Capitalism, in its most simplistic, straw-man definition, may seem like a bad idea: A system where making money is prioritized has to create horrible people right? Thus, the government should be able to regulate it and control what happens in the system because corporate entities and CEOs can’t be trusted to make the right decisions. However, unfettered capitalism can work both philosophically and empirically without regulations, which actually make capitalism worse.
Before rebutting arguments against capitalism, we must specifically define what capitalism is and the basis of its theories. Capitalism, as defined by the Merriam-Webster Dictionary, is an economic system whereby private entities, people or groups that are not the government, have private property and are able to determine the prices of that property. In simpler terms, capitalism is an economic system where the means of production are owned privately.
Additionally, basic principles must be acknowledged of the free market and people in general to make sense of philosophical points. The main ones are the two ways of getting what you want, coercion/force or willingness to give, and that everyday consumers generally prefer a vendor if they perceive him or her to be better (selling a high quality, personal efficiency, cheaper prices, etc). These two principles, combined with the universal fact that people want money to a degree, can explain almost every economic transaction.
To further crystallize my point, here is an analogy: You want to get a Rolex from a shopkeeper but he is not willing to give it away for free. The shopkeeper desires money for selling a valuable product, or at least getting something of greater value back, so he asks for $1,500. You have two ways of getting what you want: using force, in this case committing an armed robbery, or making him willing to give it to you peacefully, by giving him your money. This basic transaction is what defines the free market.
It is at about this point that people naturally object to capitalism: How can we guarantee that the shopkeeper is not swindling the buyer? What if the Rolex is a fake, how can we control that? In essence their objection is that there is no guarantee for honest transactions, and this would be a real concern if not for the second principle mentioned earlier: Consumers prefer a vendor who is perceived to be better than another.
Let us replay the scenario this time, but with two vendors, A and B, claiming to sell the same product, except that A has a fake Rolex that no consumer can tell apart from the real one. In this scenario, the person buys the Rolex from A and then takes it to an authenticator to validate it so he can increase the value of resell or confirm that he got the real deal. When the authenticator tells him he has been swindled, the consumer will not go back to vendor A for another product since they sold him a bad one and proceeds to tell everyone he knows, and the internet, that vendor A is a scammer.
Vendor B, in this scenario, sees that consumers prefer proof of a real Rolex and would be mistrusting of vendors who claim to sell Rolex watches after the viral scam. Therefore, to regain trust in the watch selling industry and to possibly increase his own credibility, he will market using a third party authenticator in every transaction in front of the customer to confirm its authenticity. The other companies, seeing now how people are starting to trust watch selling again and now prefer B’s business because he uses third party authenticators, will then themselves use third party authenticators to attract business as well.
In fact, as a basic principle, companies make more money when they make moral decisions relative to the current society rather than immoral ones as the people tend to punish companies that make bad decisions, setting an example for the rest of the industry. A real life example is, after the fall of Enron people called for more regulations around company clarity, and although this obviously does include government regulations, it would be easily envisioned that people in an unregulated free market would start boycotting companies that do not publish accurate financial data and prefer companies that do, thus shifting the market.
At this point people consider that government regulation would have been preferable to a market shift as government regulation would be more effective at stopping corporate corruption. Even then, there are still companies that make bad decisions and screw over customers and prioritize investors, so how does this idea of gradual market shift toward a better place to live?
Simply put, trust in the government to successfully regulate markets is founded upon nothing. There are numerous examples of the government failing, yet still people trust in the government to do what is best for them. For example, TSA failed to detect 95% of bombs in an internal test. A more corporate related example would be the USDA’s use of the poke and sniff method, using a metal rod to poke and then sniff the meat, spreading disease between meat samples rapidly.This method was used despite better methods being available even before 1990 when it was phased out.
The government can’t effectively regulate because they are an inherent use of force that incentivizes loopholes. The only way the government can regulate is through threats and force, yet when met with threats and force, companies do everything they can to escape the threats and bypass regulation. Most of the time, this amounts to evasion and the use of legal loopholes, however, these tactics can turn to the use of these agencies to promote themselves at the expense of others.
The EPA has repeatedly and definitively stated that the active ingredient in RoundUp weed killer is nontoxic and harmless to people, despite repeated studies showing the opposite to be true. In fact, the EPA has a high revolving door problem, having their top officials go corporate to help companies evade regulations, causing their regulatory ability to be stifled and weak. Yet, continually, people vote and rely on the government to protect them from the interests of companies and malicious corporate intent.
The solution is to bring the power of regulation to the people, not the government’s bureaucratic agencies, who can determine for themselves what they want to see companies doing. Remember, corporations rely on a steady stream of income to fund everything, including paying their investors, keeping the lights on, repairing the store fronts etc. If their flow of income was disrupted, via a boycott or choosing a better company, they are incentivized to change their business practices or they will go under.
The market, as said before, naturally favors moral decisions because the people who keep the free market running, the consumers who are you and I, value good decisions to be made. Instead of hoping the government makes the right decisions and regulates the industry correctly without over or under regulating, we the people may decide for ourselves which companies to be favored.
In fact there are examples of good company practices prevailing above others: Costco Wholesale Corporation, or simply just Costco, is worth nearly $444 billion yet still has lenient return policy with any time return, of the best employee benefits and has refused to raise the price of their hotdog despite making a loss on them. The Arizona Beverage Company has not raised its 22 ounce can price since its founding in 1992 despite inflation almost doubling in that same amount of time and retailers insisting on increasing the prices in store.
Those are just the big corporations, however, as there are numerous examples of family owned businesses and small town shops that provide a personal experience rather than the corporate feel of most stores. These too provide a good example as to how capitalism works for all on a large and small scale.
In this day and age, the government seems like the solution to everyday problems: when we struggle to feed ourselves, we ask the government to feed us. When we perceive a slight against the consumer by large companies, we ask the government to solve our problems for us. Yet capitalism allows us to take control of industry ourselves, guiding it by how we think and how we act; we vote with our dollar. “What is called ‘capitalism’ might more accurately be called consumerism. It is the consumers who call the tune, and those capitalists who want to remain capitalists have to learn to dance to it,” economist Thomas Sowell said.
