Is Capitalism Evil? - Granite Grok

Is Capitalism Evil?

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The cover page of the July 4th Union Leader read, “Poetry Returns with a Slam,” headlining the return of Slam Free or Die, a poetry club that had not met in person since the beginning of the COVID lockdowns.

The adjacent picture featured two young lyricists reciting their poetry from smartphones, with one of the pair wearing an “Anti-Capitalism Social Club” t-shirt.

Is slam poetry a hobby in communist countries? I cannot claim to know, but if it is, I am certain that its adherents are not reading their oeuvre off iPhones.

In that same vein, at the 2019 South by Southwest Festival, New York Representative Alexandria Ocasio-Cortez stated that “Capitalism is an ideology of capital – the most important thing is the concentration of capital and to seek and maximize profit…so to me capitalism is irredeemable.”

We want to thank Richard Malaby for this Op-Ed. If you have an Op-Ed or LTE
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South by Southwest, or SXSW as it’s popularly stylized, is a massive film, tech, and music conference held annually in Austin, Texas. If I had to guess, I would assume that countries with centrally-planned economies do not hold week-long festivals celebrating the convergence of art and technology. Without capitalism – that is, a free enterprise system that allows individuals to develop their own talents and to benefit materially by serving others – these pastimes simply would not exist.

So why is it that capitalism is often condemned as a system of exploitation, of leading to gross inequality, of being immoral? Is capitalism really evil?

There is an old joke about two economists passing one another on the street. The first says, “Hello, how is your wife?” The second replies, “Compared to what?”

The politicians and pundits who have gained the most from a free enterprise system enjoy bashing capitalism for political clout, but they never stop to compare what we have in America to state-run economies.

When Boris Yeltsin visited a Houston grocer in 1989, he believed initially that our government had set up a Potemkin store. “Even the Politburo doesn’t have this choice. Not even Mr. Gorbachev,” he whispered to his entourage, and that if the Soviets, who had to wait in lines for meager goods were to see a supermarket, “there would be a revolution.”

Behind the Iron Curtain, Soviets were told that Americans were starving, yet their shelves were always bare. Writing later in his autobiography, Yeltsin confessed, “When I saw those shelves crammed with hundreds, thousands of cans, cartons, and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people;” and, “that such a potentially super-rich country as ours has been brought to a state of such poverty! It is terrible to think of it.”

Yeltsin wasn’t the only Soviet impressed by everyday American affluence. Lantana Fetisov, the wife of NHL defensemen Viacheslav Fetisov, was asked to compare the United States with Russia; she stated that “America is a wonderful place; you have fifteen brands of mayonnaise.”

A 2017 study found that three-quarters of Venezuelan adults had lost an average of 19 pounds over the prior year as a result of food shortages due to hyperinflation and price controls.

Perhaps the starkest example of the difference between capitalism and state control of the economy is a nighttime view of the Korean Peninsula, where South Korea enjoys a first-world electrical grid providing light to residences and industry at all hours, but North Korea seems to disappear in darkness into the Yellow Sea.

Call it Communism, Marxism, Socialism – all these terms boil down to state control of the economy, which leads to massive inefficiency, shortages, and poverty. Yet, these “isms” are en vogue precisely because they are defined by their objective rather than the reality. These utopian theories promise their citizens necessities but cannot clear that most basic hurdle, whereas capitalism promises its citizens nothing, yet for those willing to work by serving others, it delivers unfathomable affluence.

Prior to the free market, the way people accumulated wealth was theft, be it goods or labor. In a free market, wealth is created by individuals willing to help others – to deliver services of higher quality at a lower cost. Consider how many politicians are too happy to verbally assault Jeff Bezos, Tim Cook, or Bill Gates, but would those folks prefer to live in a world without Amazon, iPhones, or computers?

Did these ultra-wealthy men take from the poor in order to amass their riches, or did they provide goods for a price consumers were willing to pay?

Perhaps the most misunderstood concept in today’s political discourse, one of the main reasons the free market is vilified, is profit. Capitalism is portrayed as evil or immoral because, as the story goes, fat-cat business owners want to make as much money as possible by gouging prices and exploiting the little guy.

Profit being nothing more than an additional cost is the Marxist definition of the term, and that understanding is totally inverted in practice. In reality, a profit is a difference between what it costs a business to produce a product and what a consumer is willing to pay for it. To claim that profit is an additional cost that a business simply tacks on to their product is to completely ignore the voluntary action of the consumer.

For instance, a farmer can attempt to sell his milk for a hundred dollars a gallon, which would be a fabulous “get rich quick” plan if there were anyone foolish enough to pay him that hundred dollars. If his customers are only willing to pay up to, say, six dollars a gallon for his farm-fresh milk, it would behoove our farmer to produce his product as inexpensively as possible to maximize his profit.

He may find that not many people buy milk at that price, but plenty will at five dollars a gallon; our farmer may make a smaller profit by selling milk at the lower price, but assuming he is one of these greedy businessmen we hear so much about, his incentive is to either sell more milk at this lower price point or to produce the milk for a lower cost.

Keep the higher price, and his potential customers may opt to buy Darigold, Garelick, Hood, Lucerne, Organic Valley, or any of the dozens of other brands. Either way, the consumer wins.

In state-run economies, that incentive to be as efficient as possible does not exist; when production costs rise, prices rise, and there is no reason to control costs as there is no competition. When there is no profit motive, there is no incentive to create goods and services. These issues lead to scarcity.

In a capitalist country, creating products such as cars, dishwashers, televisions, toilets, vacuums, and washing machines, products which improve the consumers’ quality of life, and then making them as inexpensively as possible so they are accessible to the greatest number of people, is the way to “get rich quick.”

Socialism would be a wonderful system if men were angels, but we are not. In the real world, people respond to incentives. That is the fundamental disagreement in the debate between capitalism vs communism: knowledge.

In a state-run economy, the central planners can make the decisions, but they do not have anywhere near the knowledge necessary to run an economy. Likewise, the people living in a centrally planned economy have the knowledge to produce for themselves, but they are not allowed to choose what to produce.

State planning requires coercion. In contrast, the free market allows citizens to make their own choices, leading to the creation of wealth. Our political class may bash the free market system, but consider the poverty found around the world in Latin America, in the Middle East, in parts of Asia, and compare that with the relatively unfathomable affluence of even poor Americans.

Far from being evil, the free market and the profit motive are the greatest economic forces for good the world has ever known, whether it be the creation of energy, the development of technology, or the sale of goods from smartphones and laptops to milk and mayonnaise.