The fundamental promise of capitalism is economic freedom. Cases of fraud, excess, and just plain bad practices like subprime lending are the natural side effects that accompany freedom and the individual’s right to pursue his or her financial goals no matter if they are wrong or right. Adam Smith had this in mind by advocating that economics should operate in a free and open market unmolested by politics or government. We know that is not entirely possible, even the poster child of capitalism, the United States, doesn’t actually practice pure capitalism, but we have been the closest to it. Nonetheless, capitalism is centered on the individual’s choice, rights and place in society. It is in essence based off of individualism.
The government’s only real role in a capitalist system is to provide order and freedoms so the economy can work. This laissez-faire system of economics relies on the networks of producers, consumers and markets that operate under the laws of supply and demand – not laws of government control or planning.
However, fear from the 1929 stock market crash followed by the Great Depression brought about great changes. Franklin Roosevelt’s New Deal administration poured government money into the economy to create jobs and to try to end the depression. The success of this has gathered mixed reviews from economist. This new form of economics was born from the 1930s, and thought of by the British Economist John Maynard Keynes. He revealed he had a new take on capitalism. Keynes believed that government intervention can help stabilize a capitalist economy. The theory in short was that the government could manage the market better than its natural laws could by manipulating, planning and controlling taxes, spending and interest rates. These practices were adopted and in 1946 U.S. Congress passed the Employment Act and for the first time, put our economic system in the hands and judgment of the federal government – killing forever laissez-faire economics in the United States.
We are facing, in our own time, concern and great debate over the virtues of a free market capitalist system. There are alarmist campaigning on fear and ignorance who are advocating further departure from capitalism by adopting an even stronger Keynesian model and potentially transforming America forever.
That is why it is thankful to have around people smart and wise enough to see the promises of capitalism and can articulate the miracle changes in livelihoods it has brought to mankind, and particularly in the U.S.
Terry Miller is just that type of person. He published an opinion piece in the Wall Street Journal “Freedom Is Still the Winning Formula” and in it he makes several indisputable claims on the superiority of capitalism and free market economies. “U.S. Gross Domestic Product was about $1.6 trillion in 1947 (valued in 2000 dollars), a little over $11,000 for every man, woman and child. In 2007, it was $11.5 trillion, or about $38,000 per capita. That’s almost a doubling of average incomes each generation, made possible by the free market’s efficiency in allocating capital and labor.”
Capitalism, the U.S. dance partner during this period of unprecedented economic growth, is, by the accounts of political leftists, no longer the smartest looking companion on the dance floor. They like the looks of other systems like socialism much better. Yet despite recent setbacks, they would be hard pressed to deny that capitalism steps out more nimbly than its rivals, and keeps up with the music far more surely.
For 15 years, The Wall Street Journal and The Heritage Foundation have been measuring countries’ commitment to free-market capitalism in the “Index of Economic Freedom.” The 2009 Index, published this week, provides strong evidence that the countries that maintain the freest economies do the best job of promoting prosperity for all citizens. [A Chart is included in the article at the WSJ. The U.S. ranks sixth on his chart, behind New Zealand and ahead of Canada. Hong Kong is first].
The positive correlation between economic freedom and national income is confirmed yet again by this year’s data. The freest countries enjoy per capita incomes over 10 times higher than those in countries ranked as “repressed.” This year, for the first time, the Index also correlates economic freedom with important societal values like poverty reduction, human development, political freedom and environmental protection. The linkages are robust, with economically freer countries performing significantly better on every indicator of well-being.
Those tempted to abandon the free market and capitalism in the current crisis need to look carefully at the record of countries moving down that path. In 2009, it is Zimbabwe that has lost the most economic freedom, dropping 6.7 points on the Index’s 0-100 scale and falling to next-to-last place. Deficit spending, the expropriation of land and resources, and government support of favored enterprises have destroyed the economy; hyperinflation and corruption have devastated the nation.
Venezuela recorded the second largest drop in the Index, losing 4.8 points as a result of price controls, currency devaluations, nationalizations and the corruption that characterize Hugo Chávez’s brand of Bolivarian socialism.
Be sure to read the entire article at the WSJ, here
I hope not to spoil your dreams … but your idea of capitalism belongs to 1700s … and today, what we call ‘capitalism’ has nothing to do to this idyllic ‘capitalism’ of the 1700s, to which you cling your hopes … don’t you think you should up date yourself a bit … !!!? We are in the 21st century already … a lot of things happened since ancient times …
Gilmour,
You should reread carefully what I wrote and you will see I drew differences between a pure capitalist system and the one we have now. I skipped over the boring labor laws and anti-trust era which is what I think you may be referring to. But reading your comment that may be a stretch. Anyway, I’m aware of the changes that have occurred.
But the main point of the article was to show the indisputable facts that free markets and capitalist system triumph over any other model ever devised.
You should definitely reread the article and go to the original one at the WSJ.
He he he … I’m glad you avoided the issue … ‘The fundamental promise of capitalism is economic freedom’ … that’s totally so 1700s … not even corporate CEOs DON’T really believe that kind of ‘lingo’ … only the idyllic and outdated ones …
I mean : not even CEOs really believe that kind of ‘lingo’ …
No, I don’t enjoy having to restate things. You obviously didn’t read the article and key points. Besides, you are not making a lot of sense.
But, thanks for your comments, Gilmour.
As if Adam Smith re-born made all the sense in the world …
Gilmour,
The only person I see here who isn’t making sense is you Gilmour. I don’t think that Jason is trying to argue rather the purest Adam Smith form of capitalism exist or not. He is trying to argue that capitalism in American form has been the life blood of unprecedented wealth and prosperity. The road some want to take will lead us to down the one that other failing countries belong to. It is listed and documented in the piece and the link he provided.
I reread some of the comments thinking I got in on the end of a conversation and missed something, but the only person who is missing anything here is you.
You really are showing that you don’t have a lot knowledge and understanding on the topic at hand.
Okay … then, in my very confusing way, I’ll try to state clearly, that his claim is nothing but market-demagoguery … the type of thing that got us into this mess altogether …
Oh boy, so tell me what is that you propose we do? What model of excellency and economic miracles would you have us adopt?
And before you answer that please be sure to provide a comparable case.
*Hint- I hope you are capable of space travel because you want find what you are looking for on planet earth.
By the way is that you in the picture? If so, no wonder we are having to dumb way down. How old are you, 12?
You can’t seriously expect a comparable case for something that’s quite unique in human history … I’ll check in Mars to see if I can find some cosmical equivalent …
Shouldn’t you be in school? Preferably in your jr high civics class…Seriously kid stay in school.
By the way, great post Jason. I frequent the Heritage Foundation and those folks put out solid reports.
By the way, I want to add something here. We are all aware that America doesn’t operate in nakedness in a capitalist system. That is what created slavery, child labor, and horrid labor conditions. We have laws, regulations and oversight. That is something entirely different then abandoning the fundamental principles of free market economies.
And yes, “capitalism is economic freedom” for individuals. Hence, our GDP, economy, and buying power in the private sector.
Says you … reality denies your ideological claims … capitalism became something quite different then what Adam Smith planned … but then again, what would he know being a man of the 1700s … capitalism nowadays is all about monopolies and market control … just in case you haven’t noticed …
This week we are seeing the first indications that European politicians are starting to comment on the exploding national debts in public. Mr. Obama is not there yet. It is time for our political leaders to start explaining us where they see the exit.
Or, as the FT puts it: “To calm investors’ nerves, finance ministers must make plain how they intend to keep paying creditors without resorting to debasing their currencies. Those who have not already credibly done so are living on borrowed time.”
I’ve read an interesting related article on Crunchreport.com.
Thanks for the feed back, all of you. It is always an interesting discussion when the economy and economics come up.
But here is a suggestion to one of you, if you insist on commenting and debating with others at least provide examples, statistics, informed point of views, expert opinion, ect., as the article itself provided. It makes for a much better debate and adds to the topic.
Otherwise, it is nothing more than drivel. So, please save that for the hack sites.
Gilmour Poincaree,
“I’ll try to state clearly, that his claim is nothing but market-demagoguery … the type of thing that got us into this mess altogether …”
My God what are you an anarchist or a government sycophant? So what do you chose to replace it with? Market-demagoguery led by Washington? Your argument makes no sense, whatsoever.
I suggest you do a little reading on the Austrian economic thought, Neo-Classical economic thought, Chicago University school of economic thought, as well as Keynes. You might come to realize your that our present capitalist system is a hodgepodge of these different processes. Educate yourself a little before, as they say, “You start running your suck.”
Duh … as if I didn’t know what a bunch of ‘mixoploids’ world economies have become … nevertheless, your friend is nothing but a market-demagogue …
Ok Gilmour, you got me. I’m nailed to the wall. But at least I can point to a record of success on an economy that has, is, and always will be the envy of the world.
Now for the last time, what exactly do you propose as an alternative? And look, the markets didn’t get us into this mess so go find some different talking points. It was regulation, government manipulation and political control, or monopolies as you like to use the term.
You are barely comprehensible and you have yet to make a point or reveal a point of view and you have been at this for two days.
Here is a suggestion, read more than the headlines and you may actually be on the same page as everyone else.
It’s funny how you seem to forget, that all that growth and record sucess was achieved in times of cheap petrol, in times when markets were pretty much ideologically aligned, in times when world interests were basically channeled to the big economies, at times times when our industrial whims were enough to overthrow foreign governments democratically elected … things changed a long time ago, we can’t force a leverage in our benefit upon other nations … they’ll not accept it, as simple as that.
Now, for the present crisis, it’s all about trust … better still, it’s all about DON’T TRUST … that’s why we need regulations … most specially as to what concerns the financial markets and I can’t explain in it in a clearer way.
“we can’t force a leverage in our benefit upon other nations … they’ll not accept it, as simple as that.”
Huh? So I figure that the Chinese purposeful devaluation of their yuan and the trade balance are examples of US leverage being forced upon another country? More like the US not deferring to its industrial complex to fix the problem.
http://www.nytimes.com/2008/12/26/world/asia/26addiction.html?_r=2&pagewanted=1&hp
“Now, for the present crisis, it’s all about trust … better still, it’s all about DON’T TRUST … that’s why we need regulations … most specially as to what concerns the financial markets and I can’t explain in it in a clearer way.”
Really? That’s funny because we were in the middle of a regulatory boom and we still got here.
http://www.heritage.org/research/regulation/bg2116.cfm
You seem to buy into populist meme of the Wizard of Oz economic state. Do you honestly think there is some man behind a curtain pulling economic levers?
While markets can manipulated, to a point, they cannot be controlled, especially on an international basis, and yes, it is as simple as that. The only markets that can be “fixed” are commodities and your economy has to be solely dependent on them for profit, i.e. Russia and even then fixing them through speculation is limited. The US doesn’t fall into this category.
http://www.russiaprofile.org/page.php?pageid=CDI+Russia+Profile+List&articleid=a1228841325
“success was achieved in times of cheap petrol, in times when markets were pretty much ideologically aligned, in times when world interests were basically channeled to the big economies,”
Where do you get your information from? A good economy form a macroeconomic standpoint is; low unemployment, GDP growth, little to no deficit, and low inflation. Market alignment, along ideological lines, has nothing to do with it. If that was the case we would not have had the economy in the 80′s and early 90′ which was so successful.
So, please start offering a little more than opine. Give us some facts from at least one expert who shares your ideas.
I certainly didn’t get it from the Heritage Foundation …
Gilmour,
You know I have other posts that are also interesting. HAHA.
And by the way,
“I certainly didn’t get it from the Heritage Foundation …”
We know…You get them from the University of Gilmour.
Mike, that comment was loaded with all kids of goodies.
The Heritage Foundation ain’t taken seriously anywhere but here in the US of A … and amongst right-wingers … and their biggest mistake was ideologizing the markets … as you so clearly exposed …
That is the best you can do to refute my argument? Sad Gilmour, really sad. I gave you a grand opportunity to give yourself some credibility and again you failed. Like most Left leaning idealogues you crumble when presented with information.
As far as the Heritage Institute not being taken seriously, LMAO. They, like Brookings and CATO effect policy and are among the top respected think tanks in DC and are taken quite seriously by most policymakers. And since we are talking about the US economic situation I really don’t care what their opinion of my sources are.
My friend, you are an amateur, at best, who cannot or will not present viable sources, your novice is clearly exposed. Further debate with you on this particular topic is futile.
I’m NOT attempting to refute anything … and like I’ve said they’re only taken seriously here in the USA … as you confirmed yourself, most academic institutions, including our own, don’t give a hoot as to what they write or say … they’re a think-tank of right-wingers … ‘no more no less, just a pound of flesh’ … and thinking, is something they’re NOT fully equipped to perform …
Well Jason, looks like you got your very own Brois here. All mouth and no ass, lol.
Well Mike … it looks like you don’t really have arguments beyond your foul mouth …
lol
Wow and you are impressed with your own ignorance. How delightful, lol.
No … I’m impressed with yours …
Mike, he obviously has shown that he doesn’t bring much to a debate. He is the type of guy who just sticks to the headlines.
I stopped paying attention to him about 12 comments ago. And what is real creepy, I don’t think he sleeps.
Jason,
You can’t fix stupid.
Go ahead fellas … and treat the markets as if they were some sort of ideological pantheon … let’s just see how far you both can get … professionally that is … and if you’re fast enough, you might even end up sharing a cell with Madoff …