Free market capitalism is basically defined by the protection of private property rights and individuals being able to pursue their own economic self-interest (without oppressive intervention from government) in a manner that also creates more opportunities and wealth for others. By producing and selling goods and services valued by others, you enrich not only yourself, but also benefit the rest of society. Opponents of capitalism appear to lack basic knowledge of history, human behavior, and economic concepts such as supply & demand and incentives. The system of free market capitalism that we know today started around 1800 and since that time, the world has experienced exponential growth in gross domestic product (GDP) per person. Capitalism has played a critical role in raising the standard of living for the world’s population and lifting people out of poverty. Due to the technological innovations of capitalistic societies, we lead lives unimaginable to people even 100 years ago. People live significantly longer and have access to endless opportunities.
The numbers behind this transformation are staggering. In 1990, roughly 36 percent of the world’s population lived in extreme poverty, but by 2019, that figure had fallen below 9 percent. More than a billion people were lifted out of destitution in a single generation, driven overwhelmingly by market-led growth in China, India, and across the developing world. Global life expectancy has more than doubled since 1900. No government program in history has done as much for the poor as the simple freedom to trade, build, and compete.
A few of the basic tenets of capitalism include:
- Protection of private property incentivizes increased research, innovation, and production.
- Consumers determine which products and services are in demand, not a central authority.
- Resources are naturally (not artificially) allocated to the economic sectors and activities most valued by society.
- Competition for valued products and services incentivizes lower costs and more market participants and options, thus ultimately benefiting consumers.
What Capitalism Is Not
A fair defense requires an honest distinction. Much of what passes for ‘capitalism’ in public debate is actually its opposite: cronyism. When corporations profit through subsidies, bailouts, tariffs, and regulations designed to crush smaller competitors, that is not what we mean by the free market at work. Rather, cronyism is business merged with state power, with taxpayers footing the bill. True capitalism has no favors to hand out, because the government’s role is limited to protecting property, enforcing contracts, and keeping the playing field open. The cure for cronyism is not less capitalism, but more of it.
Nor has capitalism ever promised equal outcomes, and it should not be judged by that standard. Capitalism’s promise is the greatest creation of wealth and the greatest opportunity for upward mobility of any system yet tried. In a free market, the only reliable way to become wealthy is to serve others at scale, and the poor of capitalist societies today live better than the royalty of centuries past.
Here are several quotes that capture the essence and virtue of capitalism.
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” – Adam Smith
“The way to maximize production is to maximize the incentives to production. And the way to do that, as the modern world has discovered, is through the system known as capitalism—the system of private property, free markets, and free enterprise.” – Henry Hazlitt
“America’s abundance was created not by public sacrifices to ‘the common good,’ but by the productive genius of free men (and women) who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America’s industrialization. They gave the people better jobs, higher wages and cheaper goods with every new machine they invented, with every scientific discovery or technological advance — and thus the whole country was moving forward and profiting, not suffering, every step of the way.” – Ayn Rand
“The great and abiding lesson of American history, particularly the cold war, is that the engine of capitalism, the individual, is mightier than any collective.” – Rand Paul
“In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade.” – Milton Friedman
“Prior to capitalism, the way people amassed great wealth was by looting, plundering and enslaving their fellow man. Capitalism made it possible to become wealthy by serving your fellow man.” – Walter E. Williams
“I regard the preservation of what is known as the capitalist system, of the system of free markets and the private ownership of the means of production, as an essential condition of the very survival of mankind.” – Friedrich Hayek
“The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office. Every man but one a subordinate clerk in a bureau. What an alluring utopia! What a noble cause to fight!” – Ludwig von Mises
Here are several excellent books about free market capitalism and basic economics.
- “Basic Economics” by Thomas Sowell
- “Economics in One Lesson” by Henry Hazlitt
- “Wealth of Nations” by Adam Smith
- “In Defense of Capitalism” by Rainer Zitelmann
- “Principles of Economics” by Saifedean Ammous
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