What is called “capitalism” might more accurately be called consumerism. It is the consumers who call the tune, and those capitalists who want to remain capitalists have to learn to dance to it. The twentieth century began with high hopes for replacing the competition of the marketplace by a more efficient and more humane economy, planned and controlled by government in the interests of the people. However, by the end of the century, all such efforts were so thoroughly discredited by their actual results in countries around the world that even communist nations abandoned central planning, while socialist governments in democratic countries began selling off government-run enterprises, whose chronic losses had been a heavy burden to the taxpayers.

Privatization was embraced as a principle by such conservative governments as those of Prime Minister Margaret Thatcher in Britain and President Ronald Reagan in the United States. But the most decisive evidence for the efficiency of the marketplace was that even socialist and communist government leaders who were philosophically opposed to capitalism turned back towards the free market after seeing what happens when industry and commerce operate without the guidance of prices, profits and losses.


Many people who appreciate the prosperity created by market economies may nevertheless lament the fact that particular individuals, groups, industries, or regions of the country do not share fully in the general economic advances, and some may even be worse off than before. Political leaders or candidates are especially likely to deplore the inequity of it all and to propose various government “solutions” to “correct” the situation.

Whatever the merits or demerits of various political proposals, what must be kept in mind when evaluating them is that the good fortunes and misfortunes of different sectors of the economy may be closely related as cause and effect — and that preventing bad effects can prevent good effects. It was not coincidental that Smith Corona began losing millions of dollars a year on its typewriters when Dell began making millions on its computers. Computers were replacing typewriters. Nor was it coincidental that sales of film began declining with the rise of digital cameras. The fact that scarce resources have alternative uses implies that some must lose their ability to use those resources, in order that others can gain the ability to use them.

Smith Corona had to be prevented from using scarce resources, including both materials and labor, to make typewriters, when those resources could be used to produce computers that the public wanted more.

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