Let’s start by describing some benefits of capitalism, because most of this book is about improving it and taking it to the next level—to a Win-Win 21st Century Economy. My definition of capitalism: the first choice for the delivery of goods and services to the people is through a private ownership operation in a competitive marketplace. We need to increase competition to increase quality of goods and services, employment, stimulate innovation, and increase research and development, while reducing regulations and inflation. If business operations cannot be subject to a competitive marketplace, we have to consider other alternatives for delivery. Nonprofits, government owned firms, and substantially increasing regulations, including price controls, could be alternatives to business monopolies.
In the history of humankind, there has never been a period where vast majorities of the people have lived a superior quality of life as in the last 70 years in Europe, the USA, and Japan; we can also see increases in developing nations. The lower middle class has a quality of life that in many ways is better than the elite had 150 years ago. My definition of equality is having adequate healthcare, nutrition, education and shelter, along with the opportunity for advancement.
It is not the standard definition which would describe the gap in income or net worth between the rich and the poor . The current system has delivered basic living benefits and opportunities to advance to many. Now it is time to deliver them to everyone on this globe. This is accomplished by reducing the effects of the four major flaws of capitalism. The U.S. economy was well under way to solving these flaws when we started a reactionary course, in the 1980’s, back to some concept of the “free market place solves all” (libertarian, laissez-faire philosophies).
There is no such thing as a free market place; there is always some undue influence somewhere. The free market ideology assumes human perfection, which by nature cannot exist. All markets are subject to distortions of non-market variables, such as religious practices, local customs, and traditional laws, oligarchic, ethnic, or national factors including government regulations. In practice, every market is planned and organized by some party; this has been so ever since the Neolithic rhythms of agriculture planting and harvesting.
In today’s world, governments design, organize, enforce, and help fund the ever-changing market place! In fact, there can be no fair and competitive marketplace without governments. A marketplace today may be an abstract location like a fleeting digital connection. The marketplace can have deeper processes than a mere exchange of goods and services. Any totally unregulated marketplace will eventually cease to exist, as it becomes a monopoly or at best an oligopoly. Civilization is defined by rules; rules create markets, and governments generate rules. See Robert Reich’s recent book Saving Capitalism, for its discussion on markets and the powers to influence them.
Human imperfections exist in all operations, both government and nongovernment. Since government inefficiencies are exposed by the press, one has to review the errors of the private sector. Professor Ha-Joon Chang’s book, Things They Don’t Tell You About Capitalism, is a must read depicting the many failures in the private sector.