Friday, January 15, 2010

Is Capitalism To Blame For Our Current Financial Crisis?

In the 14 January issue of Iron County Today, Luke Perry condemned capitalism and its leading proponent, Adam Smith. Mr. Perry even blamed the current economic crisis on capitalist greed of the last decade.

I suggest Mr. Perry study capitalism a bit more and compare it with the economic model we actually have in the United States and elsewhere in the world. In doing so, he will find that our economic model is actually built on the teachings of John Maynard Keynes, a leading proponent of government intervention in the economy.

We have a financial crisis because government policies and regulations have imposed the will of politicians (mostly attorneys seeking power over the lives of others -- not businessmen familiar with the workings of capitalism) upon every aspect of business.

Capitalism exists when one entity creates a product or service that a consumer wants or needs at a price the consumer can afford and at a price that enables the producer to make a profit so he can buy another capitalist's product or service. Capitalists discover or create a market, then satisfy that market. Jobs are created in the process enabling more people to have the means to buy goods and services from capitalists.

When allowed to flourish, capitalists almost always have competitors which encourage competition. Completion drives prices down and encourages innovation and efficiency. Capitalists who fail to efficiently produce a quality product or service at a competitive price tend to go out of business.

Unfortunately, thanks to the teachings of Keynes, few capitalists are truly allowed to practice pure capitalism. Government bailouts and subsidies have insulated large corporations and corporate leaders from the consequences of failure and poor decisions and therefore are rarely held accountable by stockholders and corporate directors. Irrational regulations and subsidies intended to protect the interests of certain politicians and their supporters have impeded the smooth operation of capitalism for many, many decades.

There is a limited role for government regulation of business. Adam Smith identified that role when he expressed his concern over monopolies: government must protect the individual rights of the people from unrestrained monopolies. I also accept a government role in protecting individual rights (that is a primary role of government, after all) in other aspects such as setting reasonable safety and health standards.

The Constitution authorizes and requires Congress to ensure interstate and international trade flow smoothly. Beyond that, interventionist politicians, such as Chris Dodd and Barney Frank (a couple of the real authors of our current financial distress), have absolutely no right nor Constitutional authority to impose their will on business. If Mr. Perry wants to place the blame for our financial problems, he needs to look at the politicians (such as Chris Dodd and Barney Frank) who stifle capitalism and competition and at the voters (victims of today's government schools) who keep returning the same corrupt politicians to Washington.

Recommended book:
The Fair Trade Fraud
The Fair Trade Fraud

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