Capitalism occupies the moral high ground and serves the rich and poor alike.
I’ve been told that I live a charmed life. I cannot rationally disagree. Mind you, it’s not that I’ve never faced a personal challenge or had a run of bad luck; of course, I have. Instead, in the grand scheme of things, I, and my family, have had a good run so far. As a family and as a nation, we’re generally addressing the upper areas of Maslow’s Hierarchy of Needs — Esteem, and Self-actualization — while others in the world struggle with the more primal Safety and Physiological Needs. World Hunger is still a thing, and it will be for a while. Civil wars occur, etc.
What is clear, though, is that while I am indeed individually fortunate (to be born in the West, and in the US, above all), nation-states such as my own, with mainly capitalist, constitutional democracies, are not lucky. Rather, those three structures — Capitalism, Constitutionalism, and Democracy — are functional Patron Saints that largely nurture an improved human condition where the three flourish together.
It’s Not Luck
The Patron Saint known as Democracy is best described by Winston Churchill: “[It is] the worst form of government, except for all those other forms that have been tried […].” Indeed, it almost boggles the mind that so many global denizens are living under other forms of governance: monarchies, theocracies, dictatorships. Do I need to expend more virtual ink to convince you that democracy is the least bad of these? I hope not.
The Patron Saint of Constitutionalism is a bit more controversial, I’m afraid. But I believe its importance can be summed up as follows: human beings have certain natural, universal human rights, which should not be subjected to the whims of democracy. Instead, these natural, universal human rights should be enshrined in a nation-state’s constitution to be enforced by the judiciary to check against the excesses of populist whim. Rather than wading into some of the current culture wars taking place in the courts, let’s remember that Adolf Hitler used the machinations of democracy to come to power, where he proceeded to violate every human right (with no strong constitutional or judicial barriers standing in his way).
Of course, the U.S. Supreme Court does not have a perfect record — recently or historically — in regards to protecting such human rights. Nor do American voters. However, Constitutionalism and Democracy, working together — often as checks against each other — have allowed us to move gradually, if perhaps a bit clumsily in an inarguably positive direction. Things may go backward for a year or several years, but not over several decades. Can the same be said for a lot of the Everyday Joe in Cuba? In Russia? In Saudi Arabia? I’m not sure. Certainly not to the same extent.
The remaining Patron Saint in this triumvirate is, of course, Capitalism. Trade and skill specialization have goosed economic growth since the time of the caveman. But historically, it took the rule of law enforcing some basic rules of “the game” — and a general recognition that profit-seeking entrepreneurialism was a good thing — for mankind’s progress to accelerate from a crawl to a sprint—all in the short span of a century or two.
Do I hear a cough? Alright, let’s not gloss over Capitalism’s negative externalities: pollution, child labor, the atom bomb. High fructose corn syrup. The Spice Girls. You can add a hundred more if you like.
But however many you add, they’d be outweighed handily by the positive externalities. Medicines, vaccines — their inventions are dominated by scientists and entrepreneurs in the U.S. and, to a lesser extent, in countries with similar economies.
The iPhone. Google. The automobile. The medical devices they hooked up to my son when he was rushed to the NICU shortly after his birth—pizza delivery.
How about the one billion people who climbed out of poverty between 1990 and 2010 due to the positive externalities created by expanding Capitalism? Can we credit Mao Zedong for that? (I kid, of course: to the extent that China’s recent economic boom has benefited their people, we can largely thank Deng Xiaoping, who reintroduced a weakened form of Capitalism to the Middle Kingdom after Zedong’s disastrous autocratic, communist rule.)
The sheer number of life-improving — and life-saving — Capitalist inventions is beyond count. How about the Jaws of Life (a trademark of Hurst Performance, Inc.)? The company’s equipment is synonymous with “life-saving rescue equipment.” Can you imagine such technical inventions, or such a company, emanating from North Korea or Iran?
The benefits of Capitalism are not theoretical. They are food in a child’s belly or medicine saving her life. Capitalism provides for these positive externalities an order of magnitude more efficiently than do alternative economic systems. Especially when it is combined with Constitutionalism and Democracy, Capitalism lifts the human condition of the lowest social classes more quickly than does any other arrangement in history.
A Smear Campaign
So, what’s with Capitalism’s recent bad rap? The culprit, of course, is the Financial Crisis of 2007-2008. Here’s how the Narrative goes: Greedy bankers stole from the middle class. CEOs lied and cheated. Capitalism, with all its excesses, had crashed the economy.
Except, it didn’t.
Of course, some bankers were overcome with greed. And certainly, CEOs lied and misbehaved.
But the financial sector had long since ceased being a “free market,” in any sense of the word. At the peak of government interference, in 2009, three governmental entities underwrote or guaranteed 97% of private mortgages in the United States. There was no “capitalist marketplace,” where financial firms competed with each other based on efficiency and value, governed by precise rules that did not favor any one firm over another.
Instead, Central Planners dictated the price and terms of the “market.” Favored bankers moved freely between public and private institutions, leveraging government power to rent-seek and gain an advantage. Feel free to call this “Crony Capitalism,” “socialism,” or “economic Central Planning.” But please: do not call it Capitalism or a “free market.”
Ask yourself: when the Central Planners crash the economy — and they inevitably do, the scale of each crash being commensurate to the amount of control they have co-opted — who are they going to blame: themselves? Ha! I refer you to Mr. Greenspan’s speech, where he claimed that his fatal mistake was that he simply didn’t Centrally Plan enough.
The mainstream media was only too willing to broadcast the Central Planners’ Narrative: of course, Capitalism is to blame! What we need, you see, is more Central Planning, more regulations, and a bit more socialism. You can trust us: we’re impartial journalists. (Note: if I’ve implied that the mainstream media has a left-leaning or anti-free market bias, please do not take me as a partisan hack; indeed, self-identified Democrats outnumber self-identified Republicans four to one at US media organizations.)
So, the Central Planners have smeared Capitalism. The mainstream media has smeared Capitalism (confusing it for centrally-planned socialism or Crony Capitalism). It seems that our Betters are in general agreement: Capitalism sucks!
In such an environment, who will stand up and proudly shout: I LOVE CAPITALISM!?
I will. We will.
Yes, all journalists and publishers have bias. (Do not trust those who say they do not.) So, what is my bias? What is the bias of the publisher of this article? (Note: this article is published by Poseidon Financial LLC.)
Let me be clear: at Poseidon Financial, we are unabashed cheerleaders of Capitalism. And also of Constitutionalism (that is, of enumerated human rights not being subject to majority rule), and of Democracy. But as these latter two “Patron Saints” remain broadly popular, we will cheer-lead Capitalism above all.
And not merely selfishly. Of course, Capitalism has allowed our company’s founders and employees to do fulfilling work, accrue savings, and enjoy lifestyles of great personal liberty.
But more than that: Capitalism is a force for moral good. Capitalism serves the poor above all.
Capitalism occupies the high ground, despite the smears of our politicians and mainstream media. Capitalism saves lives.
So please: fly your Team Capitalism flag proudly.
About the Author: Andy Hagans
Andy Hagans is the Editor in Chief for All Emerging Markets, and also serves as the CEO of parent company Poseidon Financial. He is passionate about the “Bogleheads” school of investing, and is focused on helping investors achieve higher net returns via tax efficiency and fee minimization. He resides in southwest Michigan.