Reflections on Entreprenuership Part 7: Capitalism and Reality

When I was in sixth grade back in 1960, I was taught that socialism was a viable alternative for certain countries at certain times in their economic development, and just because capitalism worked well in America, we should not believe it would work everywhere in the world.  I liked my sixth grade teacher. He intended well; but, what he was teaching us, as I discovered later in life did not correspond to reality. He was a great guy and during recess he taught us how a backfield was intended to function with a quarterback, a fullback and two halfbacks.  Like the game of football, the world has changed; but, common sense is still common sense and reality is reality.

Long story short, socialism just doesn’t work.  It never has and it never will. Here’s why. Whether we care to admit it or not, we are all greedy and desirous of the things which material wealth provides.  This is just part of who we are as human beings. Under any financial system imaginable people want more and better things. This is a large part of the reason why there have been wars, murders etc. throughout history.  Whether we are talking about fascism, communism, a monarchy, socialism, capitalism or an environment with no financial/political system of any type(if this is possible), people just want more and better things.

The interesting concept about capitalism, which sets it apart from other systems is that by its very structure and nature, in order for a person to succeed he or she must serve other people and serve them well. Some people like to criticize capitalism by saying it makes us greedy.  Part of the problem of this type of critique of capitalism is that it presupposes a kind of optimistic humanism in which human beings are perceived as being basically good. The problem with this supposition is that it simply ignores the reality of history.
People are not basically good.  Among many other things about us human beings, we are greedy.  We have intense and insatiable desire for material wealth. It’s just in our DNA.  It’s a big part of who we are. Just look at the insatiable desire we have for more and better technology.  No matter how fast our IPhone works we want it to work faster, and faster and faster.
To be fair, not all people are insatiable in their desire for more and better stuff, and while some people desire more and more things to set them apart from others, not all people are this way. Think of Mahatma Gandhi for example.  He didn’t have an insatiable desire for more and better stuff. He was very happy to live a quiet rural life tending goats and weaving his own cloth to make his garments. Yea. During a visit, one of his benefactors was well remembered for saying to Gandhi, “You know it is costing us  a fortune to keep you in poverty”.                                                          

The quality of capitalism which sets it apart is that it provides a means by which a person must provide a superior product or service to another person in order to prosper.  It provides a system whereby we must serve others well in order to do well for ourselves. This is what separates capitalism from other economic systems. In other economic systems a person succeeds only by serving those elites who are in positions of power, be they warlords, kings, dictators etc.

The reality is that entrepreneurship, functioning within a free market economy which capitalism provides, leads to an accumulation of wealth both for the “poor” and for the”rich”.  Whether poor or rich, one must serve the needs of others in order to succeed.
If you doubt this, all you have to do is compare free-trading Vietnam to protectionist Laos, free-trading Bangladesh to protectionist Pakistan or free-trading Colombia to protectionist Venezuela.  Poverty is declining in countries where capitalism is allowed to flourish within a free global trading system.
The same is true not only in Vietnam, Bangladesh and Colombia; but, look at China after 1979, or India after 1991. When trade barriers are removed and capitalism is allowed a foot hold , people have time to invent and create and buy and sell other things.  The economy is invigorated and poverty diminishes.

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