Anti-capitalists have been in the news lately: the New York City mayoral front-runner Zohran Mamdani and the New Democratic Party leadership candidate Avi Lewis (the husband of the more famous anti-capitalist Naomi Klein) in Canada. Both are promoting socialist agendas – wealth taxes on the rich and government-owned grocery stores – to “re-distribute” wealth from the rich to the poor, in the name of equity.
Anti-capitalists like Lewis and Mamdani blame capitalism for many of today’s problems. They hold it as the cause of food price inflation, the housing crisis, unemployment, and declining private investment and low productivity and wages (the latter three in Canada especially). In his campaign video, Lewis was accusing Canadian grocery, telecom and banking oligopolies in particular: “the tiny group of corporations that control every part of our economy,” make “billions in profit,” and whose leaders are “hoarding extreme wealth (and) foreclosing our shared future.”
The anti-capitalists’ allegations amount to this: the root cause of today’s problems is the capitalists’ – the big corporations’ – “greed” for profits. The capitalists jack up prices, cut jobs, oppress wages, and don’t invest in productivity. This is made possible by crony politicians who, in return of political contributions and other ‘benefits’ protect their favored companies and industries against competition (both domestic and foreign) and provide them subsidies, relaxed regulations, and government contracts. Small businesses and workers are the victims.
But the anti-capitalists are barking up the wrong tree: they mistake our socio-economic system, the mixed economy, for capitalism.
The mixed economy is a mixture of some freedom and government control, of capitalism and statism. The protection of individual rights to life, liberty and property against violations by criminals or in the case of disputes is the element of freedom that the government safeguards. But the government also violates those rights by curtailing people’s freedom to produce and trade, through regulations, subsidies, and other interference in the economy. This is the statist part of the mixed economy.
Capitalism is a system of freedom where the government’s only role is to protect the rights of individuals. It does so by operating the police, the military, and the law courts. Beyond protecting individual rights, the government is not involved in the economy, business, or the private lives of citizens. Full capitalism doesn’t exist today, because we (or most of us) want our freedom to be restricted and repeatedly vote for a mixed economy. (For an explanation as to why, see my earlier post).
The problems anti-capitalists blame on capitalism are in fact caused by statism: government interference in our freedom and the economy.
Take price inflation (in food, housing, consumer goods, energy, etc.). It’s not caused by companies raising prices to increase their profits to the detriment of their customers. Government actions put upward pressure on prices. Regulations that control competition, restrictions on the development of energy and infrastructure, and taxes and price controls disincentivize housing construction and other private business. Statist governments also grow deficits and debt that further increase their costs, ultimately born by the individual and corporate taxpayers.
These government actions have caused capital to flee Canada (mostly to United States where the returns are much higher). Economic growth has stagnated and wages with it, innovation has withered, and unemployment has increased. Companies are not increasing prices and oppressing wages out of capitalistic greed. Unless among the few chosen for government favors and protection from competition, they are doing what they can to survive in the face of government-inflated costs and restrictions on their freedom to compete and trade.
The irony of this expanding statism in Canada (that has the lowest GDP per capita growth rate in the G7) is the history repeating itself. Writing in Financial Post, Janice MacKinnon recalls another Big Government era in Canada, followed by an anti-dote of increased economic freedom. In the 1980s, as now, Canadian governments imposed cumbersome regulations on business, except for those the government had picked as winners and subsidized heavily, often at big losses of taxpayers’ money. The uncompetitive tax system then, as now, was “a serious impediment to investment and growth.”
By the 1990s, Canada’s finances became unsustainable and necessitated a course reversal. MacKinnon’s oil-producing province, Saskatchewan, increased economic freedom. It worked. They reduced oil royalties that resulted in a “record-breaking” expansion of the oil industry, with growth in jobs and government revenue. The investment of private capital allowed the province to balance its budget and sustain economic growth.
If the anti-capitalists really wanted better lives for people – jobs, decent pay, affordable living costs, housing options, and increased prosperity – they would advocate freedom instead of state control, and perhaps even capitalism – if they only knew what it is. For those wanting to know, I recommend Ayn Rand’s essay, “What Is Capitalism?” in her book “Capitalism: The Unknown Ideal.”
