Length: 404 Words Reading Time: 1 Minute 30 Seconds
Blog Post Was Prompted By: Steve Forbes’s “Capitalism Ain’t Kaput” in Forbes Magazine of May 31, 2019
I see a lot of comments in the news and on the Internet about the imminent death of capitalism. The negative judgments are all over the ballpark—from the free market is no longer relevant to the government can do it better to the free market will soon be replaced by socialism. The latter is inevitable, or so the critics believe.
All these naysayers and doomsday prophets do not seem to understand or appreciate how dynamic and robust the free market system is when left to its own devices. The only serious challenges that the free market faces are senseless bureaucratic regulations, foolish political legislation, and the presence of crony capitalists (or their lobbyists) lurking in the corridors of power.
The free market is so dynamic that it changes every single day. New businesses emerge, and old ones die off. Every day is a brand new day, and that will not change, unless governments inadvertently or by design kill the golden goose. All of us need to understand the dynamism of capitalism because dynamism is its core competency to borrow a term from the world of management. There is no way that the welfare state, socialism, or communism can match that dynamism.
Joseph Schumpeter was correct in his assessment: capitalism embodies “creative destruction.” This creative destruction allows the economy to shed businesses that are no longer innovative and that no longer satisfy the needs of customers. This creative destruction is occurring at an ever-increasing rate. Examples abound in our economy. Just look at what Facebook, Apple, Amazon, Netflix, and Google have done since they appeared on the scene and the effect they have had on many areas of the economy.
Somehow the critics of the free market conflate the free market system with only big business. They fail to realize the free market is both broad and deep. They do not understand that the free market system comprises companies all over the world and all sizes of businesses from mom-and-pop operations up to large-scale multinational corporations. The free market includes millions of enterprises, big and small. And, these enterprises are all operating without any global plan. They are merely responding to the trillions of choices and decisions that the global customers make every single day.
In the United States, the free market system is very developed but is undoubtedly constrained by too many regulations to be wholly free. I believe if the free market system were unleashed, there is no telling what would happen to the economic growth and wealth of America.
We will continue to see significant changes in businesses everywhere, and the free market system will remain an essential part of the business equation. Corporate leadership in American enterprises have recognized that tectonic shifts are occurring in American culture. They are striving to catch up. They must do so because it is a matter of survival for them.