Capitalism and Why It Works

August 24, 2012

The Democrats this election season are painting the Republican candidates with the brush of evil greed, as they always do. With the naming of Paul Ryan as vice presidential candidate, a one time disciple of the great promoter of capitalism and self interest, Ayn Rand, the accusations of greed have intensified.

I am one of those who does not believe that greed is necessarily evil or even escapable. Greed or self interest is a great motivator and becomes a vice only when it leads a person to do something dishonest, stupid, or harmful to others. When “greedy” producers are rewarded according to their production, as in capitalism, it leads to greater productivity and produces greater wealth from which society benefits.

When non-producers are rewarded according to some bureaucratically determined redistribution of wealth system, it leads to less production, shoddy work and greater poverty, and all society suffers. These observations are proven over and over again by sales organizations who pay their sales people on a commission basis or organizations who tie bonuses to production and quality of work as compared to those who don’t.

The willingness of able bodied people to take from society that which has not been earned is just another form of greed, a greed which says I am going to get all I can get while doing as little in return as possible. It is harmful to society and to those practicing it. It does not create wealth, rather it creates poverty.

The role of government is not to stop the wealthy from making as much as they can, but to prosecute them when their greed takes the form of dishonest or harmful transactions. Instead, what happens all too often is that the politicians who condemn greed, profit handsomely by protecting the greedy from prosecution and passing laws on their behalf to enhance that greed and both profit. There is a reason the wealth of most politicians and bureaucrats increases exponentially the longer they remain in office.

The history of redistributive societies has not lead to the utopian classless society hoped for. It has just led to a wealthy class that achieved its wealth by manipulating the system rather than providing products or services people wanted and would be willing to work and pay for. The closest this world has seen to a classes society is the capitalistic United States where even the poor live fairly well if they use their limited resources wisely.

So let’s talk about capitalism and what makes it so successful. It is a religious issue. I am not one who believes that capitalism is the economic system promoted by the Christian New Testament or blessed by God. There is no doubt the Christian faith is one of altruism and the denial of materialism. One could even make the case that portions of the New Testament promote redistribution of wealth, though I would argue against that.

What the Christian Bible teaches that speaks to capitalism is the doctrine of the fallen nature of man. This says that mankind is flawed in a fundamental way. That his focus has turned from God toward self. Man, by his very nature, is selfish and capitalism is an economic system that prospers due to this reality. Christians might want to voluntarily redistribute their wealth, but they must create that wealth in a world where the fallen nature of man is operative.

This means in a capitalistic society the “greedy” risk takers and high achievers profit, creating wealth out of self interest. From this, we all can benefit. In a redistributive society, the greed of the masses is rewarded when they take everything they can for as little effort as possible, which leads to less and shoddy production. Eventually the system destroys itself.

 Even the Apostle Paul had to finally tell the early Christians, “if you don’t work you can’t eat.” The same occurred in the early American colonies when Captain John Smith had to declare, “if you don’t work you don’t eat.” A redistributive society eventually comes to this realization and in this regard, Ayn Rand’s Atlas Shrugged is quite prescient, though I’m not fond of her atheism.