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The Importance of Free-Market Capitalism

In Its Own League

There are many age-old debates that we may never be able to decipher, but the effectiveness of free-market capitalism is not one of them.

Free-market capitalism is the greatest charity in human history. There — I said it. There is no substitute for free-market capitalism as an advocate of human success.

In the year 1776, the world watched as the Declaration of Independence was signed, and the book called “The Wealth of Nations” was published by Scottish economist, Adam Smith. The purpose of his book was to explain how to design a modern free-market capitalist economy, and to give examples of the benefits of doing so.

America’s Founders took Smith’s concepts to heart, and within 100 years a free-market economy turned the United States from 13 frail colonies into the world’s largest economy and hasn’t given up the title since.

A Rising Tide

Boats on a rising tide at sunsetPresident John F. Kennedy’s analogy of the free market is ideal. He so beautifully said in his argument for free-market capitalism that, “[a] rising tide lifts all boats.”

Kennedy wasn’t under the assumption that the only way for the poor in our society to get richer, was for the richer to become poorer. He believed everyone could profit from economic growth. History has only proven his belief to be correct.

There are those that believe that free-market capitalism is self-serving, egotistical, and even immoral. They say it’s about hunger for money and power, furthers the rich, and discriminates against the poor. They are sorely mistaken.

The free market is not only economically superior, it is also morally superior to any other way of economic organization. Moreover, the free market calls for voluntary transactions between individuals; there is no forceful persuasion. In an uninterrupted free market, if I want something from you, I must do something for you.

The free market is constantly accused of being a zero-sum game, like a game of poker, if you win, I must lose. That is in no way true. Yes, during the US economic expansion the wealthy got wealthier. That always happens when new wealth is created; the middle class and the poor, however, also profited greatly. In 1820, 94% of the world’s population lived in severe poverty. By 2015, only 9% lived in severe poverty. This was an enormous milestone. Single-digit percentages for the first time in human history — thanks to free market capitalism.

Give Me the Facts

With a generation of new leaders emerging that have never felt the devastating effects of socialism, we are hearing the cries for the transformation of our nation daily.

Many students’ response to the claim that free market capitalism is to thank for the economic prosperity seen in the last century is, “capitalism hasn’t done that! It’s just the impact of the Industrial Revolution emerging.”

The evidence seen from 1990 to the present, utterly debunks that claim. Johan Norberg, a Swedish economic historian, shows how well ordinary people do when a free market economy is in place. As seen in the chart below, since 1990, hunger, poverty, illiteracy, and child mortality have all declined significantly with the decline of socialism. This all happened while we added two billion people to the world.

The effects of capitalism

Far more people, better health outcomes, far less poverty, life expectancy extended, and fewer infant mortalities. This is irrefutable proof of what free market capitalism, and economic freedom, can do.

The Master of Your Fate

Earlier I mentioned the idea of a zero-sum game. Ironically, it’s the government, not the free market, that is the creator of zero-sum games in our economy. If you depend on the government to wholly sustain you for a farm subsidy, or a business bail-out, you might benefit to an extent but at the unfortunate expense of other Americans.

It seems more moral to promote a system of people serving their fellow man in order to have a claim on what he produces, rather than not serve others and still have a claim. The government has nurtured and strengthened a culture of reliance on bureaucratic programs to the point where, for many, a safety net looks more appealing than building something with your own two hands.

The response to that is frequently, “what about giant corporations? Don’t they have too much power over our lives?” Not in a free market! In a free market, We the People, decide the destiny of companies who want our business.

Free market capitalism punishes businesses who do not keep customers content or fails to use resources efficiently. Businesses, big or small, that wish to flourish, are held accountable by the people who in a sense “vote” with their dollars.

The government, unfortunately, can undo this. Case in point, the auto industry bailout of 2009. The industry was struggling to survive because they were failing to produce cars that satisfied enough customers. In a free market, they would have gone bankrupt, but when GM and Chrysler failed, they went to Washington D.C. and convinced the government to bail them out.

This action essentially sent the message to American taxpayers that these companies would no longer be accountable to stockholders and customers, no matter the inferiority of the product, and the government would prop them up financially with money from American taxpayers.

When the government interferes in our lives, it takes the power away from the people and rewards companies that couldn’t successfully compete in the market.

People Helping People

That’s why a free market can only work if there is limited government. With limited government, you and I decide which businesses survive by where we spend our money. This is the America our Founding Fathers envisioned. It is the free market that has constructed the wealthiest nation in human history.

In a free market, it’s not the government, but an ambitious and voluntary citizenry that drives the economy. People, to the best of their ability, shaping their own destiny.

Quest For Knowledge — Family Discussion Questions

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Reading this with your family? We encourage you to talk about these discussion questions together to reflect on what you’ve learned about our rights as Americans.

Then feel free to share your responses with us on our social media via Facebook, Twitter, or Instagram — and let us know what else you’d like to learn about.

  • What is free-market capitalism?
  • How is the success of businesses determined in a capitalist society?
  • What does a zero-sum game mean?
  • What are some of the benefits of free-market capitalism?
  • How do you see the benefits of capitalism in your daily life?
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