politicians to get them out of the way. Can you imagine where we would be today if the railroads were not allowed to prosper because they would be a “dangerous competitor” to the politically backed steamboat industry? Do you know why AT&T, Verizon, and Sprint have so much power? Because the Federal Communications Commission has granted them a cartel hold over the communications industry. Monopolies, cartels, and the like are impossible under capitalism, unless they are industrious enough to maintain such a hold on the market share. The Aluminum Corporation of America was able to hold such a monopoly over the aluminum industry until anti-trust regulations killed it in the 1960’s. It was not a coercive monopoly, and innovated enough to keep such a lead. And it was not a monopoly over the construction materials industry, after all, there was always other materials such as steel or concrete for construction. A cartel is held together by the government, which holds a monopoly on the use of force. Only the government can do such a thing. The point then is simple- it is not the corporations who create the lobbyist atmosphere that is our disgrace of a national Capitol (and a disgusting perversion of Washington’s great name), but the government itself. Thus, to fix this nation requires education, and not the slop I went through in the public schools. We start with a change in ourselves first, and only then can we as a people and ultimately as individual human beings, can we change the world. Read up on you basic economics, scrutinize your so-called leaders, and do not take everything for granted. That is the attitude of the people who reelected our Dictator-in-Chief, but most people visiting this website are better (and perhaps smarter) than them. I don’t know who you are Norak, but the fact that you have visited this website means that you have taken a small step in the right direction. But to save our country (or countries), our liberties, our property, and ourselves requires more than a few enlightened, dedicated seekers of truth and liberty communicating on a single website. We need a grassroots organization or two that stands strong on principles and numbers in a mass large enough to grab the world’s attention. For this we may take a page (or several) from our opponents; the collectivist left has a monstrously effective propaganda and recruitment machine doing its job as we speak. If we are to win the fight, we cannot hide in the shadows any longer. The Republican party and its candidate, Mitt Romney lost the 2012 election for President of the United States of America not merely out of ineptitude, but out of silence as well. The voters ultimately saw no difference in the messages of the two candidates, and stuck with the devil that they know over the devil they don’t. Romney focused on the economy, but that was simply not enough. West Virginia, one of the most heavily unionized states in the US, voted against Obama in the election. The truth is that while the “Conservatives” outnumber the “liberals” in the United States, the left has a choke hold on the media, and even more importantly, the education system. Whatever message Romney got out there was filtered, skewed, and deliberately obfuscated by the left. The result was that Obama “won” reelection. While he may not be a actual dictator yet, Mr. Obama has destroyed the Constitution, and the reality is simply that America is rapidly sliding towards totalitarianism under his weight, and though America may survive four more years of Obama, the nation and capitalism will not survive the rise of a ignorant, and indoctrinated voting public. Hence the reason for the calls to repeal the 17th Amendment.

  • Editor GoI Monitor

    But how can we imagine a government which would accept to have no control whatsoever? The ideal capitalist state, just like an ideal communist state, has never existed and would never do so because its basic premise is flawed …it’s time we move away from these theories.

  • Lucas

    “…how can we imagine a government which would accept to have no control whatsoever?”

    Read the article – easily imagined.

    “The ideal capitalist state…its basic premise is flawed…”

    I see nothing flawed about it.

  • Evan Neumann

    Your written diarrhea is ridiculous and tl;dr.

    During the 2007 bailout we saw a sample of what happens when capitalism is left unrestricted by government regulations. As is human nature, the capitalists used government to further their own agendas. This is the same root reason communism failed: human nature.

    Any ideologically pure system of government will fail through oligarchy or dictatorship.

  • writeby

    Affordable Housing Act, Clinton.

    F-Mae, F-Mac: Lead the way; insure those with poor credit get loans by the bushel; distort market; inflated prices; bubble bursts.

    Wow, Fannie & Freddie, capitalist organizations, who’d a thunk it?

    Human nature innately corrupt? I smell a Christian and the Doctrine of Original Sin. Or at least a Platonist and the mind-body dichotomy.

    “Ideologically pure”? Let’s rephrase: A system of consistent, rational ideas leads to tyranny while a system of mixed & contradictory (or irrational) ideas leads to freedom. So act-first-think-later pragmatism is the way to go. Then you ought be happy with what we now have.

    Or IOW: It’s all those ideologues’ fault–and that’s my ideology.

    The Founding Fathers would’ve been interested in learning that.

    (PS. Nice ad hominem & unsupported assertions. But, hey, it saves time from constructing a rational argument.)