Al Gore claims that capitalism “has turned many of the world’s largest economies into hotbeds of irresponsible short-term investment.” He argues that capitalism causes business people to focus on short-term profit maximization which, allegedly, prevents sufficient regard for “people, society, and the planet.”
Nothing could be further from the truth.
Capitalism, according to Ayn Rand, is “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” Such a system does not exist today—note the frequent violations of individual rights by governments and other individuals, and “public” ownership of property—but if it did, it would be extremely “sustainable” (to borrow Gore’s language).
Capitalism is a system of competition in which companies and individuals strive to do their best in producing and trading goods and services in order to maximize profits—short-term and long-term. If a businessperson pollutes someone else’s property or violates their other individual rights (life, liberty, pursuit of happiness), say, by committing a fraud in the pursuit of short-term profits, he will not be able to achieve or keep those profits. Why? Because individual rights are recognized and protected (by the government), the businessman cannot get away without penalty and compensation to his victims. In a system of competition those companies that maximize profits while recognizing the individual rights of others will be the winners, both in the short and the long term.
Capitalism is not the cause of “irresponsible short-term investment.” What is? People in business and elsewhere act irresponsibly and irrationally when they can get away with it. And they can get away with irrational behavior when governments sanction it, such as by bailing out bankrupt companies with tax payers’ money, or by forcing banks to give out mortgages to unqualified borrowers, or by not protecting the individual rights of the victims of irrational companies.
It is not capitalism that encourages irresponsibility but the governments’ interference in the operation of the markets. That is the reason why Gore’s proposal for “curing” capitalism by banning quarterly earnings reports is a bad idea: it would violate business firms’ right to liberty and prevent competition from promoting the best players as winners.
