Capitalism

We live in a free market economy. Prices of goods and services are determined by supply and demand. That type of system is called capitalism. Countries that employ a true captilalistic economic system enjoy the highest standards of living in the world. The reason is that free markets balance supply and demand. Those individuals or companies that ‘waste resources’ (i.e. produce goods and services in greater quantities or poorer quality than people want to purchase at a given price) suffer through less or no profits or profit losses and eventually go out of business if the situation is not corrected. They have to lower prices to sell what won’t sell until eventually, if at all, demand finally equals supply.

Those that give people what they want in the right quantities and qualities profit (i.e. are rewarded) if they keep their costs in line. If instead, they charge too much to customers or deliberately get ‘greedy’ with their prices to increase their profits, that profit factor acts as an incentive to other individuals or companies to enter the market. That increases supply, which in turn lowers prices to levels that will inspire additional demand from consumers to snatch up the available supply.

In other words, capitalism gives people what they want efficiently, at the right price, and with the least amount of cost and waste. The complete opposite of the capitalist economic system is communism. Communism controls one or more of the three variables of a free market system, supply, demand (e.g. through rationing), and prices (including wages). Waste is subsidized by the government and companies are not penalized for it. Therefore, less of wanted or needed merchandise is available to the citizens and their standard of living suffers. There is no effective worker motivation to do well in their jobs or to innovate and/or start new businesses. This also lowers the standard of living and quality of life.

However, totally free markets really do not exist. Even in free markets, governments, in the cause of social justice or other reasons, impose varying restrictions and even trade barriers. For instance, to protect an industry (e.g. agriculture). This throws supply and demand (and thus prices) out of whack. We are no longer efficient. Instead we are wasteful and lower our standard of living as we pay more than would be the case under free markets. That extra money we pay means less money to spend on other goods and services, or savings, and we are poorer for it as less of those goods and services are produced and ultimately less people are needed/hired in those industries, raising the nation’s unemployment rate.

The government, labor unions, and liberals only sees and cares about the industries and jobs it protects. In the aggregate we are worst off. Fortunately, we do this a lot less than the Europeans who suffer from high unemployment and much lower standards or living than us. In effect, governments are enforcing a dosage of communism on capitalism. That guarantees waste and higher prices (e.g. farmers are paid more for their milk and/or produce though government price supports than a free market would pay, so that consumers also must pay more to buy it while at the same time, the government must pay to store the surplus, wasting more resources). We all suffer economically for it as less money to purchase other goods and services are available to us after paying those higher prices.

Sadly, the poor are hurt the most since they have little or no discretionary income to absorb the higher prices for basics such as milk and produce. In the meantime, agricultural corporations are the beneficiaries. The romantic notion of helping the small farmer is a fabrication since in reality, the number and more importantly the percentage of agriculture they represent is nearly non-existent in reality. If the small farmer needs help, he/she needs to become more efficient or go out of business, not be subsidized. His/her labor can be more beneficial if employed elsewhere.