Capitalism Solves Problems; Statism Creates Them

A couple of years ago, President Barack Obama, speaking on the economy, told an audience in Osawatomie, Kansas: “‘The market will take care of everything,’ they tell us. … But here’s the problem: It doesn’t work. It has never worked. … I mean, understand, it’s not as if we haven’t tried this theory.” To believe what the president and many others say about the market’s not working requires that one be grossly uninformed or dishonest.

The key features of a free market system are private property rights and private ownership of the means of production. In addition, there’s a large measure of peaceable voluntary exchange. By contrast, communist systems feature severely limited private property rights and government ownership or control of the means of production. There has never been a purely free market economic system, just as there has never been a purely communist system. However, we can rank economies and see whether ones that are closer to the free market end of the economic spectrum are better or worse than ones that are closer to the communist end. Let’s try it.

First, list countries according to whether they are closer to the free market or the communist end of the economic spectrum. Then rank countries according to per capita gross domestic product. Finally, rank countries according to Freedom House’s “Freedom in the World” report. People who live in countries closer to the free market end of the economic spectrum not only have far greater income than people who live in countries toward the communist end but also enjoy far greater human rights protections.

According to the 2012 “Economic Freedom of the World” report — by James Gwartney, Robert Lawson and Joshua Hall — nations ranking in the top quartile with regard to economic freedom had an average per capita GDP of $37,691 in 2010, compared with $5,188 for those in the bottom quartile. In the freest nations, the average income of the poorest 10 percent of their populations was $11,382. In the least free nations, it was $1,209.

Remarkably, the average income of the poorest 10 percent in the economically freer nations is more than twice the average income of those in the least free nations.

Free market benefits aren’t only measured in dollars and cents. Life expectancy is 79.5 years in the freest nations and 61.6 years in the least free. Political and civil liberties are considerably greater in the economically free nations than in un-free nations.

Leftists might argue that the free market doesn’t help the poor. That argument can’t even pass the smell test. Imagine that you are an unborn spirit and God condemned you to a life of poverty but gave you a choice of the country in which to be poor. Which country would you choose? To help with your choice, here are facts provided by Robert Rector and Rachel Sheffield in their report “Understanding Poverty in the United States: Surprising Facts About America’s Poor” (9/13/2011, Eighty percent of American poor households have air conditioning. Nearly three-fourths have a car or truck, and 31 percent have two or more. Almost two-thirds have cable or satellite TV. Half have one or more computers. Forty-two percent own their homes. The average poor American has more living space than the typical non-poor person in Sweden, France and the U.K. Ninety-six percent of poor parents stated that their children were never hungry because they could not afford food. The bottom line is that there is little or no material poverty in the U.S.

At the time of our nation’s birth, we were poor, but we established an institutional structure of free markets and limited government and became rich. Those riches were achieved long before today’s unwieldy government. Our having a free market and limited government more than anything else explains our wealth. Most of our major problems are a result of government. We Americans should recognize that unfettered government and “crony capitalism,” not unfettered markets, are the cause of our current economic problems and why the U.S. has sunk to the rank of 17th in the 2013 “Economic Freedom of the World” report.

  • Lionell Griffith

    There is a causal connection between economic and political freedom and the production of wealth. To produce you must be able to solve problems. To solve problems you must be able to think. To be able to think you must be free to learn, make mistakes, try, fail, and succeed. You then must be free to keep the fruits of your success to continue the process.

    Lacking that freedom, every step along the way is crippled, inhibited, and ultimately destroyed. The crippling is a feeling of “why bother?” The inhibition is “I must get permission or I cannot act.” The destruction is “I cannot live on what they permit me to keep.” The takers destroy the makers from whom they expect to take and are destroyed themselves. What follows has been called “A Dark Ages”.

    I suggest this is exactly what the takers want to happen. It is not that they want to live at the makers expense. They don’t want to live and don’t want the makers to live.

  • John Barnes

    capitalism causes problem, look at the elites like christy walton, what productive thing has she done yet her net worth increases, you dont mind if guys like the late steve jobs, and people like him who creates things and gets rich from it, they deserve it but waltons, soros , buffets that plays the stock markets and does nothing productive.

  • mkkevitt

    I haven’t read this posting or the other comments yet. First, I wanna say this. Capitalism solves the problems of maintaining and improving human life. Statism creates nothing but problems consisting of impediments to solving those problems. Statism is not government by law. It is crime. Capitalism solves that problem, too, by instituting law and government. I’ll now read the posting and the other comments. Mike Kevitt

  • mkkevitt

    I’ve read the posting now, but not the comments yet. So capitalism (free mkts.) solves problems (they work). Granted. The informed and the honest will admit to that. Obama is certainly informed. But he and many others aren’t honest, and many others aren’t informed.

    But what job does capitalism do? In what way does it work and is better? In answer, it maintains and improves human life. But that’s not what thorough going-statists are looking for, not any more than religious fanatical fundamentalists.

    These top-of-the-line irrationalists want one thing: possession of great wealth, power & total, supreme, arbitrary rule (and, thus, ALL wealth). It stands to reason that their means is initiatory physical force, not free mkts. Their religions and irrational secular ideologies are only fronts for that.

    Obama might not be THAT bad, but he tries to fool us when he talks like he’s looking for the same thing we are, as if he’s not ALSO looking for SOME wealth, power, etc. by force. What he’s saying is free mkts. don’t work for the objectives of statists. Mike Kevitt

  • mkkevitt

    Mr. Barnes: People like the Waltons, Soros and Buffet (whatever their political philosophies) are productive in ‘playing the stock mkts.’. The money they make proves it. They’ve been crucial in allocating or re-allocating resources more productively, in mkt. terms. They don’t gamble. They judge the productivity (thus profitability, the money to be made) of economic activities and ideas. When the goods come off the line and are sold, the money follows. Their profits are just some of that money. The free mkt. (the free choice of all parties) allocates that money. If some people get ‘gyped’, maybe it’s because they lack the bargaining power they think they have, or they just didn’t use all the bargaining power they had. That’s capitalism, and capitalism caused it, but it’s not a problem, except for whoever makes mistakes, which THEY are responsible for. But it’s productive just like the activities of those like the late Steve Jobs, and doesn’t cause problems any more than those activities. If there are problems, capitalism didn’t cause them. Capitalism solves problems. Mike Kevitt

  • mkkevitt

    If they don’t want to live and don’t want the makers to live, maybe that’s the end of what I mentioned in my comment above, that pure statists and fanatical religionists want supreme and arbitrary power.

    Recognition and respect of individual rights, in writing and enforced, is law & gvt. only, and vice versa only. Law & gvt. is established by intelligently directed effective responsive (retaliatory) physical force. This enables political and economic freedom. The production of wealth is caused by exercising those rights and freedom.

    It is rights against, and freedom from, crime (incl. crime by criminal plan from under cover of the guise of law & gvt.), and from foreign threats, that law & gvt. is set up to recognize and respect. It is only within the presumption of individual rights to the total exclusion of crime that any such thing as politics can exist. Politics (and elections) are about nothing but how best to enforce individual rights.

    In the real world as it actually is TODAY, so much of the jazz we call politics is actually criminal threats and posturings, and that’s much of what elections are now about, not politics. That’s because we’ve permitted the invasion of individual rights by crime (and by foreign threats) which, in the U.S., takes the form of the ‘mixed economy’. It’s because of the moral factor not known and practiced, or evaded. Altruism or egoism: What are the ‘morals’ of crime? What are the morals of politics, law & gvt.. and individual rights? Mike Kevitt

  • John Barnes

    Investing in stock isn’t beneficial to the economy. In fact,
    I’d assert that it’s harmful to the economy since, due to limited shares a
    company could have any way of either common or preferred, the wealth gets tied
    up amongst rich people who extract profits generated by the working class (who
    in turn are paid poverty level wages).

    And no, most rich people don’t “buy stuff with their money”. They buy
    stocks with their money. Then send it over-seas. The people who overwhelmingly “buy
    stuff with their money”, and thereby hold up this consumer-driven economy,
    are the poor and middle class. The wealthy don’t spend near as much of their
    income as the poor do.

    I’m sure Christy Walton paid some tax last year, if only
    sales taxes. Yet she was apparently a net drain of 10 billion from the
    country/world (the amount her net worth increased in exchange for nothing).

    If someone puts no effort in to society and
    takes $10 billion out, that represents a drain of $10 billion from society.

    Sure, her pet investment pros plow most of that capital into the stock market,
    and when they do that causes short-term hiccups up (or down if they are short
    selling). Over the long term that does nothing to help society. Sure, it helps
    the brokers who get to leech off it as it flows through, but that’s as
    irrelevant as claiming Walton is a “job creator” because she hired another maid.

  • Lionell Griffith

    1. It is not your money nor your life. You don’t have a choice about how it is spent. Spend your own money!

    2. You clearly do not understand that an asset must be owned by someone. Something that is owned by everyone is not owned by anyone.

    3. Have you ever understood the function of capital and how much its being invested adds to the economy and the wealth of all? Not likely.
    4. Wealth is not created by sweat and brute effort. It is created by the mind. This is not nothing, it is the foundation of all human life, its quality, and value.

  • John Barnes

    right-wing argument for the value of idle investor-class elites boils down to
    “But look at their money working!” Here’s the problem. Money
    working is not the wealthy person working. The idle elite is not contributing
    anything in exchange for the money they receive. The money would work
    whether Walton’s investment pros were using it to buy and sell stocks,
    commodities and real estate, or a working-class American was using it to buy
    food, iPads and homes. Having that $10 billion stay with the working class
    is better for everyone… Except Walton and Wall Street of course. And you are
    in the first group, not the second (assuming you don’t work for an idle elite
    of course.)

  • Lionell Griffith

    You make my point exactly. You do not understand any of my points. In particular points 3 and 4. The money does not work. It is the mind behind the use of the money that does the work. Thoughtful investment, thoughtful advice, and thoughtful action IS the source of wealth. Back breaking work, sweat, and raw brute labor doesn’t return enough value to to keep the worker alive, let alone enough to accumulate enough wealth so the worker can have a better future.

    It is the fact of a return on an investment (profit) that provides for the possibility of having a future. It buys time during which knowledge, process, and product can be improved resulting in an improved future for both the producer and consumer. Without it, everything is subsistence in which the slightest disturbance will have a devastating effect.

    The Marx Labor Theory of Value is so fundamentally wrong on so many levels it is not as connected to reality enough to be considered false. Yet, that is what is behind your statement.

    You are blind to the fact that the source of ALL value is a properly functioning mind. The fact is, those capable of only mindless brute effort exist ONLY because someone else used their mind, acted rationally, and created what brute effort could not.

  • John Barnes

    fact that isn’t getting through your head is that the poor/middle class spend
    almost all of the cash they receive, while billionaires have no need for the
    cash so they stash most of it. As the other guy pointed out, obviously
    diverting cash to people who turn around and spend it is better for the economy
    than diverting it to people who don’t need it and will hoard it. You’d need to
    be awfully deluded to think otherwise.

    Right-wing minions have been taught that the investor-class
    elite deserves all that income even though they do no work, because they are
    “risking their wealth”. What risk, exactly? When was the last time a
    billionaire was busted and ended up on the street? When something never
    happens, it isn’t a risk worth considering.

    What does the working class deserve for their work? Again, that’s simple math.
    If a worker takes some parts worth $10 and assembles them into a piece worth
    $30, the worker obviously deserves $20 (less whatever contribution was made by
    robotics, tools, facilities etc that were not provided by the worker.) That
    last bit can be difficult to calculate, but you can modify the equation to
    remove it. The worker deserves to be paid for whatever value they personally
    added via their work. Simple!

  • Lionell Griffith

    You continue to support my thesis that you agree with the Marxian Labor Theory of Value.

    You are blind to the fact the worker, by himself, could add no value to the product he makes unless he is taught how to make it, has the tools, facilities, and raw materials to do it, and the necessary planning behind his work to make it effective. All of this takes vast quantities of good minds at work and people having accumulated enough wealth to invest to make it all possible.

    Yet, you say this army of functioning minds contribute no value beyond factories, tools, and raw materials. Hence, you say they add no value and are stealing their ill gotten profits from the workers. The fact is that the worker is paid vastly more than the value he produces and all those minds that make the work productive get only a minute fraction of the value they produce. It is all made possible because those minds produce a huge value the worker cannot himself produce. Yet you say they should get nothing in return and that the worker should get it all.

    Try a simple experiment. Strip your self of all your belongings, your cloths, your tools, and your weapons. The go out into the back country and try to survive with out knowing, thinking, planning, or taking thoughtful action. Just work real hard at doing the first random thing you find to do. You will be lucky to have as much as six days before you die a very painful death. That is exactly what your Labor Theory of Value produces.

  • John Barnes

    well since i have a engineering background and grew up on a farm im pretty sure i can survive .

    You only think it’s wonderful that the Waltons drained $40
    billion (between them) last year because you don’t grasp the reality of where
    that money came from. You think it was magical leprechauns or something –
    That it wasn’t taken from anyone else. But in the real world if you
    receive money in exchange for no productive effort on your part, it had
    to come from someone else… Someone who worked to produce it.

    Tragically, there are no leprechauns.

    The stock market doesn’t help society either. Some of the
    middle class has been tricked into believing that they have “skin in the
    game”, but they really don’t. Most are just being fleeced by the pros.

    Nationalizing the company would be one obvious answer. Did
    you not think of that?

    Obvious answer number two – Employees take over the company and run it as a

  • Lionell Griffith

    You don’t grasp where the value of money comes from. If there is nothing produced, the money is worthless. If there is no mind involved, there is nothing produced.

    You will not and cannot continue to exist by only contributing mindless brute labor and not being allowed to keep what you do produce using your mind.

    There is no point continuing. Your mind is closed to the value of the mind in the enterprise called the economy. Since you are are convinced in the Marxian intellectual garbage, you are part of the problem but not part of the solution.

    This is my final response for you.

  • John Barnes

    sorry you feel that way, its because i dont believe in capitalism for the common person, capitalism is good for the elites.

    without workers you would have no industries, billionaires cant do things by themselves, i remember reading that book atlas shrugged and thought, what utter nonsense, galt gulch? as if millionaires would go to a place go on strike from the world and do things themselves, even they understood the meaning of ones own labor.

  • John Barnes

    well as usual the capitalist advocates cant answer my questions, well i think the native Americans had it right, their societies didnt need capitalism , money ,etc and yet they lived thousands of years without social problems until the Europeans came in and ruined their way of life.

    And none of you can explain why that is , or my question on galt’s gulch in that fable story “atlas shrugged”

  • writeby

    Your questions are unsubstantiated assertions–yes, redundant, but I think with the tunnel vision you possess, a necessity. You assert, then, when refuted, re-assert the same thing only reworded, making sure, too, you get in the last word.

    Stick to farming and engineering; you have no grasp of economics, except in the form of slogan-sneering–and by now, the axe you grind is plenty sharp.

  • John Barnes

    wow writeby, i see that i got on someone nerve, but i thought you capitalist has the answers.

    i will ask again, how did native americans survive all those years without capitalism and what do you think ruined their societies you will counter with government but its government on behalf of the rich capitalist.

  • writeby

    The American Indian lived a short, stagnant, brutish and nasty life.

    Get edumicated, Barnes:

    “…the general health of Native Americans had apparently been deteriorating for centuries before 1492.”

    “While this tendency to romanticize life in the Americas before 1492 may be understandable, it does not make it so. And during the last twenty years, growing numbers of scholars have begun to challenge the image of paradise enshrined in native lore.”

    In depth:

    PS. Re: “got on someone (sic) nerve (sic)”: Don’t flatter yourself. It’s unbecoming.

  • John Barnes

    okay dude, will give you that one, ive read the articles they are interesting and can dispute some things.

    but you cannot explain why capitalism allows the waltons to exploit the workers

    only think it’s wonderful that the Waltons drained $40 billion (between them)
    last year because you don’t grasp the reality of where that money came from.
    You think it was magical leprechauns or something – That it wasn’t taken
    from anyone else. But in the real world if you receive money in exchange for no
    productive effort on your part, it had to come from someone else…
    Someone who worked to produce it.