Americans today are facing one of the worst economic environments we’ve seen in decades, with skyrocketing inflation, supply chain shortages, and the Great Resignation, to name just a few of our current challenges. According to a Gallup poll, over seventy percent of Americans feel that our economy is not only in poor share, but that it’s getting worse.
Trent Staggs, Mayor of Riverton, Utah, explains, “Large portions of our economy–particularly the middle class– are feeling left behind, particularly the middle class. Federal Reserve data shows that the middle 60 percent of households ownership of the national wealth has fallen to just only 26 percent. Their ownership of real estate has fallen from 44 percent, a generation ago, to 38 percent today. Since 1971, wage growth has nearly stagnated while GDP and productivity have increased significantly.”
The bad news is that it’s going to get a lot worse before it gets any better. The good news, though, is that we have the solution to fix it. The only question is this—will we have the courage to implement that solution?
So what is that solution?
It’s capitalism.
Yes, capitalism, the same economic model demonized on nearly every college campus and by a large swath of politicians, political pundits, and young people today.
Staggs says, “Perhaps it is not a coincidence that support for our system of private ownership has declined as people’s stake, participation in, and ownership of that system has also fallen.”
But despite a large and vocal group of misinformed naysayers criticizing and even outright lying about capitalism, it is the economic model that has lifted more people out of poverty and leveled the playing field more than any other model in history.
So how can a system that has done so much for so many be so criticized and misunderstood by so many people? And how can that system solve our current problem? Especially when so many people don’t understand it? Well, that’s where it gets tricky.
First, we have to separate true capitalism from the economic equivalent of Frankenstein’s monster—the deformed and corrupted crony capitalism that most critics are actually complaining about without even realizing it.
In true capitalism, an entrepreneur identifies a need that isn’t currently being met and invests his or her time, money, and energy into meeting that need. In doing so, the entrepreneur incurs both cost and risk in the venture. If they’ve accurately estimated the need for their product or service, and effectively met consumers’ needs at a price point they're comfortable with, they will be rewarded with profit, and often, a growing company. If they haven’t, they will lose the time, money, and energy they’ve invested in the venture. And even if a company is successful at first, if at any point consumers feel like they're no longer receiving adequate value for the price, they will stop doing business with the company and it will go out of business. It’s that simple.
In crony capitalism, however, giant companies leverage their vast resources to curry special favors from the government, regulatory bodies, and trade associations, which aren’t available to other companies. This is most often achieved through “donations” to people in charge, but anyone with an IQ higher than a potato can see these donations for what they really are—bribes. And you don’t have to look very hard to find real world examples of this. In fact, this is exactly why our tax code is now over seventy thousand pages. All of those special write-offs you hear about, along with thousands more that you’ve never heard of, exist because a lobbyist persuaded congress to add them to the tax code on behalf of their clients.
This issue isn’t limited to tax law, either. Our government’s response to the pandemic is another clear example, where small businesses were shut down, eliminating their ability to generate revenue and keep their staff employed, while giant companies like Walmart, Best Buy, and Target were allowed to remain open. As outlined by Carol Roth, in The War on Small Business, this, along with numerous other corrupt actions, resulted in one of the largest wealth transfers in history from ordinary taxpayers like you and me, into the pockets of giant corporations.
Roth explains, “The government enabled the “Great Consolidation” with more wealth, power and resources going to the already wealthy and well-connected. A big box retailer in your town could stay open, while a small business providing similar services was forced shut. Small businesses are still contending with the long-tail effects of these government mandates. The disruption to the labor market, supply chain and inflation that they caused is a burden heavily shouldered by small business. Per the April 2022 ADP National Employment Report, their surveys saw mid-size and big companies bring back 367,000 employees to their payrolls while small businesses lost 120,000 employees during the same period.”
Spike Cohen, Founder of You Are The Power, an organization that provides tools and resources for citizens to become leaders in their communities, says. “Anyone who understood basic economics and common sense, warned that the lockdowns would destroy small businesses and entrepreneurs, while causing massive disruptions to supply chains and the labor market that would be felt for years. We also warned that the ‘stimulus’ spending would end up being the largest transfer of wealth from the poor to the rich in human history, and that it would lead to unprecedented debt and skyrocketing inflations.”
And we’re still only scratching the surface. Virtually every law, policy, and regulation that affects the business community, and as a result, our entire economy, is the direct result of lobbyists, on behalf of giant corporations, pushing an agenda that benefits their clients and shuts others out. This creates an environment where winners and losers are based on bribes rather than merit. In other words, it’s a rigged system.
Staggs says, “In reality, many likely do not oppose a system of truly free enterprise, property rights, and meritocracy at all. Rather, they oppose an economic system that benefits the few at the expense of the many and utilizes government subsidies and regulatory capture to squelch competition and economic diversity.”
Deneen Borelli, a nationally recognized conservative media personality, expands on this saying, “Government central planning means picking winners and losers and restricts the freedom of private businesses and individuals who take risks to use the free market system to innovate to create goods and services. Capitalism is good for businesses and consumers and allows the principles of supply and demand to drive the market.”
So the differences between true capitalism and crony capitalism should be abundantly clear, but how can true capitalism save America? And why is it likely the only viable solution?
In crony capitalism, giant corporations can get away with providing poor service and substandard products because they have a monopoly in the market, which is often supported by, if not entirely created by various government entities. And these corporations get special favors and handouts that smaller companies don’t, giving them an unfair advantage, and they then return the favor with generous campaign contributions to the politicians and bureaucrats who helped them. That behavior draws value, progress, and money out of the economy while not putting much, if anything, back in. It also leads to lower wages because the companies that carry the most clout tend to be able to attract more employees based on a false belief that a job at a giant company is more prestigious than one at a small business, and that the job is more stable. Neither of those beliefs are accurate. This creates a vicious cycle of growing corruption and manipulation that has disastrous effects on both our economy and society.
Cohen cites several examples, saying, “The Great Depression was caused by the Federal Reserve spurring malinvestment in the stock market, and was made much worse by the Smoot-Hawley trade protectionism acts. And the policies of the Clinton and Bush administrations were intended to increase home ownership, but caused unsustainable lending practices that led to a massive bubble that eventually burst, destroying trillions of dollars in middle-class wealth. In both of these cases, and many others, the people who got rich off of these schemes walked away scot free, while everyday Americans were stuck holding the bag.”
True capitalism, on the other hand, requires companies to actually compete in the market, rather than being propped up by the government with taxpayers’ money, which means customers have a choice in which companies they buy from, so a company has to provide real value and its principles have to align with its customers values. This leads to innovation and greater value being contributed into both our economy and society. Ultimately, it’s a true meritocracy where companies that create value thrive, and those that don’t die off as they should.
Why is true capitalism likely the only viable solution to save America today?
Simply put, it’s because true capitalism aligns the best interests of consumers, employees, and entrepreneurs into one powerful economic engine. This model forces companies to focus on delivering value in every interaction instead of relying on special favors from the government.
When a company provides a product or service that people want at a price they feel is a fair exchange of value, that company will grow. And when a company is focused on creating value like that, its executives and managers will tend to also recognize the value of their employees, and will pay them a fair wage and provide a positive work environment. Employees, knowing they are a part of a worthwhile company and being paid fairly, will work harder, making the company more productive so it can better serve its customers. They will also serve as role models both inside the company as well as within their communities.
The shift back to true capitalism will require a grassroots effort, consistently applied over a period of time measured in years, maybe even decades, because the politicians and lobbyists aren’t going to give up their gravy train without a fight. The problems we’re currently facing can’t be fixed overnight, but over time, true capitalism with minimal government interference will create a stronger, more stable economy where everyone who does their part will win.
And that is how we save America.
