The Misconception About Capitalism

Capitalism is increasingly being misunderstood as a system of destructive competition where the only way to make a profit is to hurt the interests of someone else. However, this idea forms the exact opposite of a major principle of capitalism: that a transaction taking place in a truly free market benefits all involved.

Visualize an economy without government intervention. A consumer wishes to buy a computer. He goes to an Apple store and looks around for the right computer to buy. If the Apple store wants to make a profit, it will make it worth the consumer's while to buy an Apple computer and thus provide quality products and service. The customer leaves happy with computer and Apple has received another sale. Both sides win.

What if Apple didn't make its product of high quality or the Apple store didn't provide good service? Then the consumer could go to a Fry's and buy a computer there or order a computer from Dell if he chooses to. In all three cases, the consumer had a choice of where they wanted to make their purchase, and the manufacturers and sellers had a choice of whether or not they could help the consumer by providing the best deal possible. Competition induced by the free market drove the industry to better itself. The "invisible hand" came through again.

The concept of beneficial competition extends beyond the buying and selling of products and services, too. In the field of employment, capitalism is often viewed as favoring big business above the workers. However, the interaction between employer and employee is in fact very similar to that between the producer and the consumer. If a company wishes to be able to function, it must first attract and keep workers by providing them with better pay and conditions that its competitors. Likewise, if the worker wants to keep his job, he must work hard for the company. The company provides good wages and working conditions for the laborer, while the laborer works several hours for the company. Does anyone truly lose in such a situation?

In a free society as described above, everyone benefits from someone else in return for providing something for them. When the government intervenes, whether with good intentions or bad, everyone loses.

If the state moves against business, then the business will be unable to hire as many workers or provide as good a product to consumers. But if the government moves in favor of business, government power can be used to coerce workers (as in the Great Railroad Strike of 1877), and the company is under less pressure to serve consumers.

The evidence and logic cannot be denied. Government interference in the economy clearly hurts somebody, and by doing so, it hurts the whole of society.