Capitalism: The worst economic system, except for all the others

As the new year begins, students will again be exposed to minds that assert the dangers and evils of capitalism. These thinkers have every right to put forth such beliefs — that is what America is all about. But be weary of such cynicism. Instead, try thinking of the world’s predominant economic system in both a personal and  rational manner. Then you will understand its true value.

As an American, I am incredibly fortunate to live in a nation whose economic tradition centers around capitalism. It has made this nation prosperous and provided me with opportunities unrealized in centrally planned economies — a thriving free market in which I am free to use my earned money as I wish, enroll in the university I wish to attend and lead the life I wish to lead — unburdened by the dictates of inefficient and ineffective central planning. All of this stems from the economic freedom and choice that capitalism, not socialism or Marxism, provides. 

In a speech on Nov. 11, 1947, Sir Winston Churchill reminded the UK’s  House of Commons that “democracy is the worst form of government, except for all those others that have been tried.” In a similar fashion, capitalism is the worst economic system, except for all the others.

Capitalism is no different from anything else in this world. It is imperfect because imperfect men created it. Humans are not perfect, nor are they capable of perfection. Avarice and greed are not unique to capitalism. They were present in the USSR, and they will be present in any man-made system.

Since the fall of the Soviet Union, free market systems have been implemented in numerous former Soviet States. Perhaps nowhere better illustrates capitalism’s success in post-Iron Curtain Europe than in the country of Estonia.

On Oct. 21, 1992, Mart Laar became Prime Minister of the newly independent nation. He was only 32 years old. Upon entering office, Laar’s economic knowledge consisted of one book: 20th century free market economist Milton Friedman’s Free to Choose, a personal statement advocating for the immense value of economic freedom.

The young prime minister was so impressed that he implemented many of Friedman’s ideas, such as free markets and free trade. Rather than borrowing huge amounts of money from international institutions, Estonia sought to attract foreign investment. The most northern Baltic nation prioritized real, natural growth over shallow, artificial growth. Because of this, Estonia successfully transitioned from a poverty-stricken nation with a planned economy to a flourishing capitalist society. In fact, by the latter half of the 1990s, Estonia received more foreign investment per capita than any other central or eastern European country. Therefore, because of free markets and private investment — not central planning and public intervention — new workplaces formed, old factories were reconstructed and new knowledge and technology were acquired, making Estonia authentically modern and increasingly competitive.

In 1992, Estonia’s GDP per capita (in dollars) was $2,823. In only 20 years, GDP per capita increased dramatically, totaling $17,041 in 2012.

Leaving Estonia and entering China, one will find more corroboration for the case for economic freedom.

Globally, capitalism is responsible for lifting nearly one billion individuals out of poverty in the past 20 years alone. China is responsible for three-fourths of this achievement. Moreover, extreme poverty is disappearing. Between 1981 and 2010, China elevated 680 million people out of poverty and reduced its extreme poverty rate from 84 percent in 1980 to 10 percent today.

Like Estonia, China has experienced great economic liberalization leading to a vast influx of foreign investment — producing remarkable domestic growth and opportunity.

As evidently displayed in practice, nations that have focused on economic freedom, such as Estonia and China, have significantly grown and developed. Regimes that focus purely on abstract and utopian ideology, as those of Soviet Russia and Maoist China did, fail to provide true progress and sustainability.

As Friedman once said, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.”

Government initiatives alone cannot solely bring about equality. Equality must also derive from those governed. If the governed are not granted freedom, no one can be equal — for equality stems from freedom — and not the other way around.

There is no question that capitalist societies produce inequalities. A system based on freedom of choice with reward based on merit is bound to yield different results in different circumstances. It is this very quality that reflects capitalism’s natural effectiveness and practicality. It is the freedom to choose that makes us human. It is the profit incentive that drives us to work our hardest. It is our inherent and distinct ability to reason as individuals, not as collectives, that makes us truly free.

As Winston Churchill once said, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”

I will take the former over the latter any day. I have made my choice. You are free to make yours.

Write to Matt at mrb111@pitt.edu