Capitalism: how the system works

Those who disparage the “trickle down” (I don’t particularly like that term, but it is accurately descriptive) aspect of free market capitalism do not understand how the system works.

There is no better proof than what has occurred in both India and China in the last 20 years. In both countries a great number of people have become rich and at the same time many millions of people have been raised above the poverty level. They are much better off than they were 20 years ago because of free market policies!

And it seems the same people rail against corporations (especially oil companies). It is important to remember that our high standard of living is attributable to the productivity of labor – all labor, not just the machine operator.

Large corporations are a necessary means for the “economy of scale” that is a major factor in high productivity. The standard of living can only increase as a result of productivity increases.

In recent years it seems that the standard of living has not kept pace with productivity. This is generally attributed to the rich grabbing more than their fair share. I submit that a significant factor is the tort lawyers and the cost to companies of protecting themselves from frivolous lawsuits, so less is available to labor. It would be interesting to have a serious study on how productivity increases are distributed.

I am not jealous of the rich. How am I adversely affected by the fact that someone else is “rich?” It is not a zero sum game. The idea of taking a large percentage of the wealth of the rich to help the poor is a leveling process but it levels down (socialism). We need to keep opportunity alive so more people can aspire to and become rich.

Glen Holzhausen