There are many people in this country that argue tirelessly and passionately against capitalism. They blame capitalism for low wages, income inequality, environmental destruction, homelessness, and many other issues we face year after year in America. There’s only one problem; we don’t live in a capitalist society. If one takes an honest, unbiased look at how the public and private sector influence each other, one can better understand why free market capitalism bears no responsibility for the current state of our union. What we have in America is a delicate balance of corporatism and socialism, not free market capitalism.
Corporatism and socialism are like mirror images of one another. Under a corporatist system, the government redistributes money from the poor and working class to the corporations. Government subsidies and tax breaks for the pharmaceutical industry, factory farms, the big banks, and oil companies are just a few examples of corporatism at work. Big corporations use the special treatment they receive to grow larger and larger, easily out competing smaller and less politically connected businesses. Eventually, they grow into giant conglomerates that enjoy monopolies gained through corporate takeovers and collusion (cartels). In return for the handouts, the politicians get big campaign contributions to help them stay in power so they can keep the gravy train rolling along.
Of course, our country is just as much socialist as it is corporatist. Socialist policies redistribute wealth from the private sector to the poor via taxation, fees, and regulations. The Supplemental Nutrition Program (SNAP and WIC), public housing, Medicaid, and the Temporary Assistance for Needy Families program (welfare) are all examples of socialism at work. Interestingly, these policies seem to benefit the conglomerates as much as the poor by helping eliminate whatever competition exists in the marketplace.
Socialism often becomes a strain on small local businesses that may not be able to afford the taxes, fees, and regulations that fund socialist programs. Bigger corporations, unlike their small business counterparts, avoid the taxes and absorb the costs of funding socialist programs. As small business declines, fewer opportunities exist for the recipients of socialism to pull themselves out of government dependency. It’s a vicious cycle that preserves the status quo, much to the delight of those in power.
What do the politicians get out of socialism? Well, surely there are some who are truly pure in their intentions. But, right, wrong, or indifferent, the people who receive these benefits usually reward their representatives in government with the votes they need to stay in power. Of course, the corporate conglomerates are more than happy for the government to lay the burden of funding these programs at the feet of the small business owner as they continue to consolidate their power.
So, what is free market capitalism? First, in order for a free market to exist, the public and private sectors must operate independently of one another. Corporations must be prohibited from influencing government and government must be prohibited from influencing corporations. This arrangement does not exist in America. Without special treatment, big corporations and small businesses would compete with each other on a more level playing field. If corporate campaign contributions were illegal, politicians would have to rely on the individual donations of the people to fund their campaigns. In essence, the free market makes it more difficult for the power brokers to maintain the status quo, not easier. Of course, government always reserves the right to enter the private sector to defend the life, liberty, and property of individuals. However, any further involvement corrupts and destroys the free market.
In a free market society the consumer is king. The people decide which companies succeed and which companies fail. In a system uncorrupted by government, individuals can vote with their wallets. They can reward companies that provide the products and services they want, at the best price. Also, if consumers decide they want more environmentally safe products, companies that produce them will survive and companies that don’t will fail. If consumers disapprove of a company’s business practices, they can boycott their products until they either meet their demands or go out of business. Without government to bail them out, corporations would have no choice but to give the public what they want.
We do not have free market capitalism in America. In fact, it’s likely that America has never been a free market capitalist society. The two sectors of our society have always sought to influence one another for mutual benefit, often with great success. The era in which we live is quite possibly the furthest we’ve been from a free market system in our history. Who knows…if we tried it in earnest, it just might work.
Eric Palmieri worked closely with Bob Healey on his campaign for Governor in 2014 and founded the “Democrats for Healey” movement. He is an elected member of the North Providence Democratic Town Committee, a Libertarian activist, and a student of Austrian Economics.
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