Thursday, September 22, 2011

3 Common Myths of Capitalism

1. Being "pro-capitalism" is the same as being "pro-business"

The point of capitalism is that business should be able to freely compete against one another, and that benefits consumers in the long run. It's not good for businesses per se because they have to work really hard to come out on top. That's why many businesses hate capitalism and spend a huge amount of money to convince the government to implement rules and restrictions that will favor them, even if these rules are not in the interest of consumers. So "pro-capitalism" really is "pro-consumers."

2. Capitalism generates an "unfair" distribution of income

True capitalism rewards people who are productive, people who work a lot of hours, people who are talented, and people who come up with good ideas; people who don't do these things get less. The one negative that people might be concerned with is that some people have very little skill and so are not able to earn that much left on their own. This is why some people support anti-poverty spending, but that's completely different from interfering with capitalism. Regulating prices, limiting quantities, and imposing all sorts of restrictions on business--these make the economy less productive, give us a smaller pie, and make it even harder to implement programs that help those who are less fortunate.

3. Capitalism was responsible for the recent financial crisis and the recession

In so many words, it's not capitalism's fault that what happened happened: the government interfering with capitalism--with its regulations, subsidies, and bailouts--is clearly to blame. Oh yeah, the private sector was also involved (a bit).

Lesson learned: The less straightforward a statement is, the more likely that it is bull shit.

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