COVID-19: the New Pretext for Attacking Capitalism
The usual suspects are at it again! Left-wing politicians, progressive activists, and even some left-leaning investors are ramping up their typical accusations and attacks on capitalism. The same people who have become rich under the system and even exploited it over the decades have also campaigned tirelessly for its destruction.
Never Let a Good Crisis Go to Waste
Using the mantra of never letting a good crisis go to waste, capitalism is being blamed for the COVID-19 pandemic and the economic crisis it has caused, among the many other evils it has allegedly brought upon this earth.
Just imagine that a Senator like Bernie Sanders has become a millionaire by attacking the very system that allowed him to increase his wealth. It is hypocritical, but not surprising, that such individuals opt to criticize capitalism and advocate its abolition from the safety of the prosperous capitalistic United States or even Europe, instead of the impoverished socialistic Venezuela, Cuba, or North Korea.
According to its many critics, the system of capitalism has enriched the few, damaging the many. Shareholders, investors and wealthy people in general have used corporations to enrich themselves at the expense of the workers, suppliers, and the overall society. Focusing on profits for themselves, they argue, shareholders do not care if the rest are harmed. Through stock buybacks, leverage, and short-term thinking, the job security of their employees was sacrificed. Now, the critics insist, the corporations are abandoning their workers as the crisis intensifies while keeping their executives’ salaries intact. The virus exposed terrible, unfair and faulty business models say the opponents of capitalism.
Seeing Through the Anti-Capitalism Argument
This is a logic that many believe. It is easy to find a target and direct all the energy and the anger towards it. What better target for someone who has lost their job than the “greedy, evil capitalists exploiting people.” So, through these modern-age millionaire-socialists, the masses are convinced that it is the system’s fault. The replacement presented is more government control, which will be benevolent and for the first-time socialism will be properly implemented — the real one this time. In every generation there is someone who believes he will implement true socialism.
In fact, true socialism and communism have been implemented time and again and have produced misery, death and destruction. However, the nice words, without reasoning or logic, are enough to convince the “social justice warriors” and the Twitter mobs who set out to free the world from capitalism from behind their keyboard.
Capitalism is Not to Blame — It’s Actually the Opposite
First of all, it is a fallacy to say that the fault of the current crisis lies in the capitalistic system. Countries, although not all of them, entered into lockdowns, closing their economies, because their governments mandated it. The damage to the economy was done due to government decisions. Even the strongest capitalist economies were not able to resist because for more than two decades there has been a mismanagement of public finances, high taxes, huge and unproductive government spending, and massive accumulation of debt by governments. They and central banks have interfered in markets, distorting them. And as a cure they present more of the same.
This is not capitalism. It is the opposite of it. Currently, most countries have strayed from the true form of capitalism and misrepresenting it, when in fact there is deep interventionism and also mercantilism in some countries that is ill-intentioned and goes against the philosophy and practice of capitalism. The left is saying we are in a bad situation economically because of bad policies — which are the opposite of what capitalism stands for — while naming them capitalistic. Their solution is more government and more empowerment for politicians.
Capitalism Works and Unlike Socialism and Communism
Secondly, the proof for the efficiency of capitalism can be found in the records of history. The lifespan of people has been greatly increased in the last century with the industrialization of countries. In the 1800s, you were lucky if you lived to be 40 or 50 years old. In the US, average real income per capita has jumped 4,000% since the 1800s. According to an article by former US Ambassador to the UN Nikki Haley, in 1820, 94% of the world lived in extreme poverty, earning less than $1.90 a day. Today, around 10% live in extreme poverty. That is still a big figure, yet it is much lower than it could have been in a socialist system, judging by the state the good people of Venezuela find themselves in today. A once prosperous, oil-producing nation, Venezuela was destroyed by the socialist policies of Hugo Chavez and its current leader Nicolas Maduro.
Scandinavian Socialism? Not So Fast
The Scandinavian countries have the highest degree of free markets and capitalism, and that is why they are among the wealthiest. Their corporate tax rates are generally lower than in America and the European average and the freedom of doing business is among the highest. Minimum wage is not imposed by law, the labor market is flexible and government intervention is nonexistent. The American and Scandinavian examples of wealth and freedom give capitalism the economic advantage.
Yet, in the United States, there are those in the private sector advocating for a stakeholder capitalism, a name that is entirely misleading. According to this philosophy, companies should not focus on their shareholders anymore, but on their customers, workers and communities. While the sound of it is undoubtedly charming, it is entirely deceiving. It leads anyone to believe that until now these companies harmed their customers in one way or another. How can a company cheat its customers and stay in business? How can it harm a community and not go bankrupt? Just a simple logical question extinguishes this whole philosophy. I am sure that these business leaders who have come out in favor of this so-called stakeholder capitalism know the absurdity of the idea. However, they are under pressure from a left who takes no prisoners and uses boycotts as a weapon, simply for the fault of not being left-wing. When you do not have the truth on your side, violence is the next option, apparently.
Every sensible finance theory proves that maximizing shareholder value maximizes the value of society. Resources in the world are limited. In a corporation, there are several stakeholders, all of which get what they require before the shareholders. So, suppliers get the money for the goods delivered, bondholders get their interest or principal payments, otherwise the company would go bankrupt. The employees get their wages, and so on. The last one to get paid are the shareholders. Thus, following this logic, shareholders have the highest incentive to expand the pie, so to speak. By expanding the pie, and using the resources at their disposal efficiently, shareholders benefit not only themselves but also their customers, suppliers, creditors and the community as a whole. Moreover, the companies are inclined to be involved in charity, in causes cherished by community and being socially responsible. Capitalism is the only economic system in which a group of people, the entrepreneurs, have no choice but to concern themselves with the needs and well-being of others, i.e. their customers.
Acknowledging the Shortcomings of Corrupt Corporations and Cronyism
It is true that there are corrupt businesses who use their government influences for power and profit. That, however, is not capitalism, and it is illegal. The cronyism in a socialist society is much worse because everyone is equal in sharing the misery except for the government and their cronies. We hear all the time from billionaires to increase taxation and lower inequality. But, the ones being hurt from the tax increases are the middle classes and the poor. If these billionaires want to pay more, they are welcome to make donations to the government or individual citizens.
In addition, stakeholder capitalism failed in Britain. Former PM Tony Blair forced corporations to take into account the interests of employees, suppliers and the environment. Yet, that did not stop the country, its banks and the private enterprises from being hit hard by the crisis of 2008.
The renowned free-market economist Milton Friedman famously said that the only social responsibility of business is “to use its resources and engage in activities designed to increase its profits so long as it stays in the rules of the game”. He knew and had proven that that was the only way that society could benefit, because profit is the incentive that has led to the major breakthroughs in science, art, technology. Anyone who is against capitalism should stop using any iPhone or Samsung, any cars or buses, tablets, planes, microwaves. Basically, anything everybody uses in everyday life should be off limits to them, because these products are the result of capitalism and the ingenuity of the private sector, not the government.
Letting the Free Market Work
Companies who are left to compete freely and without interference by the government, will be the agents that capitalism uses to provide more goods and services, and at the right price that customers and sellers decide, and also the ones that will help protect the environment and the communities. They will do so because they have an incentive. The healthier and richer the consumers are, the more profitable a business will be, the more employees it will hire and the more goods and services it will produce. If a company cheats, abuses and misbehaves, the market punishes it, because customers will simply switch to its competitor. The market is the most wonderful “entity” created, because it can correct itself and ensures the optimization of the resources available. Whereas, if we were to choose relying on the government, which is a monopoly that produces nothing, it will lead to abuse, corruption and indebtedness, and nobody will hold it accountable because all the power will have been surrendered to government.
True capitalism prohibits that, because in its fundamentals, it is a system that promotes freedom, equality and cooperation. It cannot exist without these three elements. On the other hand, socialism immorally thrives in their absence. That is why socialism is so good, that those that enforce it do so through violence and suppression, leading to poverty. Capitalism promotes choices and competition, through the free cooperation of market participants, among the various goods and it is the consumer who decides what is best, whereas in a socialist society the government tells the citizen what to buy, eat and say, how to be educated and where.
Equality of Opportunity
Capitalism ensures equality of opportunity, while promoting the most deserving, thus putting in place a meritocratic system. So, we have a competition even among people to show their best and avoid falling into complacency. Overall, it is more in line with the human nature. For this reason alone, capitalism will always be morally superior. Socialism and statism go against human nature, being a perversion of everything that make us human. Most importantly, capitalism channels self-interest into altruism. People who want to make a profit, invest into entities called companies with people who have the “know-how”, in order to produce goods and services, at prices set by themselves in cooperation with the consumers. That is why capitalism is sustainable in the long run.
Capitalism is a bearer of hope and optimism. It adapts and changes based on what the individual needs and gives the possibility to make dreams a reality. Socialism on the other hand, limits creativity, drowns people in negativity, because it crushes the human instincts and prevents individuals from having the means of realizing their dreams. Capitalism and the free markets have done more for prosperity and poverty reduction than any other statist system.
Improve the System, Don’t Scrap it
We must improve our current systems and make them truly capitalistic, more meritocratic and less reliant on government. Let us remove the negatives and cronyism from capitalism, ensuring it is truly free, and let us reject any notion of socialism. A free market is the only way forward, if we want to survive the challenges of our time. It is imperative that we move towards saving and wealth creation, instead of indebtedness and uncontrolled spending. Government must be there to provide incentives to invest, by cutting taxes and deregulating, while ensuring our national security and also that the rules are fair and apply to all. Competition in every sector will ensure better healthcare, better education and a safer environment. Lastly, we must understand that each of us has also obligations in society, not solely rights.
In our current situation, it is thanks to capitalism that we have any hope for a cure or a vaccine. We should be grateful to capitalism — the true one, not the deformed cronyism that interventionist governments create — for any future technological breakthroughs that will lead to improvements in the lives of billions of people as they have done throughout the last century. If individuals fall prey to the fairy tales of socialism and communism, we will be headed towards a lost century with poverty, misery and suppression. By improving capitalism, we have the chance for a golden era of innovations, wealth and hope.