Capitalism

My poor dad grew up to become a socialist. He was school smart but not street smart. He strongly believed the government should take care of people for life.

My rich dad grew up to become a capitalist. He did not finish school, but he did become street smart. He believed in building businesses that provided stable income for his family and his workers' families. He believed that people should learn to take care of themselves. As a capitalist, he believed in teaching people to fish.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

The word capitalism was coined by none other than Karl Marx, who hoped that it would help in his crusade to denigrate the system of private property and free enterprise and to promote socialism. Marx insinuated that the only beneficiaries of capitalism were the capitalists. Of course, nearly every one of Marx's assumptions (government would wither away under communism, capitalism would make workers poorer, etc.) turned out to be wrong, including this one. Free-market capitalism, based on private property and peaceful exchange, is the source of civilization and human progress. Human beings have a natural propensity to "truck, barter, and exchange," as Adam Smith said more than two centuries ago, and free-market capitalism is by far the best-known means by which this can be accomplished.

— Thomas DiLorenzo; How Capitalism Saved America

Ignorance, as well as disapproval for the natural restraints placed on market excesses that capitalism and sound markets impose, cause our present leaders to reject capitalism and blame it for all the problems we face. If this fallacy is not corrected and capitalism is even further undermined, the prosperity that the free market generates will be destroyed.

— Ron Paul; U. S. House of Representatives Speech, July 9, 2002

In his famous treatise The Wealth of Nations, Smith neatly summed up the essence of how capitalism works: "Give me that which I want, and you shall have this which you want." In other words, commerce is what economists call a "positive-sum game." The act of buying and selling always benefits both buyer and seller; otherwise they wouldn't trade with each other. Voluntary exchange in the free market is mutually advantageous.

— Thomas DiLorenzo; How Capitalism Saved America

These myths are inflicting great costs on the American economy and society. The more Americans feel that capitalism needs to be reined in, or that the public has no say in an economy that is largely in the hands of "plutocrats," the more the government is called on to regulate the economy. Congressman Ron Paul, Republican of Texas, is exactly right: Because of a widespread misunderstanding of what capitalism is, our leaders—and also much of the general public—incorrectly blame capitalism for any economic problems we face. Consequently, they are all too quick to recommend bigger government as the "solution."

— Thomas DiLorenzo; How Capitalism Saved America

Sure enough, in the wake of the corporate accounting scandals that became public starting in the late 1990s, anticapitalist dema-goguery has become pervasive. Pundits, politicians, and intellectuals have argued that such fraud is an inherent and unique feature of capitalism and that, therefore, the government needs to impose more regulations on financial markets, the accounting profession, and corporations in general. But fraud is not a feature unique to capitalism: we find wrongdoers not just in the corporate world but also in government, in charities, in religion, and everywhere else. In addition, there are laws against fraud, and those who commit fraud quire often end up in jail; thus it is ridiculous and irresponsible to wage a general political campaign against capitalism when the laws already in place address the problem of wrongdoing.

— Thomas DiLorenzo; How Capitalism Saved America

Nor is the threat of a jail sentence the only deterrent to corporate fraud. The anticapitalists who call for more government regulation also ignore what Congressman Paul calls "the natural restraints placed on market excesses that capitalism and sound markets impose." Businesspeople have great incentives not to commit fraud because they know that sooner or later no one would want to do business with them if they were somehow manipulating the market, and that they would ultimately lose money or even go bankrupt. And these "natural restraints" are much weaker, perhaps even nonexistent, in the government sector. Thus, if fraud were a problem it would probably be a much bigger problem in the government regulatory agencies than in the businesses they are supposed to be regulating.

— Thomas DiLorenzo; How Capitalism Saved America

The most important point that the anticapitalists overlook or ignore is this: overwhelming evidence indicates that the more regulations, controls, taxes, government-run industries, protectionism, and other forms of interventionism that exist, the poorer a country will be. Big government invariably causes higher unemployment, higher prices, shortages of goods and services, and myriad other problems that can be eliminated only by more, not less, voluntary exchange on the free market—that is, by capitalism. Excessive government controls are precisely why the countries of western Europe lag so far behind the United States economically.

— Thomas DiLorenzo; How Capitalism Saved America

A careful review of our nation's history reveals a long series of myths that demonize capitalism—and just how pernicious such myths are. Capitalism supposedly harmed the working class during the industrial revolution; is prone to monopolization; harms consumers with dangerous products; generates macroeconomic instability; harms the environment; exploits the Third World; breeds discrimination; is a cause of war; and on and on.

This is all untrue.

— Thomas DiLorenzo; How Capitalism Saved America

As we will see, the fact is that true capitalism - that is, capitalism absent excessive government regulation and taxation - has not existed to any significant degree in America in many, many years.

— Thomas DiLorenzo; How Capitalism Saved America

Free-market capitalism is a network of free and voluntary exchanges in which producers work, product, and exchange their products for the products of others through prices voluntarily arrived at.

— Murray Rothbard; Capitalism versus Statism quoted by Thomas Dilorenzo

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

— Ayn Rand; Capitalism: The Unknown Ideal quoted by Thomas Dilorenzo

In civilized society [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is far their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, brewer, or the baker, that we expect our dinner, but from their regard to their own interest.... Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow citizens.

— Adam Smith; The Wealth of Nations quoted by Thomas DiLorenzo

Here Smith clearly explained some of the most important elements of capitalism—the division of labor, social cooperation, and free exchange. The division of labor is a natural, and beneficial, consequence of the fact that each human being is unique in a thousand different ways—in motivation, intelligence, interests, physical attributes and abilities, preferences, goals, skill levels, age, formal and informal education, worldly experiences, family history and culture, psychology, and much more. So, for example, people who happen to live in a fertile part of the world are more inclined to specialize in farming than, say, people who live in the arid Middle East. But because of this specialization, we rely daily on thousands of people whom we don't even know for the basic necessities of life. This breeds social cooperation. The farmer in the American Midwest can sell food to Middle Easterners and use some of the money he earns from that to purchase, for instance, petroleum products that are generated in the Middle East. Imagine how poor we would all be if we were to live under what is called economic autarky - where we all had to grow our own food, build our own houses, make our own clothing, manufacture and fuel our own cars, and so on.

— Thomas DiLorenzo; How Capitalism Saved America

A common myth spread by anticapitalists is that the wealthiest capitalists profit at the expense of the rest of the society, particularly the working classes.

— Thomas DiLorenzo; How Capitalism Saved America

Ludwig von Mises wrote, "Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things."

[...] The result is that the average American working person today lives better in many ways than kings did several hundred years ago, with his automobiles, central heating and air conditioning, swimming pools and hot tubs, inexpensive food, and all the other "necessities" of modern life that those kings would have considered miracles.

— Thomas DiLorenzo; How Capitalism Saved America

Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that. If a businessman does not strictly obey the orders of the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt. . . . Other men who did better in satisfying the demand of the consumers replace him. . . . The consumers . . . make poor people rich and rich people poor. They determine precisely what should be produced, in what quality, and in what qualities. They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. . . . They do not care a whit for past merit and vested interests. . . . In their capacities as buyers and consumers they are hard hearted and callous, without consideration for other people.

— Ludwig von Mises; quoted by Thomas DiLorenzo

[...] people are free to choose their occupations, but subject to the demands of consumers.

— Thomas DiLorenzo; How Capitalism Saved America

One of the more famous demonstrations of the complexities of an economic system came in an essay about what goes into making a seemingly simple product: a pencil. In “I, Pencil,” Leonard Read, the founder of the Foundation of Economic Education in Irvington, New York, discussed the many materials necessary to produce a pencil: wood, metal, zinc, rubber, paint, and dozens of other things. But that is just the beginning, for there is an entire industry to produce each of those materials—a lumber industry to get the wood, a mining industry to get the zinc, and so on. Moreover, engineering and tool-making businesses are required to supply all of those industries. Finally, neither the pencils themselves nor the various elements needed to manufacture pencils could be transported without the oil and shipping industries.

All told, making the most simple of objects, a pencil, involves thousands of people who possess very detailed knowledge and information about their day-to-day jobs, whether they are in the lumber industry, the rubber industry, or elsewhere. And these people come from all over the world. No central planner or “pencil czar”—even with access to the most powerful computer imaginable—could possibly possess and utilize all the detailed and constantly changing information that goes into making pencils. And yet we still have our pencils. How? Because of private property and the free-market capitalism it enables. Under a free-market system, all of these thousands of people, very few of whom actually know each other, have an economic incentive to cooperate with each other under a division of labor and produce pencils. There’s no magic or invisible hand involved. It is the common sense of everyday life under capitalism. As long as there is a consumer demand for pencils—and thus the potential for profit—people will cooperate with others to figure out a way to produce and market pencils. Consumers get the pencils they want, and the people who produce them improve the standard of living for themselves and their families. Property rights and the capitalist system make all of this possible.

The more complex an economy becomes, the more essential it is to rely on free-market capitalism. Indeed, Leonard Read’s pencil example emphasizes just how misguided government planning of the economy is: no group of experts could possibly possess the knowledge required to produce a simple pencil, let alone “plan” an entire economy. The delusion that a single person or group of government planners could possibly possess such information and manage an entire economy is what Nobel laureate economist Friedrich Hayek called the “pretense of knowledge” or the “fatal conceit.”Central planning inevitably leads to economic chaos.

— Thomas DiLorenzo; How Capitalism Saved America

Not all entrepreneurs are successful, of course; many lose money and go bankrupt. But this is another strength of free-market capitalism, where the consumer is king. If one capitalist uses his resources in a way that does not please consumers and therefore cuts back on resources or goes out of business, more successful entrepreneurs will take up those resources and use them more efficiently. Indeed, in many cases a company that goes bankrupts is purchased by a more successful competitor in the same industry who knows better how to manage those resources and produce products and services that are more to the liking of consumers. The freedom to fail is an important ingredient of capitalist success.

— Thomas DiLorenzo; How Capitalism Saved America

Any discussion of economic freedom must consider degrees of freedom, for neither the United States nor any other nation has ever had an economy that was genuinely free of government interference— that is, free of taxes and regulations. Rut overwhelming evidence indicates that the more economic freedom a nation has, the more economic opportunity there will be and the more vibrant that nation's economy will be. And the opposite is also true: the more regulations, controls, taxes, government-run industries, protectionism, and other forms of interventionism that exist, the poorer a country will be. The strongest evidence comes from several annual ''economic freedom indexes" calculated and published by the Fraser Institute in Canada and by the Wall Street Journal and the Heritage Foundation in the United States. These indexes show a strong; correlation between the degree of economic freedom in a country and economic growth. And in fact the studies show more than just a correlation; they explain why a higher degree of economic freedom (that is, a more capitalistic society) causes more prosperity.

— Thomas DiLorenzo; How Capitalism Saved America

As these studies clearly convey, capitalism is the best-known source of upward economic mobility. And, despite the oft-repeated claims of anticapitalists, capitalism actually reduces income inequalities within a nation as well. While there will always be inequalities of incomes—this is only natural, for every human being has different aptitudes, priorities, and interests—the economic opportunity in a capitalist economy enables those at the bottom of the economic ladder to ascend to the middle and the top. Over time, income inequalities diminish as more and more people take advantage of job opportunities, work hard, learn skills, educate themselves, save their money, get married and raise families, and start up their own businesses.

— Thomas DiLorenzo; How Capitalism Saved America

Nevertheless, the success of capitalism has always bred a certain number of malcontents who, among other things, believe that they are insufficiently rewarded by the capitalist system, are envious of other's success, have a compulsion to use politics to control other people's behavior (and their wealth), deny the reality of human inequalities, believe that personal freedom is overrated, and resent the power that ordinary consumers have over the economy. Many of these anticapitalists are ignorant of basic economics, but that does not stop them from assaulting capitalism at every opportunity.

— Thomas Sowell; How Capitalism Saved America