Economic Freedom or Control?
The Historical Triumph of Capitalism
Over the last few classes, we’ve explored the success of capitalism. Through historical data, we’ve seen the massive leap in human life quality, innovation, and wealth. Capitalism—driven by the price system and profit motive—has allowed individuals to experiment, create, and thrive.
But this leads to a natural question:
Why can’t other systems do what capitalism does?
Socialism, fascism, central planning—they all fail to replicate capitalism’s success. Why?
The Individual: Capitalism’s Core
Every innovation stems from a thinking individual. Whether it’s Henry Ford and the assembly line or Apple and the iPhone, behind every product and business revolution is an individual with a vision.
Capitalism’s defining attribute is freedom—freedom to think, to act, to choose.
Contrast that with central planning:
“They replace your thinking with their thinking. Your choices with theirs.”
A planner cannot know your personal values, preferences, or dreams. They impose a value hierarchy that isn’t yours.
Key Features of Capitalism
- Freedom to think and act
- Failure and feedback = learning and growth
- Individual value hierarchies respected
- Voluntary exchange and pricing signals
- Progress through experimentation
Why Central Planning Fails
1. It Suppresses the Individual Mind
Central planning removes the possibility of trial and error. It dictates what to buy, what to produce, and how to live. It assumes that the state knows best. But:
Only you know what’s best for you.
What central planners miss is that human flourishing is individual, not collective. No one can determine your happiness, your values, your aspirations better than you can.
2. It Eliminates Pricing Signals
Prices in capitalism express value hierarchies. They tell producers what’s in demand, what people are willing to sacrifice for. In socialism:
- There are no prices.
- No supply/demand mechanism.
- No way to measure success or failure.
- No incentive to improve or innovate.
3. It Destroys Incentives
If everything is done “for the common good,” there is:
- No reason to work harder.
- No reward for thinking differently.
- No feedback mechanism when things go wrong.
This creates stagnation, not progress.
Case Study: Baby Formula Shortage
In 2022, America faced a baby formula crisis. Shelves were empty. Parents panicked.
Why?
- A plant that made 40% of the formula was shut down by the FDA.
- Tariffs and regulations made importing nearly impossible.
- The market was dominated by three companies due to government welfare programs and regulatory favoritism.
- Even during the crisis, the FDA blocked parents from bringing in European formula.
Regulations intended to protect became the very cause of scarcity.
The Mixed Economy: A Confused Middle Ground
Most countries today operate under a mixed economy—some capitalism, some statism. But this mixture brings about:
- Distortions: Certain products never reach market.
- Cronyism: Lobbying replaces competition.
- Stagnation: Innovation is stifled in regulated industries.
- Subsidized Inefficiencies: Like American car companies or chip manufacturing.
A few examples:
- Electric Cars: Heavily subsidized while other technologies get left behind.
- USB-C Mandate: Convenient, but ends innovation in charging tech.
- CHIPS Act: Picks winners and slows down competition.
The Truth About Economic Crises
Economic crises like the Great Depression and 2008 Financial Crisis are often blamed on capitalism.
But in reality, they were caused by:
- Central banks manipulating interest rates
- Tariffs and taxes during downturns
- Massive government intervention
We let 12 people decide the price of money—perhaps the most important price of all.
Expanding Central Control
Today, central planning extends to:
– Education
Why aren’t schools advertising? Competing? Innovating?
Because:
“We trust the government to teach our kids more than we trust them to deliver our mail.”
– Healthcare
More than 50% is publicly funded. Private systems are distorted. Bureaucracy dominates.
Cronyism and Pressure Groups
Cronyism arises not from capitalism, but from the power we give to politicians.
Example:
Microsoft didn’t lobby in the 90s. The government sued them for being a monopoly. Now they spend tens of millions on lobbying.
The Capitalist Ideal: Separation of Economy and State
True capitalism requires:
- A government limited to protecting rights.
- No regulation of business.
- No subsidies, no tariffs, no central banking.
Just courts, police, and military.
The government should not manage the economy any more than it should manage religion.
Final Thoughts
If we understand that:
- Individual rights matter
- Central planning on a large scale fails
- Mixed economies lead to distortion and stagnation
Then why do we tolerate small violations of liberty?
“A little socialism” is still socialism.
“A little central planning” still undermines freedom.
Only a fully free market can unleash the full potential of the individual.