Capitalism Requires Choice

July 7, 2020

I have often said that "Capitalism is the most democratic economic system there is, for every time you spend a dollar, or refrain from spending a dollar, you are casting a vote." My Merriam-Webster dictionary defines capitalism as "an economic system characterized by private or corporate ownership of capital goods and by prices, production, and distribution of goods that are determined mainly by competition in a free market." For either of these statements to be true, the consumer must be able to make a real choice and have real alternatives to choose between (the "competition in a free market" part of the dictionary definition).

Many people think that if money is transferred from one entity to another it must be capitalism. But this is only true if the entities transferring the money have a real choice in the matter and have real alternatives. It is NOT a real choice if you must either choose this or you die or are imprisoned, fined, evicted, sued, or in some other way coerced. Also, having a number of alternatives to choose from but being denied any real information on which to base your choice, such as having a number of medical doctors to choose from but no information on what they charge for services or their track record on providing these services, is NOT a real choice. These examples aren't capitalism. In fact, many of the transactions that occur in the United States, which is claimed by many to be one of the most capitalist countries, are not capitalist as the consumers have little real choice in the transaction.

Some aspects of our lives can't be capitalist because by nature we have little choice in the matter. People don't choose to have heart attacks, strokes, cancer, diabetes, get diseases (such as COVID-19), be born with certain physical limitations or challenges, or many other medical issues. If you are rendered unconscious, you have no choice on if or how you are taken to a medical facility and which facility you are taken to and what services they render. But, here in the US, you are responsible for the costs of any of these services performed while you were unconscious that were chosen by others. That is far from capitalist. But it is necessary if you want to live and minimize loss of physical capability.

The real question is whether this is fair and desirable. Many of the super rich, where over $100,000 in medical emergency costs is pocket change, probably think this is fair. Many of those over 65 years old, who have most of their medical costs covered by a very socialist Medicare program, also probably think this is fair. Many of those working for very large corporations or government entities with generous medical insurance benefits (a subtle way these entities try to obtain and maintain monopoly control of various aspect of our society and is itself borderline socialist) also probably think this is fair.

But for the rest of us, it is a major gamble whether we are going to be destroyed financially by some medical issue we have little or no control over. I understand that medical debt is the number one cause for people to file for personal bankruptcy in the US. If it weren't for Medicare, most people over 65 years old would eventually go bankrupt or simply not live as long because they would have to avoid necessary medical treatment due to medical costs. And private insurance isn't the answer, as these insurance companies will gladly take your premiums as long as you make no or only a few cheap claims, but drop you or jack up your premiums to exorbitant levels so you are forced to drop them if you suddenly make any significant claims. The reason insurance exists is to cover unexpected major expenses.

There are many people that want to privatize a lot of tasks that government is presently doing. They argue that private industry can do these jobs cheaper and more effectively than government can. This is probably true if the performance of these tasks is open to multiple companies who have to compete on a daily basis for the customer's business. An example would be in trash collection, where the government would allow the consumer to select any company (or none, haul it themselves) to collect their trash. This is capitalism. The consumer has a choice.

But this is usually not true if the government grants one company a monopoly franchise over this service. This company which is granted the monopoly has little incentive to keep prices for their service low or provide quality service. So the government usually has to create a board to regulate prices and service. This provides a convenient single point where the company can apply pressure and incentives to get their way. Consumers have little or no choice in the matter. This is not capitalism, but a more subtle and easily corrupted form of socialism where, instead of the government having direct monopoly control over a product or service, it sanctions a private company to have a monopoly over this product or service, which government still maintains tight control over. I refer to this type of socialism as corporate socialism, a form of socialism practiced extensively in the US and pushed heavily by many Republicans (who claim to be free enterprise capitalists). Consumer costs almost always are higher, as, besides the cost of the product or service, they are also paying for the oversight board and added company profits, plus any influence costs.

So, for capitalism to work, consumers must have a real choice in whether to get a product or service and who provides it. Without this choice, it is not capitalism. Some things in life can't realistically be capitalist because of their nature and should probably be provided by the government. But, also, there are many things that people claim are capitalist but are far from it because the consumer has little or no real choice in the matter, which is not free enterprise.

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