Why do people support Capitalism?

In this post I’ll explain why people say they support capitalism and then the actual reasons why people support capitalism. To end capitalism we need to understand why people support it. I’m listing the positives in the post that I don’t agree with. In future posts I’ll describe the myths of capitalism and the reasons why we need an alternative.

It’s easy and common to conflate capitalism, liberalism, neoliberalism and free market economics. Many use them interchangeably and I’m going to go with that for this post.

 

Why people say they support capitalism

There isn’t a viable alternative economic system. Capitalism’s supporters agree that capitalism isn’t perfect but it’s all we’ve got. [1]

The moral argument for capitalism is based on individual freedom being a natural right that pre-exists society. Society is valued and justified because it benefits humans and enhances economic freedom, instead of limiting it.

The practical argument for capitalism is that many forms of centrally controlled governments have been tried and failed. Therefore privately owned and controlled means of production is the only viable way to run economies. [2]

Everything is better under capitalism. Capitalism has resulted in improved basic standards of living, reduction in poverty and increased life expectancy. There is also the argument that Western capitalist countries have the happiest populations because they can consume whatever products and services they like. [3]

Economics arguments. Capitalism results in exponential growth, which allows companies and individuals to benefit. This relates to the idea of, ‘A rising tide lifts all boats’, where if the rich get richer, then this will benefit everyone. Capitalism produces a wide range of goods and services based on what is wanted or can solve a problem. It is argued that capitalism is economically efficient because it creates incentives to provide goods and services in an efficient way. The competitive market forces companies to improve how they are organised and use resources efficiently. [4]

In 23 Things They Don’t Tell You About Capitalism, Ha-Joon Chang describes the free market ideology:

“We have been told that, if left alone, markets will produce the most efficient and just outcome. Efficient, because individuals know best how to utilize the resources they command, and just, because the competitive market process ensures that individuals are rewarded according to their productivity. We have been told that business should be given maximum freedom. Firms, being closest to the market, know what is best for their businesses. If we let them do what they want, wealth creation will be maximized, benefiting the rest of society as well. We were told that government intervention in the markets would only reduce their efficiency. Government intervention is often designed to limit the very scope of wealth creation for misguided egalitarian reasons. Even when it is not, governments cannot improve on market outcomes, as they have neither the necessary information nor the incentives to make good business decisions. In sum, we were told to put all our trust in the market and get out of its way.

Following this advice, most countries have introduced free-market policies over the last three decades – privatization of state-owned industrial and financial firms, deregulation of finance and industry, liberalization of international trade and investment, and reduction in income taxes and welfare payments. These policies, their advocates admitted, may temporarily create some problems, such as rising inequality, but ultimately they will make everyone better off by creating a more dynamic and wealthier society. The rising tide lifts all boats together, was the metaphor.” [5]

Capitalism has brought significant technology innovations. These included smartphones; the internet with rapid home delivery; streaming movies; social media; and automation has dramatically increased labour productivity. [6] Business invests in research and development to create better products and remain competitive. Employees work to improve their best practice to increase their productivity. [7] Supporters of capitalism argue that capitalism is very flexible and adaptable at dealing with society’s problems as they develop. An example would be climate change, with technologies such as renewables, carbon capture, nuclear power and geoengineering.

Capitalism is a social good and provides services to others. Selfishly working to make money means producing goods and services that others need. Even overpaid professions such as playing sport, or unpopular professions such as banking. This means that people can earn money and solve a problem for someone else. [8]

Capitalism promotes equality. This is the ‘American Dream’ idea that you may start out poor but if you work hard, you can be successful and rich. This is also known as meritocracy. [9]

Capitalism fits well with human nature. Humans are naturally selfish, greedy and competitive. People that work hard are successful and outcompete their competitors, and are therefore rewarded financially. Capitalism also allows for other aspects of human nature such as altruism, patience and kindness. This is done through the creation of welfare systems and charities. [10]

Capitalism and democracy work well together. Capitalism is built on democracy. Everyone gets one vote so they have equal political power, which is not affected by their race, gender or views. [11] Capitalism also encourages people to get involved in all aspects of society to get what they want. This includes getting involved with both governance and the government, from voting in elections, to standing in local or national elections. [12]

Capitalism gradually balances differences across countries through free markets and free trade. Countries can use their competitive advantage to benefit themselves and also access goods and services from the rest of the world. [13]

Capitalism maintains low taxes, which is good for workers and businesses. Low business taxes encourages companies to stay and provide more jobs by reinvesting the money they would pay in tax into the company. Some also argue that low business tax generates more tax for the government. [14]

Allan H. Meltzer, who wrote ‘Why Capitalism’, argues that capitalism has three strengths: economic growth, individual freedom, and it is adaptable to the many diverse cultures in the world. [15] He makes the case for capitalism in more detail:

“Capitalist systems are not rigid, nor are they all the same. Capitalism is unique in permitting change and adaptation, and so different societies tend to develop different forms of it. What all share is ownership of the means of production by individuals who remain relatively free to choose their activities, where they work, what they buy and sell, and at what prices. As an institution for producing goods and services, capitalism’s success rests on a foundation of a rule of law, which protects individual rights to property, and, in the first instance, aligns rewards to values produced. Working hand in hand with the rule of law, capitalism gives its participants incentives to act as society desires, typically rewarding hard work, intelligence, persistence and innovation. If too many laws work against this, capitalism may suffer disruptions. Capitalism embraces competition. Competition rewards those who build value, and buyers with choices and competitive prices. Like any system, capitalism has successes and failures—but it is the only system known to humanity that increases both growth and freedom. Instead of ending, as some critics suppose, capitalism continues to spread—and has spread to cultures as different as Brazil, Chile, China, Japan, and Korea. It is the only system humans have found in which personal freedom, progress and opportunities coexist. Most of the faults and flaws on which critics dwell are human faults. Capitalism is the only system that adapts to all manner of cultural and institutional differences. It continues to spread and adapt, and will for the foreseeable future.” [16]

 

Reasons why people actually support capitalism

So why do ordinary people continue to support capitalism or not actively seek an alternative economic system? This is a huge, complex question so I don’t plan to answer this in detail now. I do want to outline some broad reasons.

There is no alternative (tina). When Margaret Thatcher used this phrase, she meant that capitalism was the only viable economic and political system. In the 21st century it has become near impossible for most to imagine a coherent alternative to capitalism, this is known as ‘Capitalist Realism’. [17] The dominant narrative is that any attempts to organise societies in a non-capitalist way have been complete failures, and this has been accepted by many. Movements, leaders and parties which have attempted to reform capitalism by creating measures to bring about a fairer, more equal and less harsh society, have been attacked, distorted, misrepresented and finally crushed, examples being Corbynism in the UK, Bernie Sanders in the USA, and Syriza in Greece. This results in ‘disaffected consent,’ which I wrote about in this post. [18]

Need a job to pay bills. People are understandingly cautious about supporting an alternative to capitalism that might disrupt their lives and make things more difficult or worse. However unpopular and unstable capitalism is, it does allow a large number of people to live.

Want a fairer capitalism. Many that are struggling just want capitalism reformed to make their lives a bit better, rather than grand plans to change everything. These are seen as achievable, reasonable, small changes. Many are too busy trying to survive and provide for their families to engage with politics themselves – meetings, groups, campaigns are all too time consuming. They want this done for them by political parties.

Have not experienced collective struggle and don’t understand things could better under a different economic system. The left is historically weak, so many that want things to be better have no experience, knowledge, access and interest in left organisations and institutions, eg the trade unions. Many are anti-left and identify with the Tories.

Way out of poverty. For many born poor, capitalist society offers some that work hard and are lucky the chance to get rich, or if not rich then to have a comfortable lifestyle.

Personally benefit from capitalism. For those that enjoy the benefits of capitalism, this is a powerful motivator to keep things as they are. They have worked hard for their money and private property,  and are looking forward to retirement with a pension plan. The Tories are the political party of capitalism. Many may not really like the Tories but they are perceived to be good at running the economy and maintaining the status quo. For many this is the deciding factor.

Bought off by consumption. The decline in real wages since the 1970s, and the lack of opportunities to make meaningful democratic inputs into political decision making, has been compensated by the expansion of consumption – homes, cars, electrical equipment, furniture, holidays etc. This has been made possible by the explosion of household debt and cheap goods from Asia. [19]

Economics as a subject is based only on the the theories of those who support it. University courses in economics are only taught by those that support capitalism. They do not teach the significant problems with capitalism or the viable alternatives. [20]

Endnotes

  1. https://listverse.com/2010/12/24/top-10-greatest-benefits-of-capitalism/
  2. https://www.quora.com/What-are-the-strongest-arguments-in-defense-of-capitalism?share=1
  3. https://www.dailywire.com/news/5-statistics-showing-how-capitalism-solves-poverty-aaron-bandler, https://listverse.com/2010/12/24/top-10-greatest-benefits-of-capitalism/, https://en.wikipedia.org/wiki/Enlightenment_Now
  4. https://listverse.com/2010/12/24/top-10-greatest-benefits-of-capitalism/, https://vittana.org/17-pros-and-cons-of-capitalism, https://netivist.org/debate/pros-and-cons-of-capitalism
  5. 23 Things They Don’t Tell You About Capitalism, Ha-Joon Chang, 2010, Introduction
  6. https://www.jacobinmag.com/2015/12/erik-olin-wright-real-utopias-anticapitalism-democracy/
  7. https://vittana.org/17-pros-and-cons-of-capitalism
  8. https://vittana.org/17-pros-and-cons-of-capitalism and https://listverse.com/2010/12/24/top-10-greatest-benefits-of-capitalism/
  9. https://listverse.com/2010/12/24/top-10-greatest-benefits-of-capitalism/ and https://vittana.org/17-pros-and-cons-of-capitalism
  10. https://listverse.com/2010/12/24/top-10-greatest-benefits-of-capitalism/
  11. https://listverse.com/2010/12/24/top-10-greatest-benefits-of-capitalism/
  12. https://vittana.org/17-pros-and-cons-of-capitalism
  13. https://netivist.org/debate/pros-and-cons-of-capitalism
  14. https://www.conservativehome.com/thecolumnists/2018/04/chris-grayling-the-argument-for-capitalism-over-socialism-cannot-be-won-with-a-history-lesson.html and https://www.telegraph.co.uk/finance/economics/11498135/Why-lower-corporation-tax-means-more-for-Treasury.html – download word doc of article Why lower corporation tax means more for Treasury
  15. Why Capitalism, Allan Meltzer, 2012, page ix
  16. https://www.writersreps.com/Why-Capitalism
  17. Capitalist Realism, Mark Fisher, 2009, page 2
  18. https://buildingarevolutionarymovement.org/2020/04/29/what-is-neoliberalism/
  19. Neoliberal Culutre, Jeremy Gilbert, 2016, page 25
  20. Richard D. Wolff Lecture on Worker Coops: Theory and Practice of 21st Century Socialism, 3 mins, https://www.youtube.com/watch?v=a1WUKahMm1s