Capitalism: A Beautiful Display of Human Order

If you click on any liberal website, it won’t take long until you find an article bashing capitalism and advocating socialism. They are well intended in their cause for social justice, but fail to acknowledge capitalism for the sensational display of human order. All around the world, people voluntarily exchange goods and services in the pursuit of profit. In that pursuit, some of the most amazing things have come to fruition.

I won’t go into detail about the low wage, environmental disaster, and anti-capitalist claims. They are derived from logical fallacies, aggregate statistics, and a general dissonance from reality. Capitalism has, across the board, benefited everyone who is free to participate in voluntary exchange. Total compensation has increased rapidly for everyone and global poverty is falling off a cliff. Quality of life has improved for people of all incomes. We have eradicated diseases, efficiently fed a growing population, and technology has made the world that much better.

This does not mean that capitalism leaves people behind or that it eradicates poverty entirely. We will always have poverty and other social ills. It does, however, show us the beauty of spontaneous human order. When people are free to pursue their dreams, the resulting output makes the world a better place. But why? Why do we have iPhones and no more phone booths? Why does GrubHub bring me a burrito on demand? Simple: voluntary exchanges that occur because they are mutually beneficial.

Now for an exercise. I want you to empty and examine the contents of your pockets. For our purpose here, I am going to assume you have a wallet, cell phone, and car keys (maybe even electronic). But why are these in your pockets? I highly doubt you make cell phones and credit cards at home. Obviously, you bought them from someone or some business. This begs the next question: why is the business able to sell these goods at a price I can afford?

Consider the origins of a smart phone. The screen comes from Vietnam. The smart chip is made in America with equipment from the Netherlands. The circuit boards are manufactured in Bangladesh. The buttons come from the Philippines. It is finally assembled in China and then shipped to America by a Canadian logistics company (hypothetically). It is driven from the dock to the retail location by an American trucker where you buy it.

Sounds complex, right? Who would go through all this trouble just so you can make a phone call? Apple does just that, and they do it for profit. They do it because they profit from your benefit. If you didn’t benefit from it, I highly doubt a smart phone would be in your pocket. In fact, they are so good at bringing you a phone that they can do so at a price level that makes it widely affordable.

It’s not just Apple. All the firms involved in every step are constantly trying to do something better or they lose to their competition. At their root, these improvement are a result of new manufacturing processes capable of meeting new product design requirements. You will likely never hear about it, but you will see these improvements in the form of lower prices, higher quality, and/or new technology.

This addresses what economists call “supply side” of the economy. However, there are two sides of the equation and the other one is demand (or you). Your demand only exists based on products that also exist. When people were buying Razor phones, consumers weren’t saying “I really wish this was touchscreen and had an app to order food”. On the contrary, you woke up one day and saw the headline “Apple invents iPhone”. You didn’t ask Apply to invent the iPhone. You didn’t ask GrubHub to create an on-demand food service. These firms did it solely because they knew you would benefit from such a product, and they were right.

The detractors of capitalism ironically use the manifestations of capitalism as a means to speak against it. They could learn a thing or two from history: capitalism has made it much easier for people to fight tyrannical governments, social injustice, and express their ideas. If these detractors were actually opposed to capitalist endeavors, they would be circling their propaganda on leaflets and brochures, and not the Internet from their smart phone.

Capitalism is a beautiful display of human spontaneous order. Using impersonal, price-driven, and voluntarily exchanges, we can allocate scarce resources to efficiently meet unlimited demands. However, this is not new or exclusive to the modern era. Over the course of history, people have gone even greater lengths to obtain self-benefit. Sure, inventing the smart phone is a significant human achievement, but can you imagine trekking for weeks through wilderness in hope to turn a few bucks on a cattle herd? Or even travel to the nearest town for trade and supplies? The risks were huge relative to their return.

People did not go to these lengths for the altruistic purposes. Simply put, they were using a productive means to provide an output (money or goods) which they could consume and/or trade for a good which they cannot produce. When the U.S. was an agricultural economy, people traded most of what they grew for profit. Somehow, without modern day communications, entire populations of people voluntarily came together for mutually beneficial exchanges and it did not require any central planners. It just happened.

In my opinion, that is an incredible display of human spontaneous order which we take for granted. It has continued into today’s world, although modern technology makes it happen at thousands times the speed. When free markets are left alone, they have been proven to find ways of using scarce resources to provide for a rapidly growing population.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s