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"If Capitalism Is So Good, Why Isn't It Working?"

12/2/2011

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Many Occupy Wall Street protestors have expressed valid concerns and frustrations with capitalism and the state of our economy.  

What they don’t understand is the difference between real capitalism and “crony capitalism."  And they don’t recognize that government is a major cause of the problem.  More government is not the solution. 

 George Mason University Economics Professor, Chris Coyne, explains the difference between capitalism and it’s counterfeit, “crony capitalism.”

In capitalism, people earn a profit when they produce goods and services that others value.  
People suffer losses when they fail to produce goods and services that others value.  

Although it may seem harsh, the system thrives when people are allowed to compete freely in a fair market.  

Producers earn a profit when they make people better off.    

Even those who suffer losses can do better in the long run because they can go back to the drawing board and use their experience to create something better.

Everyone benefits. 

Crony capitalism, on the other hand, is a fake.  It eliminates genuine competition.  Instead of winning in the marketplace with products people value, businesses persuade government to give them money and/or create regulations that give them an unfair advantage in the market.  

For example, some large businesses today are allowed to keep all the profit when they succeed, but when their failure leads to losses, taxpayers are required to pay the bill.  This encourages excessive risk taking and other unwise business practices   

This can happen because corrupt politicians abuse their political office and use taxpayer dollars (your money and my money) to reward their friends and potential allies.  They destroy the fair marketplace that's essential for capitalism to thrive.

So, while we all have important concerns  and frustrations about the economy, the key is to recognize that government is a major cause of the problem, and is not the solution.  

The real solution is to limit the power of government so corrupt or foolish politicians can’t give your money to their friends and political allies.








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