Thursday, April 18, 2013

What Is The Difference Between Free-Market Capitalism and Crony Capitalism

The other day an acquaintance mentioned that he believed capitalism was a good socio-economic model, but also felt as if it was too easily abused by greedy entrepreneurs and industrial capitalists the way it is currently practiced and therefore didn’t make sense as it tended to push people down. Well, I understand where these thoughts are coming from, mostly from socialist propaganda, but the reality is that just isn’t the case. When he speaks of “how capitalism is practiced currently” well, he is looking at crony capitalism, certainly not free-market capitalism theory. Okay so, let’s talk shall we?

Now then, as a capitalist, I’ve noted in this country that most of the problems come from the manipulation of capitalism, and crony capitalism exploits, so I’d blame the less-than-ethical politicians and uninformed politic for allowing that. Of course, we hardly teach economics in our schools in the US anymore, and most people here anyway can’t balance a check book which is probably okay because everyone is living off future earnings, and paying interest on credit cards to do it and the rest is ATM cash accounting, which anyone can understand as the money is taken out of their accounts in real-time, and they can check their balances on their iPhones at will.

Okay so back to argument that “it’s not being practiced correctly,” capitalism that is, and that it should benefit everyone, not just greedy business people. You see, it does indeed benefit everyone, it delivers us everything we have you see, surely we all benefit from abundance right? Ever been to a third world nation, not a lot happening, why? They don’t have an economic system set up the way we do.

You see, Capitalism (yes with a capital “C” as it should be) is not to be used or have its production, credit, capital, or labor controlled or hijacked, but rather to solve all the problems by allowing producers to produce based on the demands of the buyers. If something is very important to someone else, intrinsically, that person is willing to pay more, then if the entrepreneur is making more, then other producers and entrepreneurs will move over to get in on the game, thus, more competition lowers the price, thus, the lowest price and most efficient producers continue.

But when we artificially screw with price controls, production limits, tariffs, mandatory labor costs, free grants, credit, tax gifts, etc. we throw the “free-market” laissez faire benefits out the window, then it is inefficient, and doesn’t work, but if we hadn’t screwed with it, it wouldn’t have broken. If we over regulate one industry, not another, we unbalance the choices, prices, and are asking for corruption, manipulation, and incestuous relationships between big business and big government and when we do it’s our fault for doing so, not the free-market system, which gets blamed.

Indeed, let’s not confuse crony capitalism or that incestuous relationship that Adam Smith warned us about, with what free-market capitalism is. Indeed, I hope you will please consider all this and think on it.

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