My father, Bishop Austin Lewis, a Jamaican native, who grew up in abject poverty, stands as a testament to the profound impact of free market capitalism on individual destinies. My dad was a pastor-preacher on Sundays and weeknights and held a daily job at Hartford Hospital as a wallpaper hanger and painter. Born and raised in an era marked by economic challenges in Clarendon, Jamaica from the 1930s to the 1950s, Rev. Lewis’s surroundings painted a grim picture of limited possibilities and scarce resources.
During this period, Jamaica’s economy struggled to gain traction, and its welfare system proved insufficient in inspiring innovation or offering sustainable opportunities. Rev. Lewis experienced firsthand the stifling effects of these circumstances, prompting him to seek a brighter future in a land where the principles of free market capitalism flourished.
Arriving in Connecticut in the early 1950s with nothing more than an empty suitcase and an unwavering drive for success, Rev. Lewis encountered the harsh reality of working in the tobacco fields for meager wages, earning less than fifty cents per hour. However, these demanding laborious hours would become transformative as he recognized the latent power embedded within a system that celebrated individual initiative and rewarded hard work.
Tirelessly toiling in the tobacco fields, Rev. Lewis witnessed the stark contrast between the economic landscapes of Jamaica and the United States. This stark juxtaposition fueled his resolve to seize upon the unprecedented opportunities unleashed by free market capitalism. Every hard-earned dollar became a steppingstone to carve his own path to success, as he diligently saved and invested, embracing the belief that he, too, could shape his destiny in a land where limitless possibilities abounded.
By leveraging his hard-earned savings, Rev. Lewis began purchasing real estate, particularly apartment buildings, with small amounts of money down. With a keen eye for opportunities and a deep understanding of market dynamics, he strategically invested in properties that showed promise for growth and rental income potential.
Lewis’s dedication to his properties and commitment to excellence became evident in the manner in which he managed them. Through meticulous attention to tenant needs, property maintenance, and effective marketing strategies, he was able to attract reliable and long-term tenants, ensuring a steady stream of rental income.
As the value of his real estate portfolio increased over time, Rev. Lewis recognized the opportunity to further leverage his assets. He employed financial strategies such as refinancing and reinvesting the proceeds into additional properties, thereby expanding his wealth and creating a virtuous cycle of growth.
Lewis’s success in real estate investment serves as a testament to his astute business acumen and entrepreneurial spirit. Through the power of wise financial decisions and leveraging the potential of the housing market, he was able to transcend his humble beginnings and build a considerable fortune.
Lewis’s journey represents an inspirational triumph of free market capitalism over the limitations imposed by oppressive economic alternatives. It underscores the notion that even in the face of dire poverty and restricted resources, the principles of free market capitalism can open doors to individual and collective prosperity. It was the potential of this liberation that propelled Lewis’s determination to break free from an economic environment that hindered progress and stifled opportunity.
The Wealth of Nations
Let’s take a look at the father of free-market capitalism Adam Smith. Adam Smith’s ideas in “The Wealth of Nations” make a compelling case for free-market capitalism. He argues that when private enterprises control production and markets operate with minimal government interference, allowing supply and demand to naturally regulate the economy, both wealth and prosperity flourish. Imagine if America had truly embraced Smith’s principles—the country might have become an unmatched economic leader, setting a new standard for success. Instead our once free-market mindset has over time become attacked by critics who often confuse bad capitalism, controlled largely by the wealthy elite few, with free-market capitalism, which is available to all.
Expanding on Adam Smith’s ideas, we can delve deeper into the concept of free-market capitalism and its potential benefits for society. A crucial aspect of Smith’s philosophy is the notion of the invisible hand, where the pursuit of self-interest in a competitive market leads to the best allocation of resources and overall economic prosperity. This invisible hand allows individuals to freely make choices in the market, fostering innovation, efficiency, and productivity.
Furthermore, free-market capitalism encourages entrepreneurship and economic growth. By removing excessive regulations and barriers to entry, it creates an environment where individuals with ideas and ambition can start their own businesses, create jobs, and contribute to economic development. This entrepreneurial spirit is a driving force behind technological advancements, as companies compete to provide better products and services to meet consumers’ needs. This leads to a constant cycle of improvement and innovation, benefiting both producers and consumers.
In addition to economic benefits, free-market capitalism also promotes personal freedoms and individual autonomy. The ability to freely engage in economic transactions without undue government interference empowers individuals to make choices based on their own preferences and values. This fosters a culture of self-reliance, personal responsibility, and accountability. Moreover, the competitive nature of the market can ensure that resources are allocated fairly, based on merit and efficiency rather than arbitrary criteria.
While critics argue that capitalism can lead to exploitation and inequality, it is crucial to highlight that these negative outcomes are not inherent to free-market capitalism itself but rather the result of external factors such as corruption and government favoritism. When there are extensive regulations and government intervention, it often creates opportunities for rent-seeking behavior and crony capitalism. However, in a true free-market system, where competition is encouraged and monopolistic practices are prevented, exploitation and wealth concentration are less likely to occur.
To ensure the success of free-market capitalism, it is essential to have strong institutions that promote fair competition, enforce property rights, and protect consumer interests. Government has a role in creating a level playing field and regulating markets to prevent anti-competitive behavior and fraudulent practices. Simultaneously, it should refrain from excessive intervention that stifles innovation and discourages entrepreneurship.
Other Systems And Why They Don’t Work
When comparing socialism to free-market capitalism, it becomes evident that the former often fails to deliver on its promises of equality and social justice in its genuine and practical form. While socialism aims to distribute wealth and resources more evenly among society, it often leads to inefficiency, lack of innovation, and decreased personal freedoms.
In a socialist system, the means of production are typically owned and controlled by the state or the community as a whole. This centralized decision-making can hinder the efficient allocation of resources because it is difficult for a centralized authority to have perfect knowledge of individual preferences, needs, and capabilities. Without profit incentives, there is less motivation for individuals to work hard and innovate, as they may not reap the rewards of their efforts. This lack of incentives can dampen productivity, economic growth, and overall prosperity.
Furthermore, the heavy reliance on government intervention in a socialist system can lead to a loss of personal freedoms and individual autonomy. The government’s control over various aspects of economic and social life can limit choices and stifle personal initiative. People may be forced to conform to a predetermined standard of living, with little opportunity for upward mobility or the pursuit of their own dreams and aspirations.
On the other hand, welfare systems, while designed to provide a safety net for those in need, can sometimes inadvertently create a culture of dependency. When individuals or sectors of society rely heavily on government support, they may lose the motivation to work or strive for economic progress. This can lead to economic stagnation, as the population becomes too comfortable relying on the state instead of actively participating in the economy.
In stark contrast, free-market capitalism allows individuals to take risks, create businesses, and pursue their ambitions. The competitive nature of the market incentivizes innovation, efficiency, and customer satisfaction. In free-market economies, entrepreneurs and businesses constantly strive to provide better products, services, and solutions to meet consumer needs and outperform their competitors. This drive for excellence fosters economic growth, job creation, and rising living standards.
Take the example of Silicon Valley, a hub for technological innovation and entrepreneurship. Free-market capitalism has created an ecosystem where startups have the freedom to experiment, investors have the incentive to provide funding, and talented individuals have the opportunity to make their mark. As a result, some of the world’s most successful companies and technological advancements have emerged, benefitting both the local economy and the global community.
This experience is not only limited to America but have been experienced in other countries. Singapore is another stellar example of free-market capitalism propelling a country to prosperity. With minimal natural resources, Singapore focused on creating a business-friendly environment, excellent infrastructure, low tax rates, and open trade policies. This attracted massive amounts of foreign investment and turned Singapore into a global hub for finance, trade, and technology.
Another example is Estonia. Since breaking away from the Soviet Union, Estonia has embraced digital innovation and free-market principles, making it one of the most advanced digital societies in the world. The government’s early decision to invest in internet infrastructure and e-governance has fostered a thriving environment for tech startups, including the creation of Skype. Estonia’s embrace of digital technology and capitalism shows how small countries can leverage open markets to achieve rapid growth and innovation.
Understanding Why Free-market Capitalism Works
Free-market capitalism is an economic system where the laws of supply and demand dictate the production, pricing, and distribution of goods and services with minimal government intervention. The ‘nuts and bolts’ of this system lie in its foundational concepts such as private property rights, voluntary exchanges, profit motive, and competitive markets. Let examine the various cogs in the wheel that help fuel the fire that make free-market capitalism thrive. These dynamics include private property rights, voluntary exchange and the price mechanism, profit motive, and competitive markets.
Private Property Rights
The principle of private property rights is the cornerstone of free-market capitalism. It allows individuals to own and control their resources, investments, and output. This ownership incentivizes entrepreneurs to innovate and improve, as they stand to benefit directly from their endeavors.
Voluntary Exchange and the Price Mechanism
In a free-market setting, transactions are voluntary and based on mutual consent. The price mechanism, or the interaction between buyers’ demand and sellers’ supply, determines the prices of goods and services. Prices communicate information and guide economic agents to make informed decisions.
Profit Motive
Profit motive drives businesses to operate efficiently by cutting costs, innovating, and improving their products. Profits signal successful operations and attract further investment, while losses indicate inefficiencies or market saturation.
Competitive Markets
Competition in free markets leads to better quality goods and services at lower prices. It fosters innovation as firms compete to attract, retain customers, and gain market share. This competition ensures that resources are allocated to their most valued use and inefficient operations are phased out.
The Finest Solution
Why is free-market capitalism considered the best solution for America? It is because these mechanisms have historically driven innovation, productivity, and economic growth in the country. By empowering individuals to pursue their self-interest within a competitive marketplace, resources are allocated more efficiently and adaptively than in centrally planned economies. Moreover, the system is more responsive to the changing preferences and needs of consumers, leading to a dynamic and resilient economy.
Free-market capitalism is not without its criticisms, however. Critics argue that in the absence of regulation, it can lead to monopolies, inequality, and externalities like environmental damage. However, ironically enough, all of those things happen regularly even with overreaching government oversight. Many people rightfully argue that when properly regulated to prevent these negative outcomes, the strengths of a free-market system – efficiency, innovation, and freedom – make it the most effective economic model for driving prosperity and opportunity in America.
Dr. Aaron Lewis, February 1, 2024