Monday, March 29, 2010

The Efficiency of Captialism

Proponents of capitalism like to say that it's the most efficient economic system we have. I think it would be more accurate to say it's the least inefficient, similar to how democracy
is the worst form of government, except all those other forms that have been tried.

-Winston Churchill

Capitalism works well - very well - in certain controlled circumstances. When a resource is scarce, but not too scarce. When there are few barriers to entry. When there is strict regulation preventing monopolies from forming and other predatory business practices. When there's not too much unemployment, but not too little. When there's an increasing population. When income inequality is not too high, but also not too low.

If all these conditions, and others I haven't named, are met, capitalism is quite efficient. But too frequently, these conditions aren't all met. And when that's the case, capitalism kinda blows. Other forms of economy may blow even worse (though I'm sure other forms can outperform capitalism in certain circumstances), but that doesn't make capitalism good.

What brings this up is farmers destroying their crop, because they have too much. From a capitalist point of view, they're making the right decision. Reduce supply to increase price and profit. I can't see how any economic system rewards destroying a resource (especially one as valuable and necessary as food) more than distributing it could possibly be considered efficient. It seems to me to be an incredible failing of the system of capitalism.

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