Capitalism is not broken

By Robert Doar of AEI.

"Capitalism is not broken. It does not always work perfectly, of course. But the free market combined with our strong safety net has drastically reduced poverty and improved quality of life for the vast majority of Americans.

A free and healthy economy ensures that wealth is being generated and allocated to those who contribute to its creation. That’s why our current economic health has led to increases in production, and why wage growth for workers in the bottom half of the pay scale is outpacing those in the top half. With unemployment low and labor force participation ticking up, more people are going to enjoy the fruits of a dynamic capitalist economy.

Here’s a big idea – something to keep in mind as you hear about inequality and mobility. The middle class is shrinking, which might make it look like capitalism is failing workers. But the lower class is shrinking, too. Meanwhile, the upper class is bigger than it has ever been. About 28% of households now make more than $100,000 per year, more than double the rate of 40 years ago. More than half of Americans will be part of the top 10% of earners at some point in their lifetimes. Contrary to much contemporary rhetoric, workers in the US are getting richer, not poorer, as competition in the free market allows them to purchase a greater variety of goods for less money than ever before.

To be sure, life is about more than money. Many analysts, from right and left, worry about the tendency of market capitalism to decimate institutions and drain small communities of their vitality. They have a point – the pursuit of economic mobility often entails leaving people, places and ways of life behind.

We should be mindful of how we can support what the supreme court justice Louis Brandeis called the “quality and spiritual value” of local communities. But a free market can provide a solution here, too: employers seeking the best and brightest can and should offer more to employees by way of childcare, skills training and other benefits that help keep families and communities thriving.

And ultimately, each and every individual can and must choose their own path. That isn’t a vice of capitalism – it’s a virtue. A free market is the emergent order of free people, freely making their own decisions. Trying to “fix” that would be badly misguided.

Rumors of the death of mobility have been greatly exaggerated. Capitalism isn’t broken – it’s our best shot at keeping the American Dream of freedom and success alive."