Capitalism is a convenient punching bag. From academia to politics, it is subjected to a constant barrage of denunciation but possesses no means to defend itself. It is, at its core, silent and voluntary. Its guiding principles, particularly free enterprise and the guarantee of private property, are so ingrained in American prosperity that we all just take it for granted. Capitalism has become a victim of its own success. The debates surrounding sensitive topics like cronyism and wealth inequality tend to be overpopulated with the critics of capitalism. Defenders need to step into these debates and advocate for history’s most successful economic system.
The silence of defenders has created the illusion that capitalism has no defense on certain topics. Not only does this leave problem-solving to the authoritarians who benefit from anti-capitalist sentiment, but it also allows for a warped belief on what this economic system truly is. The vices of greed and selfishness are used to define capitalists, while the virtues of innovation and entrepreneurship are seldom attributed as they should be. In the inequality debates, the concept of wealth is incorrectly perceived as a fixed pie graph, where the elites consume an enormous portion and leave but crumbs for everyone else. Seldom acknowledged is the reality that money is a renewable resource: its investment yields more wealth for more people. The economy ought to be thought of as a garden rather than a pie.
Cronyism is a subject that defenders ought to be just as vocal about as anti-capitalists. This is a condition where private businesses obtain special privileges, tax breaks, subsidies or protection from the government. They achieve these arrangements through clever lobbying strategies, such as donating to a politician’s election campaign or employing citizens in a target politician’s district. Some businesses have entrenched themselves so deeply into this corporate welfare system that dislodging them becomes impossible for politicians. The corporate contractors that supply the U.S. Department of Defense, such as Lockheed Martin and Boeing, are outrageous examples of welfare permanence.
Some claim that cronyism is a symptom of capitalism. It is actually a symptom of government. None of those special benefits could be allocated if government consistently refrained from market intervention. Every time government bails out unsuccessful companies or prohibits Airbnb competition to protect hotels, taxpayers and consumers are left with empty pockets and fewer choices. Capitalism is entirely premised on the voluntary and free exchange between independent parties. Anything that distorts that is a corruption of free exchange. When defenders make this case, they need to juxtapose it with the arguments coming from anti-capitalists. If the problem is that government is in bed with corporations, then the solution should not include an expansion of government. That just makes the bed bigger. Instead, a combination of self-imposed restraint and public transparency is what fortifies government against cronyism.
The wealth inequality debate is where defenders of capitalism have relinquished the most ground, unfortunately. Pro-capitalism scholars go unheard, passive supporters remain quiet and wealthy narcissists dominate the public’s perception of the richest among us. All that remains to carry the banner of capitalism are extremists who fail to express a genuine concern for those less fortunate.
This means that the banner of socialism wields greater influence in this debate. The wealth redistribution argument relies on an incomplete measure of prosperity: crude income. It fails to address the myriad of factors that cause cyclical poverty, such as lack of opportunity and labor immobility. Since it is difficult for tax collectors to distinguish between the investor class and the money-hoarders, the penalty will fall on both groups equally. Over-taxing the investors, whose money fuels the business economy, will only decrease the opportunities available to the working class.
When defenders step back into this debate, they need to focus on addressing the causes of poverty with genuine concern. History is on their side: capitalism has an excellent track record when it comes to alleviating poverty. Nearly 1 billion people in the world have been freed from extreme poverty since 1990. Much of that progress occurred in China, which has embraced capitalism in practice even though its government remains communist.
A strong card for defenders to play is labor mobility. As an economy transforms, the concentration of employment shifts around different economic sectors. The burden for anti-poverty advocates is to make sure people don’t get left behind. Authoritarian interests demand that government either prevent those transitions via regulation or subsidize the left-behind areas into perpetuity. Both are detrimental to progress.
The barriers to labor mobility are pervasive, but free markets hold the key. Occupational licensing, which encompasses the massive stockpile of government permission slips to do a job, has expanded from 5 percent of the workforce in the 1950s to 25 percent in the 2010s. In many states, these licenses are required for work as ordinary as hairdressing or auctioneering. Defenders should always be looking for ways to break down unjustified restrictions and free the individual.
Maximizing opportunity is what defenders of capitalism ought to make a case for. The existence of cronyism is the result of irresponsible governance, and the existence of wealthy people does not come at the expense of poor people. The economy is not a crude pile of treasure with a finite quantity of wealth to be shared. The economy is us, an aggregate of millions of individual transactions every day. It is supposed to be organic and free. Capitalist defenders must step up to the plate and make this case. If not, there won’t be much left to defend.