Friday, April 25, 2014

I am a Capitalist... here's why

I am a capitalist. I'm proud to say I think we need to have the free market work for the majority of the economy because it is efficient. Looking at all the models of the world, no other model rewards ingenuity as well which is the bringer of prosperity, no other model encourages people to improve themselves in the same way that capitalism does, and self-improvement is the way to a prosperous society. No other model (when talking about capitalism as envisioned by Adam Smith and John Maynard Keynes, even Milton Friedman, not the crony capitalism that has evolved in the United States) creates an environment where one person with a good idea can revolutionize the world, such as (despite their many faults) Bill Gates, Steve Jobs, Thomas Edison, and other great inventors who were able to market their ideas. This incentivism is good for everyone.

I am reading an essay by Andrew Carnegie, The Gospel of Wealth which I highly recommend. Andrew Carnegie made immense improvements on our quality of life (despite their drawbacks such as pollution) which raised the standard of living by providing electricity through his steam power, which moved our economy forward in incredible ways.

He argued that the wealthy should use their wealth in a way that makes society better. He did this with the libraries, schools, and other good works he did that made America better, which still makes a lasting impact in our society. He argued in his work that it is important for the wealthy to give to society also in taxes, and applauds in his piece the implementation of Pennsylvania implementing a large estate tax. He personally despised his colleagues who did not have the level of patriotism he possessed and foolishly saw themselves separate from other people. He recognized he was a part of a greater whole and worked towards that.

Economically speaking, his argument makes sense from a self-interest model as well. What goes around comes around, and providing the ability for many people to get educated to the point where they too can improve the world means they can make great inventions, and the wealthy have an unusual place in society in being able to make these tools there which is proven to reduce poverty.

I personally am persuaded by his argument. The other model, Communism, doesn't work as it develops a corrupt dictatorship inevitably and in over 30 examples has proven itself to always end in corruption. China has developed, but only with the embracement of capitalism and they are not truly communist in their economic sphere today.

When I say capitalism I must make it very clear that this doesn't mean the government shouldn't be involved at all, not even Adam Smith or Milton Friedman (the inventor of the Alternative Minimum Income Tax) would market such an idea. From monetary policy to important investments, the government sector is important.

We need to modify our system of course, education needs to be seen as an economic necessity for such a developed culture. We need to make sure we prepare our teachers with the tools they need to give students the best education they can and provide the training they need when they are in school to fully use their talents. Education is the best way, and there are many studies that show this. People with education are able to get better paying jobs through specialization (which means there is a lower supply for each job which raises the wage) and moves our technology up, which expands our GDP. We also need to allow unions because they allow workers to negotiate at an equal level with their employers which helps share the gains and so people can see the fruits of their labor. There is no other way I know of. The last component is we need health care which makes it so that workers can be at work at a full schedule (within reason, we shouldn't have people working 60 hour weeks) and improves the quality of life for everyone. These are the types of things that Andrew Carnegie was talking about in his work for the betterment of society to use our surplus to make people better across the board. Socially responsible capitalism is the future.

Only by looking at the probable consequences of our actions can we make correct decisions that will make the world a better place, and this leads us to a moderate form of capitalism, leaning towards free markets, but not to the extent of anarchy. We must be reasonable as economists and responsible to respect the data. Because of this, I lean towards capitalism as opposed to the alternatives.

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