Daniel Garcia

A short case for Capitalism

Posted on February 22nd, 2012 by danielgarcia.
Categories: Uncategorized.

Capitalism is a vital component of modern society and the lifeblood of the American economic system. While many perspectives on Capitalism exist and economists, politicians, historians, and citizens have not yet struck a clear balance in the definition of a perfect capitalistic society, we must study and understand the just benefits the market system and voluntary exchange of goods has brought to nations that adhere to capitalistic ideals.

A strong argument in favor of capitalism is the one brought forth by Ludwig von Mises. Von Mises introduced the economic calculation problem of how to rationally distribute resources in a fair and just economy. Capitalism and free markets allow price mechanism and the economics of supply and demand to put a price on goods and services. Average citizens carry a voice that creates a system of checks and balances along with government intervention and the economic system.  I would argue that this strong differential from socialism and the welfare state situates Capitalism as a much more just and fair system than the previous two.

A second argument in favor of Capitalism stems from Friedrich Hayek and his “Denationalization of Money” ideals. Hayek advocated that instead of following the government mandated gold standard, a free market can develop a healthier and more stable currency by creating competing standards of money and wealth. In “The Use of Knowledge in Society” he also created a strong case for central banks lack of knowledge and capacity to govern the supply of money. This I understand as a Capitalistic idea that would eliminate a central bank and create even more competition in the market.

A third argument in favor of Capitalism comes from Milton Friedman. Even though his idea about how the Federal Reserve should operate distances him from Hayek, his ideas of economic freedom surely support free markets and individual rights. Peruvian economist Hernando de Soto received the Friedman Prize in 2004 by advocating property rights a way to accelerate a just and fair system and eliminating poverty in third world countries. This social component to Capitalism is vital to creating a strong healthy free society.

The strongest case against Capitalism are competing class struggles and human nature, pioneered by Karl Marx. Capitalism, I believe, does create well defined lower, middle, and higher classes and while this can lead to class struggle, it also allows for upward mobility between classes. As an eternal optimist, I see class differentiation as a positive aspect in Capitalism. However this is still the strongest argument against free markets and Capitalism.

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