by | Jan 12, 2020 | Economics, Motivation | 0 comments

Nature is red in tooth and claw. So is capitalism.

My parents always had one type of small business or another. Running a grocery store in a small town, they watched a huge grocery chain open a store a block away. The chain bought products cheaply in huge quantities. It sold everything at a lower price than my parents. So much for running a small grocery store.

My parents then sold general goods. That went well until a huge discount chain opened a store in the next town. Everyone went there because of the low prices.

Big chains often wipe out small businesses. The worst chains sell goods below cost for months in a new location until competing small businesses go broke. Then the chains raise their prices.

Fierce competition exists between retailers, manufacturers, workers — everyone selling something. The only escape is to create a monopoly. Then the money pours in. If you have ever played the game Monopoly, you know the idea.

The great thing about competition is that it leads to lower consumer costs for goods and services. I especially like being able to drop an airline or a dentist who has not treated me well. Right now I am boycotting countries that deny their own people basic human rights. With capitalism, consumers operate like royalty.

Creating lower production costs sometimes involves shifting production overseas where people work for low wages in dangerous conditions. Other times the low costs come from replacing humans with robots.

You can love capitalism or hate it. Or both. It has made us collectively very productive and raised our standard of living. There is no good alternative. The best we can do to minimise the harms caused by capitalism is to regulate it to prevent unfair trade practices and predatory monopolies.

Capitalism operates on a simple psychological principle: Humans will do what leads them to rewards (like money) that they value. Those enterprising individuals who start a small business and work at it 14 hours a day for years show that principle in action. Many of them will go broke; some will do OK; a few will become rich.

Most of us do not take risks like that. Instead, we compete for jobs or for promotions. Competition is at the heart of capitalism, for better or for worse. That competition motivates you to work harder, does it not?


[Photo by Robert Anasch on Unsplash]


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