After my last post, a reader wrote that capitalism is scary to many people because they fail to recognize its essential benefit: the freedom to pursue, and achieve, your happiness. That prompted this post.
Capitalism can indeed feel intimidating. Life is rife with uncertainty: we don’t know if we will lose our jobs or business, go bankrupt, fall ill, get injured, become disabled, or not. While we want to succeed, failures, illness and accidents are possible, often for reasons beyond our control.
In a mixed economy, the government provides taxpayer-funded social security, unemployment benefits, “free” health care, and other welfare functions to protect us against such vicissitudes. Most people understand capitalism to be a free-market system where the government does not perform any welfare functions. Because of the possibility of failures, accidents or illness, not having a social safety net – the government taking care of us – can feel scary, particularly if you are supporting family or other dependents.
The fundamental reason for being intimidated by capitalism is that it is poorly understood. Most of us live in a mixed economy and take the welfare state aspects of it for granted. If it weren’t for the government, who would provide us health care and health insurance, old age security, and other benefits? Who would take care of the poor and the destitute?
Most people have never learned about capitalism and have been exposed only to distortions about it through education and the media. Some of these are: capitalism is system of the survival of the fittest; it exploits workers and consumers; it makes the rich richer and the poor poorer and is ruled by ruthless dog-eat-dog competition.
As a consequence, most don’t know the benefits of capitalism: the freedom to pursue, gain and keep your values, and achieve happiness that can ensue only from such freedom. They settle for the government-provided safety net that saddles them to be their brothers’ keepers through taxation and curtails their freedom to choose how to live their own lives, earn their living, and spend their earnings.
It would be one thing if taxes were voluntary. In Canada, according to a recent Fraser Institute study, an average family spends more of its income on taxes (about 42%) than the necessities of food, shelter and clothing. That severely limits the ability to choose other values to pursue.
It is true that capitalism is a system of competition where production and innovation are rewarded. Those who produce the most prosper the most. But their prosperity is not taken from others. On the contrary, it is created through innovation and productiveness encouraged and made possible by freedom. Such innovation and productiveness also benefit others, through more jobs and better pay for workers, better and cheaper products and services for consumers, and through more business for suppliers. This allows others to prosper also and gives them more opportunities to pursue their values.
To remedy being intimidated by capitalism, we must understand what capitalism is and what it requires of individuals to succeed.
In contrast to a mixed economy of relatively free markets and government controls, capitalism is, as Ayn Rand defines it, “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”
In such a system, the government’s only role is to protect individual freedom of action against initiation of force by others. The government does this by protecting individuals’ rights to life, liberty, property, and the pursuit of happiness through the police, the military, and the law courts. In capitalism, the government does not provide welfare programs, health care, unemployment benefits, education, or any other entitlements.
In a system where there is no social safety net, we are guaranteed only one thing: freedom from physical coercion (unless we initiate such coercion, in which case the government must retaliate on the victims’ behalf).
To protect ourselves against uncertainty and possible misfortune in capitalism, we must develop our knowledge and skills so that we can produce values and trade with others, whether by working for someone else or for ourselves. Either way, we must learn to think and solve problems to support ourselves. Cultivating such abilities would have the added benefit of having the self-confidence in our ability to deal with whatever life deals us.
Productive work also yields savings that can be invested to provide extra cushioning against life’s vicissitudes. Taking private insurance against accidents, illness and disability adds extra protection. (Those who are truly unable to support themselves, save, and afford insurance, must rely on private charity – that historical evidence has shown to flourish in the conditions of freedom and the absence of government welfare programs).
The above protections and understanding the true nature of capitalism would enable us to embrace and advocate for it. Eventually, we would gain the freedom to pursue and achieve our chosen values – instead of the government choosing for us. Happiness would be the reward, only fully possible in the conditions of freedom and capitalism.
Photo by Juan Mayobre on Unsplash