By Walter E. Williams
Wednesday, December 18, 2013
Pope Francis, in his apostolic exhortation, levied
charges against free market capitalism, denying that "economic growth,
encouraged by a free market, will inevitably succeed in bringing about greater
justice and inclusiveness in the world" and concluding that "this
opinion ... has never been confirmed by the facts." He went on to label
unfettered capitalism as "a new tyranny." Let's look at the pope's
tragic vision.
First, I acknowledge that capitalism fails miserably when
compared with heaven or a utopia. Any earthly system is going to come up short
in such a comparison. However, mankind must make choices among alternative
economic systems that actually exist on earth. For the common man, capitalism
is superior to any system yet devised to deal with his everyday needs and
desires.
Capitalism is relatively new in human history. Prior to
capitalism, the way people amassed great wealth was by looting, plundering and
enslaving their fellow man. With the rise of capitalism, it became possible to
amass great wealth by serving and pleasing your fellow man. Capitalists seek to
discover what people want and produce and market it as efficiently as possible
as a means to profit. A couple of examples would be J.D. Rockefeller, whose
successful marketing drove kerosene prices down from 58 cents a gallon in 1865
to 7 cents in 1900. Henry Ford became rich by producing cars for the common
man. Both Ford's and Rockefeller's personal benefits pale in comparison with
that received by the common man by having cheaper kerosene and cheaper
transportation. There are literally thousands of examples of how mankind's life
has been made better by those in the pursuit of profits. Here's my question to
you: Are people who, by their actions, created unprecedented convenience,
longer life expectancy and a more pleasant life for the ordinary person -- and
became wealthy in the process -- deserving of all the scorn and ridicule heaped
upon them by intellectuals, politicians and now the pope?
Let's examine the role of profits but first put it in
perspective in terms of magnitude. Between 1960 and 2012, after-tax corporate
profit averaged a bit over 6 percent of the gross domestic product, while wages
averaged 47 percent of the GDP. Far more important than simple statistics about
the magnitude of profits is its role in guiding resources to their
highest-valued uses and satisfying people. Try polling people with a few
questions. Ask them what services they are more satisfied with and what they
are less satisfied with. On the "more satisfied" list would be profit-making
enterprises, such as supermarkets, theaters, clothing stores and computer
stores. They'd find less satisfaction with services provided by nonprofit
government organizations, such as public schools, post offices and departments
of motor vehicles.
Profits force entrepreneurs to find ways to please people
in the most efficient ways or go out of business. Of course, they can mess up
and stay in business if they can get government to bail them out or give them
protection against competition. Nonprofits have an easier time of it. Public
schools, for example, continue to operate whether they do a good job or not and
whether they please parents or not. That's because politicians provide their
compensation through coercive property taxes. I'm sure that we'd be less satisfied
with supermarkets if they, too, had the power to take our money through taxes,
as opposed to being forced to find ways to get us to voluntarily give them our
earnings.
Arthur C. Brooks, president at the American Enterprise
Institute and author of "Who Really Cares," shows that Americans are
the most generous people on the face of the earth. In fact, if you look for
generosity around the world, you find virtually all of it in countries that are
closer to the free market end of the economic spectrum than they are to the
socialist or communist end. Seeing as Pope Francis sees charity as a key part
of godliness, he ought to stop demonizing capitalism.
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