Through the publication of The Morality of Capitalism, Students for Liberty is sharing essays from individuals around the world who promote free market capitalism. Most importantly, this collection of essays reclaims the moral high ground for the economic system—and given that they have added so much to my ever-growing intellectual foundation as a classical liberal, I strongly recommend reading them.
I was very intrigued by the virtues of entrepreneurial capitalism. There are several incorrect, mainstream opinions regarding capitalism. One, for example, is that capitalism facilitates “survival of the fittest” competition that undermines human rights. It is true that competition is a component of capitalism; however, it is competition towards providing value to customers. Successful companies tend to be headed by creative and innovative individuals who can be labeled as “fit” or "survivors" as a result of these qualities. With this better understood, I contend that competition is a great thing! It enhances the quality of products and services while simultaneously reducing prices.
I have a personal experience with competition that I would like to share.
I took a challenging class my senior year of my undergraduate career called Psychobiology. In this class, there were two individuals who were biology graduate students. These individuals had a clear advantage over the rest of us, who were only psychology undergraduate students. Why? They had already taken many classes in biology and chemistry—knowledge regarding theses two subjects was essential to Psychobiology. These graduate students had a strong foundation, to say the least, demonstrated by the fact that they never scored lower than 100 on all the exams!! This bothered the majority of the psychology undergraduate students because the majority had little hours of chemistry and biology classes under their belt if any. My minor in biology had required me to take 18 hours on the subject of biology, but I had only had 8 hours of chemistry classes, so I was sort of in between.
I was devastated because I really wanted an A in the class. I knew that if those individuals had not signed up for the class, I would not have to work extra hard for the A. But there I was faced with two choices: drop the class to ensure my GPA would not drop or try harder.
When my professor said he would replace the first exam grade with the second exam grade if, and only if, I received a B or higher on the second exam, I did what any determined student would do. I prioritized my time and perfected my study habits. I read my textbook, recorded the lectures (listened to each lecture twice), took diligent notes, and recited everything aloud to anyone who allowed me to. All of this helped me retain the information better for the next exam. I ended up getting an A on the second exam, surpassing my expectations! Most of the other students still failed the second exam though. In a class that started out with 60 students only about 15 remained past the drop deadline.
I am proud to say that I ended up getting an A for a final grade. However, what I value most about the aforementioned experience is the knowledge and lesson I took from it. Those individuals, by virtue of pursuing their own self-interest, unknowingly motivated me to push myself beyond my limits. In addition, since my professor refused to hand out unearned A’s, I was also motivated to study a lot more than I had intended on. Is it not amazing how competition and self-interest can lead to positive results?
Moreover, I would like to share my understanding regarding what free market capitalism is and is not. A true free market does not contain government interference. The mainstream evaluation of the free market is based on a fallacy—that it favors the rich and suppresses the poor. However, it is understandable that individuals would confuse true free market capitalism with crony capitalism or corporatism. The government bailouts are a prime example of what should not be done in a free market. Through government bailouts, politicians are basically choosing the winners and losers. It is definitely not fair that a company should be saved by taxpayer dollars while another is left to fail. That is not to say that companies will never fail in a true free market. Reality check: failure is an essential part of life. But at least failure in a pure free market would be as a result of the voluntary choices made by consumers, investors, entrepreneurs, and workers—not the government! Do not worry, though, since failure causes individuals to innovate.
William Edward Hickson said it perfectly:
'Tis a lesson you should heed:
Try, try, try again.
If at first you don't succeed,
Try, try, try again.
This leads us into another component of free market capitalism: cooperation. In order for a free market to work, individuals have to cooperate. Consumers must cooperate with entrepreneurs in order for transactions to occur. For example, Steve Jobs (R.I.P.) created products that many people consider to be valuable—worthy of paying a lofty amount to acquire. What some do not understand is that consumers determine the price Apple charges for its products. Individuals are willingly purchasing Apple products at the price they are being sold. Is this not cooperation? No one is forcing anyone to purchase Apple products. If people were not willing to purchase Apple products at the current price, then Apple would either have to lower its prices or go out of business. Peoples lives have been made easier, and once you insert competition into the equation they also pay less. That is the way the free market works. If entrepreneurs are wealthy, it is through their ability to create products of value to the consumers—not because they are evil and greedy (not all of them). Not only did Apple create a product that is valuable to consumers, it harbored an environment for healthy competition. How? Apple released an attractive smartphone—the iPhone—which caused other manufacturers to create similar smartphones. This essentially lowered the average price of smartphones, making them accessible to a broader array of individuals, and enhancing the quality of smartphones every passing year. Sounds like a win-win situation to me.
Another common misconception is that most wealthy people nowadays have inherited their wealth, not worked for it. That may be the case in some situations but not all cases. It should not matter even if it were the case. Envy is not healthy for the soul. Take me for example—I am the daughter of two first generation immigrants. My parents both grew up in relatively low income families in Mexico. My grandparents sought to provide the best for their family, so they immigrated to the United States back in the late 1970s when my parents were in their late teens. Why? Because free market capitalism provides opportunities and upward mobility in general, especially for those who are willing to work hard. My paternal grandfather was a cook at Fort Bliss in El Paso, Texas, and my maternal grandparents sold vitamin. Neither side became extremely wealthy but they built a foundation for their descendants. My mother is a psychology instructor at a junior college, and my father is a medical technologist. My elder sister is the market research analyst at a local credit union, and my younger brother is studying physics at the university level. Me? Today, I am trying to promote economic freedom. Tomorrow? Who knows.
As a daughter of first generation immigrants, I am essentially learning American and Texan culture (I love Texas!) from scratch—even though my parents have assimilated quite a bit. I come from a culture that tells me to put my family above my career. This could be considered a disadvantage. At the end of the day, though, I have the freedom to make the choices I want to make. I can evaluate what I want and prioritize my time so that I can achieve my goals.
I am not denying the fact that some individuals have a relatively easier life than others because of financial freedom (more money). Life is not perfect. However, if we want to allow people to have more income mobility and move upward, free market capitalism is the perfect tool. There will always be a wealth gap; however, capitalism has allowed the United States to become richer as a whole. The average poor person today is many times wealthier than the average poor person 100 years ago.
Milton Friedman said it perfectly, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.” Let us give true free market capitalism a chance.
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