Capitalism is the political and economic system where private owners control trade rather than the state. Martin (2016) points out that, libertarian capitalism where the government neither plays any role in the market nor have authority to interfere with voluntary transactions is the freest economic system. Since traders have different products, they both have the incentive to transact or trade voluntarily to increase their utility. Coyle, Rindermann & Hancock (2016) also highlight that capitalism enhances innovation, economic freedom, efficiency, political freedom and economic growth. As Milton Friedman once said, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.” Capitalism has both its pros and cons, however, this paper will argue in favor of there being good reasons to think capitalism is just.
Freedom to make choice is very fundamental in life. Coleman, Frankel & Phillips (1976) observe that capitalism promotes choice which is a very basic freedom. Capitalism is the only system that grants the people ability to choose where they want to live, what they want to buy, the quantity they want to buy, decide their own work place and so on. The state often limits the freedom its citizens should have. Freedom leads to good health and happiness since the people do that which they want. Government intervention for example makes the state decide what products can be available in the market, amount of water an individual or household should use, the minimum air conditioning system factor efficiency and many more. By removing simple choices from the public, freedom is reduced and thus enhancing slavery. Miller (1990) government intervention in production and prices of goods and services lead to bureaucracy. Therefore, it is also worth noting that capitalism does not only lead to economic freedom but also political freedom (Miller, 1990).
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Capitalism also promotes coperation (Hodgson, 2017) . Suppose an investor in real estate needs Wi-Fi installed in his rental apartment, he would call a contractor. The investor and contractor will agree on a price that is favorable to both of them. Capitalism therefore gives individuals the chance to voluntarily cooperate and accept prices of a service or product. The contractor also has an obligation to prompt the labor of his employees to perform the task of installing Wi-Fi in the apartment so that they get compensated for their work in return. In addition, the contractor has to cooperate with suppliers or distributors regarding purchase of materials required for the installation. On the other hand, statism denies cooperation. Decisions are made by central planners then forced on people. Statists also often make decisions that the people disagree with. For example statist system may impose price controls or any wage such as the minimum wage. By imposing minimum wage, a contractor or employer is forced at times to pay even an unskilled worker that requires supervision what he does not justify. Cooperation is more moral than force thus making it a just economic system.
Capitalists system gives people the privilege to live in a world of opportunity. Capitalists constantly survey landscape for chances of gaining, expanding or building while the statists pay more attention to scarcity. Statists see that resources are so limited that they have to be rationed and allocated. However, the statists overlook human inventiveness and resourcefulness which are unlimited. Citing Gunster (2017) who says that, agricultural innovation has resulted in increased food production on less or same piece of land while statists predict that the world would not be able to feed itself. By concentrating on limits the statist become self fulfilled hence suppressing hope and progress.
Taleb (2005) point out that, as much as socialism bestows much power on the public, capitalism also believes that people can make the best decisions independently. This is what makes capitalism a free market where people are many but each individual has the power to choose. In contrary the statists believe common man is not capable of making the right choices; an elite has to intervene and decide for the people or make choices on their behalf . Despite the fact that individuals have inborn weaknesses and shortcomings, capitalism believes in brilliance and goodness of common man while statists belittle the public.
According to Sturm & De Haan (2015), capitalism fights for equality while the statists just promote inequality. The capitalists point out that, albeit people cannot be wholly equal, experience, skills and effort improves ability of individuals and this is best achieved through competition. Statists observe that the poor will become poorer or remain poor while the rich gain more wealth. This means if one achieves the individual has to give some credit to the one who does not achieve. This is far from truth which is that every person has the ability to improve their income by their own efforts. Concentrating on opportunity and not results makes capitalism a more just economic system (Sturm & De Haan, 2015). Winston Churchill said, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
Income inequality stirs up jealousy and wrangles. Statists want the common man to envy the rich and those earning high income (Sturm & De Haan, 2015). However, capitalists urge the people to emulate the wealthy and high income earners. Envy is a great barrier to progress. Successful contractors are often brought down by their envious peers who fail to realize the need to attempt being like them. We should believe in our capacity to change our own reality. What someone has done others can also do. Emulation is regarded to be more moral than envy and this is what capitalism promotes.
Judge, Fainshmidt & Brown (2014) determine that, under capitalism a person is valued depending on their income and wealth. In a nut shell in capitalism whoever delivers more value ultimately obtain corresponding compensation. However, statists reward political power and connection. According to Judge, Fainshmidt & Brown (2014), the wealthy in a statist economic system exploit power and connection in order to succeed. Most nations in the world have mixed systems. United States for example has successful entrepreneurs who succeed by building big companies. Capitalists also use government connection to their advantage. Leaders elected to represent the people in the congress also emerge with a lot of money few years after their election. It is moral to obtain wealth from value delivered rather than by just exploiting connection or using political power.
Judge, Fainshmidt & Brown (2014) assert that, the general intelligence of the market is always smarter than that of a few selected government planners. In free markets decisions are made by millions who also have the potential to give the best outcome than the selected state planners can achieve. It is therefore undisputable fact that the more the state use autocracy to control decisions, the worse the outcomes . The common man has all it takes to make the right decisions and provide solutions to various problems.
Incentives are very significant for good performance. O'Boyle, Patel & Gonzalez‐Mulé (2016) illustrate that, if an individual is paid on commission depending on sales or income generated they work very hard to earn more. Suppose the person is put on salary, performance will obviously decline. Human beings generally need a motivation to perform. Capitalism is also based on the conception of incentives. Every person builds, creates or serve others with a reason. Statists on the hand suppress incentives. What the most productive should earn is redistributed to those that produce less or the ones not producing at all. Capitalism is a true reflection of human nature that is, making efforts to improve and gain. Equal distribution of wealth even to the less productive makes human beings content with their status quo only to act on instinct hence we only seem to be a little more than animals.
Gunster (2017) highlights that, capitalists protect the planet while socialists moan about environment. Environmental conditions are always best where there is wealth. In addition, capitalists advocate for property rights and private which are both good for the environment. ‘The Tragedy of the Commons’ explains that privatization is better than public ownership. There is no incentive to protect the commons or handle public property responsibly. People however are more responsible when it comes to private property since there are consequences of their careless behavior. However, statists believe that much property should be owned and controlled by the state.
According to Harford (2009), statists believe that the less fortunate should be taken care of. Even though capitalists also argue with the need to help others, they object forceful wealth redistribution by the government since the help is not free will. Harford (2009) observe that, even before the government started initiatives to help the poor, they were taken care of through Mutual Aid Societies. The societies acted as private welfare organizations that supported one another in times of need. With the modern welfare state it is impossible to determine who is trying to work and who is able which Mutual Aid Societies could do.
Taleb (2007) assert that, most contractors are capitalists and they defend the system. Contractors invest a lot of money and this puts their capital at great risk. Intense competition, regulatory hurdles, corporate taxation and inflation are among the challenges that contractors face yet each day the still gather courage and make the same choices hoping to achieve or prosper. Though imperfect, Churchill says that the contractors are suppose to defend the capitalism as much as they can.
According to Sheifer (2009) capitalism is also leads to economic growth. The market determines prices and production of goods in a capitalist system rather than the government. Property rights also give individuals or private investors can freely produce or provide goods and services to the market. Sheifer (2009) further observes that, just like liberty is better than oppression, capitalism deserves every support for economic growth and development. Moreover, the incentive to efficiently produce in a capitalists system while state owned firms tend to be more inefficient. Heath (2009) defends capitalism against lump of labor fallacy by David; he argues that free markets increase efficiency and argue that free markets increase efficiency whose advantages supersedes the disadvantages such as job loss. Through promoting to innovate and hard work, capitalism leads to economic expansion. Consequently there will be increased Gross Domestic Product and improved living standards.
Frank & Cook (2010) observe that, free markets encourage competition and consequently innovation. Through competition in free markets, capitalism drives organizations to innovate. In a competitive market every firm will strive to increase their profitability. Firms often work on inventions that help to minimize costs and enhance quality of their product or services thus through these the need for innovation and use for new technology automatically comes. Capitalism encourages firms to create new and profitable products thus enhancing innovation.
In conclusion, capitalism just like socialism and statism is not a perfect economic system (Miller, 1990). Nevertheless, capitalism promotes freedom, equality, economic growth, innovativeness and efficiency. I am therefore inclined to agree that capitalism is a just economic system. Moreover, Martin (2016) explains that socialism is like a pathway to sustainability.
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