Column #445     March 8, 2024Adam Smith

Other than the communists and socialists, most folks believe capitalism is a great system. Merriam-Webster defines capitalism as: “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”1

Capitalism came into being as an economic system during the 16th century. But the first analysis of modern capitalist theory was in a 18th-century treatise, “An Inquiry into the Nature and Causes of the Wealth of Nations,” by Scottish political economist Adam Smith.2

From the beginning it was known that capitalism had its flaws. Karl Marx didn’t like it because he considered it unreliable and unstable in managing growth. It produced social harms such as pollution, inhumane treatment of workers, and mass income disparity. But those ills needn’t be.

In a democratic republic elected representatives make laws, but the laws must follow a constitution that protects the rights of the minority. That’s a necessary foundation for capitalism to thrive. But various other political freedoms must also be in place such as free speech, private property rights, free trade, and limited government regulation. Additionally, for optimizing the benefits of capitalism it helps immensely when a country’s government has a sound money system (the gold standard), balanced budgets, stable tax environment, and minimum levels of welfare.

A proper, constitution-based legal system will avoid social harms such as pollution, inhumane treatment of workers, and mass income disparity. But the laws must be enforced. A clean environment is a responsibility of all citizens. Income disparity can be minimized by breaking up monopolies and companies that have grown too large compared to others in their markets. And, there is nothing better than capitalists competing for workers by providing desirable working conditions and wages.

Capitalism needs sound money and a grounded credit system such as our country had for its first 150 years. Economic growth is also not an underlying condition for capitalism. Business conditions are cyclical and free capitalism can adjust to changing times. Unfortunately, our country has been off the gold standard for 90 years. The consequence is that the dollar has lost 99% of its purchasing power since 1932. This has incentivized the use of debt to the point where it has been abused which distorts all decisions made by producers and consumers.

When it comes to free speech and freedom generally based on a constitution-based legal system, anything less morphs into tyranny, which is the goal of the Great Reset which we hear about so much these days. Recently Jennifer Grossman, the CEO of The Atlas Society, wrote a short commentary about the Great Reset that’s worth a gander.3

The Great Reset is fully behind the agenda to lockdown people globally and now are poised to pick up the pieces and reassemble them toward authoritarian ends. The intention of the project is to abandon capitalism and free-market economics and replace it with "Stakeholder Capitalism."

This is just government control with a different name. In fact, others have described it as “corporate socialism” and “communist capitalism.”

“Stakeholder Capitalism” involves dozens of politicians and globalist regulators dictating what companies must do -- sacrificing the property rights of owners and shareholders for the interests of “social justice” and environmental goals.

As always, they couch their bid for greater control in claims that they’re fighting “for the common good.”  Yet, this has been the justification for all tyrannies throughout history. The appeal to collectivist self-sacrifice for “the common good” is not noble; it’s evil, and it must be stopped.

Ayn Rand reminds us:

“America’s abundance was not created by public sacrifices to ‘the common good,’ but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes.”

That’s the exact antithesis of the “stakeholder capitalism” that’s being promoted by the Davos crowd – and the anti-capitalist indoctrination that’s being pushed in education and popular culture. And it’s why they do everything to mock, marginalize, and misrepresent the novels and philosophy of Ayn Rand.

Jennifer Grossman, the CEO of The Atlas Society

The dangers of Stakeholder Capitalism are many. That’s because as power is concentrated under a governing bureaucracy, markets lose their flexibility which leads to income disparities and untold corruption. And since different environments demand different practices, production capabilities will diminish as the same decisions are applied to differing problems. And then the entire business sector loses its ability to respond to changes in the economic cycle and even consumer demands.

Adam Smith made many original points about capitalism that we refer to today. One is the “invisible hand.” It’s about the motivating force that gives producers the incentive to make what consumers want, even though the producers are only doing so in caring for their own self interests. That happens by signals given off by the marketplace and does not refer to personal greed. That force created by the marketplace motivates producers to get the best price for their products. (Follow the money.)4

Another point he made early on was that capitalism works best with many small enterprises rather than a few large concentrated corporations. Where there’s economic concentration that restricts “the market's natural ability to establish a price that provides a fair return on land, labor, and capital; to produce a satisfactory outcome for both buyers and sellers; and to optimally allocate society's resource.”5

So, when you hear nincompoops talk about doing away with capitalism is favor of more government control, you now have many discussion points to use in order to illustrate capitalism’s advantages for any society. For starters, just ask the naysayers if they would rather have independent capitalists in charge of supplying them with food, energy, transportation, and communications or the ivory-towered bureaucrats holed up in Washington.

To your health.

Ted Slanker

Ted Slanker has been reporting on the fundamentals of nutritional research in publications, television and radio appearances, and at conferences since 1999. He condenses complex studies into the basics required for health and well-being. His eBook, The Real Diet of Man, is available online.

For additional reading:

1. Capitalism from Merriam-Webster

2. Capitalism Is Also Known As: Free Enterprise Economy, Free Market Economy, Private Enterprise Economy by Robert L. Heilbroner and Peter J. Boettke from The Encyclopedia Britannica

3. Atlas Society

4. What Is the Invisible Hand in Economics? by Christina Majaski from Investopedia

5. The Betrayal of Adam Smith: When Corporations Rule the World by Pierre Ratcliffe