Especially since the 2008 financial
crisis, capitalism has come under attack, most recently culminating in Bernie
Sanders’ attempt to mainstream socialism as an alternative during the
Democratic presidential primary—and getting 12.4 million votes in the process.
With this in mind, it’s worth remembering just why capitalism is the most
successful economic system in history, and why it so effectively complements
America’s unique system of a federal separation of powers—another system under
attack by both the current President and the two major-party nominees to
succeed him.
Unlike economic systems such as
socialism and communism, which attempt to redistribute wealth, enforce absolute
financial equality on everyone, and are in general overly idealistic to the
point of delusion regarding basic economic principles and human nature, capitalism
is an essentially realistic model that is clear-eyed about human nature. While
socialism attempts to enforce social equality based on what a few people
believe human nature should be,
capitalism incorporates what human nature actually is. People will generally, for good or ill, act based on what is
best for their own interests. Capitalism, unlike socialism, acknowledges
this—and then harnesses basic human impulses for good results.
Capitalism rests, essentially, on
greed—the idea that people will always want more money, compared to both other
people and their own current wealth. What the capitalistic economic model does
so effectively, however, is to channel that greed, generally considered a
negative impulse, into a force for good. In a free market, capitalist society,
greed becomes competition, as rival businesses and corporations attempt to outdo
each other with regard to two major factors: the quality of the product or service being offered, and the
comparative price of that product or
service, relative to a competitor’s price for a similar product. Greed is
channeled into a drive to create better-quality, cheaper products, all to the
benefit of the consumer and the ordinary citizen.
Aside from the obvious (and related)
philosophical arguments regarding freedom of choice, capitalism over the long
term raises up the working and middle classes far more effectively than
socialism. The latter, using brute force in an attempt to make the population
equal, instead traps them in poverty (even in the most well-intentioned
socialist nations); while the former, embracing and channeling human vices such
as greed, lifts the population to higher standards of living, a fact proven by
a simple analysis of standards of living worldwide, compared to national
economic systems.
What truly highlights the genius of this
basic concept, as well as America’s unique relationship with capitalism, can be
highlighted by our Constitution’s basic concept of a federal separation of
powers. Where in the capitalist economic model greed was the propelling aspect of human nature, in the government
model of separation of powers it is power.
The three branches of the federal government—legislative, executive, and
judicial—are set against each other, with no branch clearly superior or
subservient in terms of delegated power. The legislative branch makes law; the
executive branch implements those laws; and the judicial branch applies the
law, and enforces the Constitutional restrictions on law. Meanwhile, the
federal government as a whole is also set against the various state
governments, which have their own distinct spheres of influence.
As with the system of capitalism in
economics, the American theory of separation of powers is a realist perspective
on human nature, recognizing that people will in general seek to accumulate
power for themselves. The Founders, knowing this human propensity would
endanger the long-term survival of the experiment of the American republic,
decided to instead channel the quest for power as a means for the government to
control itself. Well-versed in the work of Adam Smith, a British contemporary
who helped establish the economic theory of free market capitalism, the
Founders saw that his basic economic philosophy could be applied to government
as well.
Something the Founders never expected,
of course, was that members of one branch of government would willingly cede
power to another branch. This relatively recent phenomenon, in which primarily
Democratic members of Congress have increasingly pushed for more legislative
power to be taken on by the executive branch, is a result of several factors
the Framers of the Constitution could be forgiven for not entirely accounting
for—including an increased willingness to defer to the judgments of unelected
bureaucrats, and the emergence of a party system that many, such as George
Washington, argued against.
Nevertheless, the basic model of
American constitutional government remains sound, absent a continued
willingness by members of multiple branches to damage it in the future. The
basic model, unique in government when the Founders first envisioned it two
centuries ago, demonstrates both the genius of the Founders and an inherent
compatibility—if not symbiosis—between capitalism and the basic structure of
American government that few Sanders voters would likely appreciate.
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