By Nick Cassol
Though the nation’s founding economic principles were that of free markets, increasingly people find themselves at odds with a system that appears to benefit the corporate elite more than everyday Americans. The US does in fact enjoy such an economic system, but it is not that of free markets, as the American people have been told. Rather, it is corporatism. Capitalism should not be blamed, and socialism should not be implemented. Instead, the market should reflect the basic struggle that all humans strive for – freedom and liberty.
Economics is the science of human incentive. Man’s incentive and desire for resources is what defines an economy in the most simplistic terms. The difference between the various economic systems is how they deal with human incentive. Most – including socialist, feudal, mixed, and corporatist – seek to suppress incentive. Capitalism seeks to encourage it. By permitting laissez-faire capitalism to exist, basic incentives will always be followed. The pursuit of the natural motivation to obtain resources is beneficial to all, as people are always most productive when working for personal gain. Such increased productivity is why capitalism, at the very least from an economic standpoint, is the superior economic system. Resources incentivize humans, yet economics itself is the study of limited resources. Desire for limited resources is what drives competition, and therefore productivity. Competition is essential to capitalism; businesses and merchants strive always to be better for the consumer than the last guy, which both serves as a check on the system, and drives productivity.
What drives an economy are prices, which represent the supply and demand for any one item. If the demand for a resource is high, the supply becomes depleted, and the price goes up. When the demand for a resource is low, there is an excess of supply, and the price goes down. This simple relationship left to its own devices can benefit both the consumer and the provider in a free market; the consumer purchases something because they have decided that the resource is more valuable than the money required to buy it, and the provider has decided that the money is more valuable than the resource. In socialist or mixed economies, the government distorts this supply-demand relationship by means of harmful regulations. One example is the minimum wage. The minimum wage determines the lowest price a worker can be paid, effectively setting a price floor on the price of labor. Because of this artificial floor, the price of labor is higher than it would be in a free market, thereby lowering the demand for such labor. Driving down demand for labor drives unemployment up, as the cost of employment becomes too much for employers to bear. This hurts workers as well as businesses, and both parties lose in this situation, a far cry from the win-win scenario described in a free market. Another regulation that hinders the supply-demand relationship is price controls, which, as the minimum wage sets a price floor, price controls set a price ceiling. They determine the highest price a provider can legally sell a good or service, even when the demand for such a good or service far exceeds the artificially set price. Because the price misrepresents the demand by making it lower than it would be in a free market, the supply becomes depleted.
As bad as the government tearing down businesses is, actively embellishing them is quite likely even worse. Such embellishment defines corporatism, the economic policy the US has been pursuing since the early 1970’s. The first half of the twentieth century definitely saw a move toward socialism for the US, and while this move still persists with people like Bernie Sanders being prominent figures in American politics, the country, or the government and corporations rather, have become much more fascinated with corporatism. The first examples of corporatism can be seen in 1971, when President Nixon dropped the gold standard. Without an actual entity to back up the value of money, its value became solely based on arbitrary interest rates set by the Federal Reserve, which is composed of private bankers. Obviously, being made up of private bankers, interest rates can be exploited for corporate benefits, and indeed, since the early 70’s, there has been a rapid increase in income inequality. Those on the left blame this inequality on the Reagan tax cuts and subsequent Republican administrations who also cut tax rates for corporations, and while this indeed is part of corporatism and surely affected income inequality, the actual implications are too small to cause large scale inequality. In addition, the trend of income inequality began somewhere around 1975, six years before Reagan even took office, and continued to grow even during the Clinton and Obama administrations when tax rates were jacked back up. Rather than random tax cuts, the distortion of the value of money once the unbiased and concrete value of gold became irradiated has contributed the large-scale income inequality, and is a prime example of corporatism in action. A more well-known example of corporatism is found in the 2008 financial crisis. Large corporations and big banks were going out of business due to their own financial irresponsibility and incompetency, and rather than letting them bear the cost of their actions as in a free market, the government jumped in a bailed them out. Meanwhile, the American people, who lost much in the crisis as well, were not given such generous treatment.
While free markets work best from an economic standpoint, they are also morally correct. The three natural rights of man are life, liberty, and property. All are essential to individual freedom, as they all describe the most individual entities that man possesses. The free market is the only economic system that upholds these principles. Governments in socialist economies through their regulations take away the most individual of individual rights, and are absolutely opposed to the freedom of the individual to pursue their right to life, liberty, and property, so long as they do not infringe upon another individual’s same rights. Author and philosopher Ayn Rand writes, “The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right to self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing retaliatory use of force under objective control.” Basically, the government may only use its inherent power to act against those who seek to take away individual freedom, rather than to be the agency of tyranny themselves.
The free market is economically sound. Why? Because economics is a science, and when left to its own devices, works naturally, and though it is certainly not perfect, it is self-correcting, which is as close to perfect as possible. The free market is morally sound. Why? Because it is the only system where the government does not seek to control, to use force against, and to take away basic rights from the individual. It is not a coincidence that the free market works on both spectrums. The free market works economically because it pursues a policy of freedom for individuals. Why? Because individuals are most productive when free to pursue their incentive, their passions, and their dreams, and when their desires are not subverted by the government. When their basic rights to life, liberty, and property are upheld rather than held back, individuals make decisions for themselves rather than the government making them for them, and they can make smarter and more productive decisions because they are individual to them. The basic rights to individual liberty must be reflected in market policy, and ultimately, mankind triumphs when it is free.