Questioning Capitalism

Capitalism May Have Flaws, But Socialism Is Not the Answer

Why does anyone still question capitalism as the basic engine for economic growth? From what used to be the Soviet Union to China, capitalism has gained recognition as the best way to achieve broad-based economic success. However, individuals like Alexi Goranov, who wrote an article for the November 20 issue of The Tech (“Capitalism and Functioning Democracy Are At Odds”), believe that capitalism is inherently flawed. This is ignorance.

Capitalism has flaws, but these are flaws in implementation and are not inherent to the concept. Everyone must recognize this. There is a tendency, in times of financial turmoil, to declare the end of capitalism. It is a post hoc ergo propter hoc argument: Because the crisis occurred in capitalist countries, capitalism must have caused the crisis. Of course, the financial crisis and subsequent recession demonstrate that something went wrong. Too much greed, a lack of transparency in financial markets and the housing bubble all played some role in the collapse. Exactly what went wrong is up for debate, but a recession certainly does not prove the failure of capitalism. It merely needs a tune-up.

The climate is ripe for opponents of capitalism to take aim. Preying on economic fears, opponents make seemingly reasonable arguments against capitalism. These arguments are only reasonable because of the economic climate. Suggestions for less capitalism rest upon an assumption that the solutions are better than the problem.

Goranov’s argument is based on logical fallacies and misrepresentations from the beginning. He defines the right to equality as “the right to equal access to labor and life.” He assumes that these principles do not exist in a capitalist society. Equality of opportunity defines a capitalist society. Likewise, there is no logical reason why the right to life cannot exist in a capitalist society. The United States Declaration of Independence cites “life, liberty, and the pursuit of happiness” among inalienable rights. The biggest violators of the right to life have not been capitalist countries, but communist countries!

Capitalism works. Opponents of capitalism can bring up examples of when alternative economic structures have worked, but these are trivial cases. Goranov cites small-scale collectives in areas near Barcelona during the Spanish Civil War as examples of the success of collectivization while ignoring the biggest examples of collectivization. The large-scale examples, the examples that matter, are of colossal failure. Collectivization in the Soviet Union led to bread lines and economic collapse. Mao’s Great Leap Forward led to widespread famine.

Compare that to the United States. Although we have poverty, it has never neared the scale of any largely collectivized economy.

Goranov could make an effective case for changing capitalism. His evidence of corporate bullying, using the example of the pharmaceutical industry, provides a compelling reason to try and address that problem. However, it is not the case for communism, collectivization, or socialism. It is the case for fixing capitalism’s flaws.

Fixing capitalism might involve some level of greater government intervention in the economy. Ensuring transparency in financial markets, regulating the shadow banking system and reorganizing effectively nationalized financial institutions are all options to help repair capitalism in the United States. While some may label these measures socialist, they unquestionably leave the market-driven economy largely intact. The implications of Mr. Goranov’s article are too extreme. The United States can adjust its economy without overturning it.

There is a reason why the United States is the sole economic superpower in the world. Free markets have allowed America to become enormously prosperous. Some segments of society have benefitted more from this prosperity than others. To fix this, we can tailor economic policy to benefit society as a whole, but we must never take away economic freedom.

Charles B. Barr is a member of the Class of 2013.