Consider a situation where you can no longer live in your country. And so, you have to resettle. You are provided with the following options – China, Russia, North Korea, Venezuela, Cuba, Vietnam and the United States of America. You must choose one of these countries to relocate to. What would your choice be ?
Presuming you are sane (and not from the US), your answer is probably the United States of America. It turns out that even if no restrictions were laid through limited choices, meaning, even if your options included all the countries in the world, there is a very high chance your answer would still be America. It’s a pretty obvious choice. But why? What is it that gives the US, such an appeal, all around the globe?
There are certain parameters that one takes into consideration, consciously or otherwise while making such preferential choices. Determinants such as, per-capita income, healthcare, employment rates, availability and variability of choices in different aspects of everyday life, all form integral constituents in determining the fundamental criterion, which is the living standard in a country. And these factors are in turn, strongly directed by the brand of economics practiced in the country.
There are broadly, two ways of organizing an economy – one being a highly government regulated market economy (a socialist economy) where in every small and big decision is made by government employed bureaucrats and politicians, keeping in mind government interests ; and the other, a free market economy (a capitalist economy) where in the government has very little control on the market exercises that are exercised, keeping in mind only the cumulative interests of the people running the market (buyers and sellers).
A free market economy is the most efficient, fair and consumer friendly of all economic models. In a free market, producers are incentivized to produce what the consumer demands. A product that has no demand in the market, will never sell. The producer has no option but to produce goods that have market value. As a result, consumer preferences drive the production choices. Consumers are given the utmost importance, unlike in alternative economic models. Free markets more often than not, provide maximum choices and minimum prices. It is highly efficient (significantly more than alternative models) in resource allocation and distribution. The optimal quantity of production is determined by market supply and demand, leading to minimum wastage. The production is continued in the long-run, provided, the producer doesn’t face losses in the long run. Thus, it establishes a win-win situation for everyone involved (buyers and sellers), more often than not.
A liberal economy with distributed power, provides flexibility in economic decision making and provides the much-needed opportunity for creativity and innovation. It speeds up functioning, unlike in a centralized power structure, where power is concentrated among a certain group of individuals (more often than not, the big government).
The United States of America has always been a liberal, free market oriented, capitalist economy, signs of which can be traced back to the 17th century, even before the nation's official birth in 1776. And the rewards are crystal clear.
US is de facto the world’s richest country with an economy of 21 trillion US dollars, as of 2019. It has a poverty rate of 11 percent (measured as per US standards of poverty which are far greater than that of other countries) and an unemployment rate of only 3.7 percent. The poor in America today have the same living standards as it’s middle class of the 1980s (which wasn’t long ago). This is an example of the US's rapid growth. It is primarily these factors that provide the US with the kind of global appeal it has. Some of the greatest inventions including, the internet, cell phones, modern submarines, first nuclear reactor, the aeroplane, and countless more were made in the US, many of which would not have been possible without its free market structure, encouraging innovation and new ideas. And even if invented, they certainly wouldn’t have reached the common man without a free market. World dominant companies like, Microsoft, Apple, Google, Amazon, and plenty more were all founded in the US, helping millions around the world today. It is the first country to land on the moon and also the first country to reach Mars. And the list goes on.
Instead of its innumerable contributions to humanity, capitalism has had to suffer its fair share of blames. One of capitalism’s primary critique has been its tendency to generate inequality in wealth distribution.
Let us consider a country with a total economy of one-hundred dollars. Let us also assume that this country is inhabited by only two individuals (for the sake of simplicity). One of the two inhabitants is a doctor and the other is a cab driver. The doctor owns seventy dollars and the driver owns thirty dollars. We clearly see that there exists an unequal distribution of the total wealth in the economy.
Is this necessarily unfair, as suggested by anti-capitalists? The alternative model to capitalism suggests that every human is worth exactly the same and henceforth, must hold an equal share in the economy (or, at least a close to equal share, or, at least a closer to equal share than the current share) and what that share would be, must be decided by the big government.
The problem with each individual’s share being close to equal is that it is based on the misunderstood and hence, false premise that an individual’s share in the economy is determined by their intrinsic value. But an individual's share in an economy is not determined by their intrinsic human value rather by the value of their labour in society. So, 70 dollars is not the worth of the doctor but it’s the worth of his labour which is medicating sick people. On the other hand, 30 dollars is not the worth of the driver. It is the worth of his labour in society which is driving. The fact that driving is less valued to medication, is for the simple reason that almost everyone can drive a car but not everyone can conduct brain surgeries. Hence, every skillset is differently valued in society, depending on its rarity and toughness. This establishes a hierarchy of skills. This further establishes a hierarchy of income, leading to unequal wealth distribution. Hence, justified.
What the value of any labour should and would be, should be determined by society through the mechanism of free market. A skill higher up in the hierarchy of skills is associated with higher monetary gains and a skill lower down the hierarchy, is associated with lower monetary gains. The very idea, that the government (mostly consistent of fat-headed politicians) should have the right over society and individuals, to decide what everyone's share in the economy should be, is both absurd and unfair.
So, what has capitalism done for the world?
For starters; unemployment is lowest in recorded history. Life expectancy is highest in recorded history. Availability of food is highest in recorded history. There are less wars now than at any other point of time in recorded history. Chances of you dying from a disease is less now than at any other point of time in recorded history. Not to mention, the technological advancements that has flooded the world with opportunities. It is a fact that an average human today is living a better (far better) life in every respect, than his/her ancestors. This is the best time to live on this planet, in recorded history (a huge portion of who's credit goes to capitalism). Period.
Capitalism is certainly not perfect and it doesn’t guarantee a utopia. But unlike its alternative model, it doesn’t kill a hundred million people in a single generation (which is quite handy to say the least, ha ha).
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