The problem with Capitalism is Government

Much of society today blames the current economic crisis on capitalism. But really digging into the reasons of the crisis and comparing it to history show that the problem with capitalism isn’t its inherent greed, the problem is Government.

To start, there are a lot of misconceptions about what capitalism is. Most attribute capitalism to consumerism and propagation of planned obsolescence, this is not true. Consumerism is only one approach to capitalism. However, capitalism isn't a philosophy, it is a system of human behaviour. It is not about money, but about value and how that value is obtained.

All living beings are self-serving, and will do what they believe to be in their best self interests. When what is valued is limited, competition then determines who gets what. It is the natural order of things to seek greater gains to cover loss.

Capitalism is simple
1. Identify and establish value: money, position, victory, acceptance, relationship
2. Understand qualifications to obtain that value
3. Compete within set parameters or rule

Built into the system are natural checks and balances such as competition and risk which keeps the system going. Prices and products are market controlled meaning income must be greater than cost on the low end, and competition keeps prices in check on the high end.

Also inherent in the system is ambition, motivation, loss and reward. It is a system that seeks efficiency, progress, development, and relationship. It is what gets people up in the morning and what drives them to be better.

When entities enter without these basic principles, it throws the market out of whack. Take away competition, i.e. monopolies, and prices become arbitrary and most likely above market value. Take away risk or the need to make a profit then prices are unrealistically below market value and again, destroy the market. Take away reward, and people get lazy in their personal lives and in their relationships.

But who can afford to do that? What entities can enter the markets and not care about losing their investment? What entities don’t’ care if their customers are unhappy with service or product? Government.

Think of it this way, markets are like the flow of a river. They are driven by self-interest and flow within natural boundaries. Drop a wall in the middle of the river, and the river still runs. Only it starts to break the boundaries, flows outside its banks and start to flood the land.

This is exactly what happened with the crisis. The Government introduced loans that normally banks would NEVER do because of the risk. The Government told them to do it anyway. The banks and creditors were stuck with a product that was sure to create loss. So what happened? The river still flows, so the market did what the market does, and sought ways to turn a loss into a gain. So new instruments were made that the markets would take, it entered the flow and started to be sold.
Whose fault was it? Those who created and sold a less than desirable product or the Government who broke market rules and forced that product into the market to begin with?

Throughout history, every time non-market entities got involved without following the natural rules, it was an utter failure. Also every time the rules were not enforced, disaster ensued.

Since the Government is NOT capitalistic, meaning it is not normally driven by profit or increasing value, it should NEVER get involved in the markets. Politics running companies, is there any ONE government program that was successful and sustainable? Not one.

Now to be fair, I do believe the Government could enter the markets, but only if it plays by the same rules and takes the same risks.

Otherwise, the Government’s role is regulation, that’s it. And in terms of the sub-prime loans, its own product, it couldn’t even do that right.

Capitalism works even in crisis, when the Government stops playing with it.