As occurs even to this day, countries that follow the free market principle witness larger economic growth and stronger economies than those that stray from the pack.
by Matt Zupon
For centuries, people with opposing economic views debated, and continue debating, the impact of free markets vs controlled economies. Throughout history, we find many examples of countries following a capitalist economic model and those bending towards socialist ideals.
As occurs even to this day, countries that follow the free market principle witness larger economic growth and stronger economies than those that stray from the pack. While anyone can deflect to North Korea or Venezuela broadly failing, people should provoke an honest conversation about what policies fail and why. Let’s begin with the positives:
One very interesting example of the free market reign of excellence appears in the above graph. According to the Bureau of Labor Statistics (BLS), goods and services uninfluenced by the government not only increased in quality but nearly eliminated the chance of “sticker shock” over a twenty-year period (Jan. 1997-Dec. 2017). In case you cannot see the graph, it shows that new cars, household furnishings, clothing, cellphone service, software, toys, and TVs either remained constant or deflated compared to their price tag in 1997. Cellphone services, software, toys, and TVs dropped the most, ranging from a 50%-100% deflation.
The overall inflation rate in the U.S. rose by 55.6%, however, government influenced goods and services such as college textbooks, childcare, healthcare services, and college tuition inflated by over 100%, with hospital services rising over 200% in price since 1997.
Interestingly enough, the largest spike hospital and healthcare services occurred right after the passage of the Affordable Care Act (Obamacare). Food, housing, and wages effectively match the inflation rate, so only minor differences exist for them over this two-decade period.
For people skeptical of this graph, just walk into your nearest Staples or Office Depot and check the prices of printers and computers. Twenty years ago, it would cost thousands of dollars to get a computer that could barely load the internet. Now you can buy computers with thousands of gigabytes and sleek processors for under five hundred dollars. A megabyte flash drive used to cost nearly one hundred dollars, but now you can get a 64-gigabyte flash drive for under twenty dollars.
The best example of the free markets lowering costs of technological merchandise comes from the printer aisle. While inkjet printers used to cost hundreds of dollars, Staples sold one for forty dollars the other day. Keep in mind that the cheapest desk chair at Staples cost
s fifty dollars. Letting the free market operate independently leaves results like this.
While automatically defaulting to “but look at Venezuela” makes a shoddy argument, many aspects of Venezuela’s economic history provides accurate insight into the failings of socialism. Business Insider explains how Venezuela’s once powerhouse economy began blooming in the early 1900s. The discovery of oil in the country led to a huge boom in profits for the country. While taxes existed on income and profits, and the country’s leader followed suit of a dictator, the markets remained free. The international market breathed easily, too. At the end of the day, the government kept its nose out of the private industry, and the industries worked out any problems to craft an economically juggernaut. However, with the passing of time came the tides of change to this prosperous Venezuela.
The country shifted to Democracy in the 1950s, and their first elected President, a former communist party official, took over. He slowly started to erode the economic liberty cherished by the Venezuelan people. Following a string of socialist leaders came Hugo Chavez who wished to push the country even farther left. Finally and currently, Nicolaus Maduro took over the country. Maduro stated that he will overturn the constitution and push the nation into an authoritarian socialist state. Private property will exist no longer exist if Maduro overthrows the resting Constitution.
The authors of the article from Business Insider make an example that will resonate with economists and laypeople alike. It truly highlights the desperate state of Venezuela. It states:
“Let's look at the cost of goods in services in terms of a salary earned by a full college professor. In the 1980s, our "full professor" needed to pay almost 15 minutes of his salary to buy one kilogram of beef. Today, in July 2017, our full professor needs to pay the equivalent of 18 hours to buy the same amount of beef. During the 1980s, our full professor needed to pay almost one year's salary for a new sedan. Today, he must pay the equivalent of 25 years of his salary. In the 1980s, a full professor with his monthly salary could buy 17 basic baskets of essential goods. Today, he can buy just one-quarter of a basic basket.”
The complete regulation of everything and abolishment of private property pays homage to an archaic ideology: communism. As many remember, the crackdown on prosperity and freedom occurred (and still occurs) in many communist countries today. The “Red Scare” of the 1950s, 60s, and 70s was justified by the swathes of countries shifting towards the Communist Manifesto.
Designing a one-party state and lifetime rule, like Maduro wishes to establish, looks similar to that of classic Marxism. What Americans should find scary about this regressive ideology is that many in America praised Maduro and his evil ideology earlier this decade. The praise ranged from socialist Senator Sanders to moviemaker Michael Moore. A new wave of Democrats, like Alexandria Ocasio-Cortez, and many other “Democratic Socialists” all preach that this heavy government intervention into private life will benefit the working class and end our economic woes. They either refuse to look at history’s unwavering examples of socialism failing or remain ignorant to the fact it ever occurred.
And one final touch to this article comes from modern-day Europe. The socialists of America always allude to Scandinavian countries as lands of paradise. They always mention the “low healthcare costs” and the “livable wage” that cause prosperity and happiness. In all truth, however, the economic framework at large in Denmark models more after a capitalist economy. Granted, the government does plague its people with high taxation due to the expanded social safety net, but the country promotes free trade and still allows the majority of corporations (aside from healthcare) to dictate the market. The country promotes school choice. While nobody can deny that Denmark still practices socialist policies, the government tried hardcore socialism then backed off, and the less pressure put on by the government, the richer the citizens get.
Additionally, following the 2008 global recession, two nations within the European Union took separate approaches to tackle stagflation: Ireland and Greece. Ireland decided to tackle the recession with free-market, individual approach. Ten years later, their numbers reflect this. Ireland's GDP per capita ranks among the highest in the world, around $79,000. Greece lags behind at $19,000.
“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” This quote by Adam Smith, author of The Wealth of Nations and known as the father of modern capitalism, truly sums up capitalism. While socialists and communists will tell you that capitalists use the economic system to enlace their bank accounts with cash, they could not make money without making a good, inexpensive product for the consumer. These companies depend on a certain standard of quality to keep the consumer happy. Therefore, the companies with better benefits/wages remain on top, incentivizing them to pay their employees a decent amount of money. At the end of the day, the laissez-faire system works itself out and molds a prosperous, successful future for citizens and nations alike.
All opinions expressed within the contents of this article reflect the views and values of the author, not Politics NOW.
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