If I were to name the one political, economic and social system that has made our country amongst the richest in the world, improved the lives of billions of people and that has fuelled and aided the human desire to succeed, that system would be capitalism. If I were further pushed to explain why I think capitalism is the system for all nations to adopt, I would simply state that it is the fairest system – much fairer than those ideologies that make that claim. Allow me to expand: the capitalist system allows for the free movement of money, goods and people.
The key ideas of supply and demand set out in “The Wealth of Nations” by Adam Smith state that only the businesses which provide the best products will succeed. The theory of competition further set out by Smith mean that if and when these companies do succeed, they will still have to compete with each other for customers through high-quality service. This all means that the best goods will be sold at low prices with an excellent attitude towards customer satisfaction.
Companies that fail to provide a decent service, or that set their prices too high, will be shunned by the market (i. . the people) in favour of a better company. Now let’s examine the alternative – the supposedly ‘fair’ and ‘just’ system of socialism. Under socialism, individuals are encouraged to look after their fellow man and completely disregard their own desires as part of an amorphous goal for the ‘greater good’. When a socialist system is in place, man is not free. He is regulate, he is taxed and his money is spent by the government. Under the most extreme version of socialism – communism – the is one choice, there is one supplier and there is one price.
There is no desire to make excellent products to attract more customers, there is only a need to fulfil monthly targets set by the government, and the cost of this need is often faulty products being sent out for fear of punishment by the authorities for failing to meet the targets. The cost for the people in this situation is surely obvious? There is no option to choose another company. Although this is perhaps an extreme version of socialism, the less extreme form still calls for high taxes on the rich, and a thirst for cooperation rather than competition.
This hinders those with the desire to succeed – after all, why bother starting a company and selling your fantastic idea of a product and in turn get rather rich, if your eventual riches are going to be taken from you. When I say that taxes on the rich will be “high”, the perspective I am referring to is one of a 91% tax on income, such as the one implemented under the Kennedy Administration. Capitalism is the most moral system, as it caters to the natural, human desire to achieve. A figure who expanded the frontiers of the free-market is somewhat a political hero of mine.
That woman is Margaret Thatcher, who I still maintain was the last great leader of this country. She was a pioneer of that great economic policy – privatisation. Privatisation is the selling off of state-controlled industries on the market, and it works over nationalisation – the opposite – mainly for the reason that the market can decide which industries are needed and are profitable much better than the government, all through the theories of supply and demand. You may be wondering where my disliking of the government comes from.
The answer to that would be my belief in the philosophy of libertarianism. Along with political conservatives, libertarians believe in absolute economic freedom, and have an inherent distrust of the government, any government regulation or economic mandate. In my view – a view backed up by many an economist – government intervention, even with good intentions, never works. Take, for example, the recent ‘cash for bangers’ scheme, where the UK government promised car owners £ 2000 towards the cost of a new car if they traded in their old one to be impounded.
The purpose of this bureaucrat’s dream was to take cars off the road that were not environmentally friendly, and to ensure that all drivers would be in a shiny new car by the end of this year. But what this intervention actually caused was a situation where less well-off people in the market for buying their first car found that they could not purchase an affordable older car, as everyone was now driving around in shiny new Bentleys. The capitalist system, however, would have ensured that older cars stayed on the roads, benefiting the poorer first-time buyers.
Therefore I must come to the logical conclusion that socialist-style government interventionism does not always work. Capitalism does. A grave contention of mine is whether or not our society can continue to function under our bloated welfare state. The culture amongst the people most likely to live off the state seems to be a culture of laziness and of expectations: mainly the expectation of having everything but doing no work to earn it. As of December 2009, around 60 million people in the UK claim benefits from the government.
Yes, 60 million. That’s the entire population of the UK. Some just settle for the £20 a week per child and an additional £13. 20 per extra child in child benefit allowance, a scheme extended to all families, rich or poor; others go all the way by not bothering to look for a job, and instead choose to claim £69. 50 per week from the government. In fact, one wonders whether the most hoaching of claimants realises that they are not asking for and getting the government’s money, but the riches of another human being’s effort.
I do know that a large amount of welfare claimants, especially during the recession, are legitimately unemployed and do have the desire to work. However the belief I hold is that each individual is responsible for themselves and themselves only, and if someone enters employment in an industry likely to suffer redundancies and pay-cuts during a downturn, then they should be encouraged to look after themselves by perhaps privately investing money in a savings account for any possible ‘bust’ in the ‘boom/bust’ cycle. As the late philosopher Ayn Rand once put it, “Man is the consequence of his own actions. In continuation of the idea of welfare, another worry of mine is the concept of ‘cradle to grave’ welfare. Many social conservatives blame the current ‘broken society’ on drug abuse, lack of discipline in schools or immigration. However my own finger of blame points towards the idea that it is the government’s ‘duty’ to ensure everyone has money. This, in my view, is a dangerous thought. After all, a government that is capable of giving you everything you need is also powerful enough to take away everything you have.
The proponents of cradle to grave welfare tend to be members of the Labour Party, or those belonging to the One Nation faction of the modern-day Conservative Party. Supporters justify high taxes on the middle-classes and the rich for the “benefit of all. ” This highlights a number of things. One – the unfairness of a progressive tax system. Capitalism quite rightly calls for a flat-tax for all – personally I would set it at 10% and drastically cut public spending. This system is the fairest, as 10% of £15,000 is still less than 10% of £50,000, but comes with none of the 70’s-style class warfare. Point two is that businesses and high earning individuals ware burdened with the bureaucracy of hundreds of taxes on income, property and business, then they will simply move their companies and themselves abroad, causing a downturn in economic revenue in this country. Rather worrying in terms of cradle to grave welfare is the section of the plan carried out towards the grave. I am, of course, referring to state pensions and other allowances for elderly people.
The entire UK government’s pension plan comes to a total cost of £105 billion to the taxpayer, and that sum is set to increase dramatically. Considering that the debt of the UK now amounts to £ 2140 billion, it seems rather foolish that the state still ploughs on with the plan of providing money to people who don’t take on the responsibility of preparing for their own future, mainly because the state can give them money anyway. In 25 years – when I shall be a taxpayer – one third of the population of Britain will be over 65, and eligible for a state pension.
Unless there are tax hikes of around 57% for all (and I do not mean for a few years, I mean forever) then pensions will sadly be funded unto the black-hole. Unless the government abandons state pensions, lets people plan their futures privately, and does not regulate or tax these savings, then the balance of tax and spend will be sorely levied on ‘spend’, causing a large increase in ‘tax’. Is this what socialism does to our futures? In this last main paragraph, I shall seek to disprove the view that capitalism caused the recession and that it has “failed once more”, the current cry of the left.
The industry that without a doubt caused the recession are the banking and finance industries. Many blame the “rampant free-market” and “dog-eat-dog capitalism” for the fact that the banks lent far too much money to people who could not pay it back. But the truth of the matter is that the banking and finance industries are the most heavily regulated in existence. Rules, laws, restrictions, government ministers dictating what banks can and cannot do, a central government-owned bank that can print money and control interest rates – does this bear the hallmarks of a ‘free’ market?
No. But the solution of our omnipotent, omnipresent and dearly knowledgeable government is to nationalise failing banks. Notice the emphasis on the word “failing” – automatic nationalisation and funding does not help the fact that these companies cannot survive, mostly due to their own errors. Just as the government should not be providing money to less well-off people for making a mess of their lives, they should also not be providing money to the wealthy for failing to balance the books of their own businesses.
By choosing the path of socialist nationalisation, the taxpayer will face even harder times during the worst recession for seventy years as government borrowing and spending goes into the red, and taxpayers bail them out. In terms of the banks who spend their money gaily, capitalism would have seen to it that these companies were wiped out due to their own mismanagement. The point I strongly desire to get across when comparing these two systems is their basis. Capitalism is based on free trade and the interaction of individuals. People under capitalism have the choice as to which product to go for and which company to buy from.
Under capitalism, government can be limited to its true role of upholding rights and building park benches. That’s all. Capitalism is based on liberty and freedom. Socialism is based on control, coercion, an immoral system of tax that closely resembles theft and the disregard for individual rights. It is a system based on the impossible goal of ‘equality’. As true as t is, I shall end with this quote by Milton Friedman: “A society that puts equality before liberty will get neither. A society that puts liberty before equality will get a high degree of both. “