Capitalism at Risk?

If you have listened to or watched Glenn Beck or Sean Hannity recently, you are aware that they are declaring the imminent death of capitalism in the United States. I am not sure of how much of what they are saying is based upon belief and how much is based upon their need to entertain or maintain attention but there is an important and subtle point that is not being touched upon.

Capitalism as an economic system works because it works. Essentially, it is the economic version of Natural Selection. An organization that produces a better product/service at a lower total cost has an advantage over those with inferior products/services and those with higher costs. The marketplace matches demand with supply by adjusting prices upward or downward until there is a transaction. Just as capitalism works independent of governments or beliefs, so does the marketplace.

We know from history that capitalism grew out of the city-states and merchants. The first corporations were formed to fund dutch trading expeditions. Although the land-based Royalty participated in these ventures or needed to be paid off through taxes, the development of capitalism occurred in spite of the power structure. In nations where public corporations created wealth, the royalty was either disposed of or relegated to ornamental status. Sometimes, for periods of time Socialist or Communist political movements have hijacked national economies. In the end, they have produced inefficiency, stagnation and shared misery. In the worst cases, they have used war and brutal repression to remain in power.

What has happened to capitalism in these circumstances? Has the marketplace disappeared?

Communism in mainland China in 1949, produced an economic giant in Taiwan twenty years down the road. Corporations simply move to more profitable (amenable) nations through relocation or more subtly through economic growth. The marketplace in a controlled economy simply moves as well either off-shore or underground. Has the "war on drugs" reduced the economic benefit accrued to drug dealers? Regardless of your position on drug policy, you can not deny the existence of a profitable "black" market functioning in spite of governmental efforts.

Capitalism is the most efficient economic system for creating wealth and the marketplace is the final judge. While we may agree to socialize certain services such as education because the services are going to be given away rather than sold, there should be no illusion that the marketplace will offer an alternative product if there is demand for it. When it comes to medical procedures, gambling-entertainment and education; people already cross borders to get the best product or best value. What will be the future traffic pattern?

The pragmatic consequences of this are that while the US economic output (Gross Domestic Product) is at risk and our typical standard of living is at risk,, capitalism is not at risk at all.