Article by Cal Nogov on Mar. 29, 2016
Free market capitalism (aka anarcho-capitalism) benefits the workers the most. Here’s why:
Imagine Abe. Abe has invented a widget. Call it Abe’s widget. He wants to build his widget and sell it to the public. He needs a factory and workers. He sets up his factory and hires his workers at 1 ounce of silver per hour. His widget sells great. He’s making lots of money in profit. His workers are making their guaranteed wages.
Bob sees that Abe is making lots of money selling this widget. Bob decides he will sell a similar widget too. He sets up a factory. In order to compete with Abe, Bob must pay his workers more to entice workers to work for him. So he pays 1.1 ounce of silver per hour. He must also under cut Abe’s price to get market share.
Abe, seeing what Bob has done, raises his wages to workers to match Bob’s to retain his workers. He also lowers his price to match Bobs so as to remain competitive in the market and not lose market share.
Wages have increased for workers, while profits have fallen for the bosses. Prices have also fallen for consumers.
Enter Carl. Carl sees that Abe and Bob are making money, so he decides he will sell a similar widget. He pays a higher wage (to entice workers) and lowers his sale price (to gain market share). Abe and Bob match.
Once again. Wages have risen for workers and profits have fallen for bosses and prices have fallen for consumers.
This trend will continue until the market reaches a saturation point and will remain stable. The workers have benefited the most by a constant increase in wages, while the bosses, although still making a decent profit, kept having their profit shrink and shrink.
When government enters the picture, this natural progression is disrupted. We now refer to it as Crony capitalism or corporatism or fascism.
Let’s imagine the same scenario except government intervenes.
Imagine Abe. Abe has invented a widget. Call it Abe’s widget. He wants to build his widget and sell it to the public. He needs a factory and workers. He sets up his factory and hires his workers at 1 ounce of silver per hour. His widget sells great. He’s making lots of money in profit. His workers are making their guaranteed wages.
Bob sees that Abe is making money and wants to sell a similar widget. He can’t. Government has granted Abe a patent on the widget. The patent prevents Bob from entering the market. Abe’s profits are protected. Abe has no need to pay his workers a higher wage. In addition to patents, government might use minimum standards, regulations, tariffs and licensing to protect Abe from competitors.
Sometimes Abe might become too abusive in wages and prices, thereby government may break up his monopoly and/or force a minimum wage upon him. These things wouldn’t have been necessary had government not interfered in the first place.
Government protects Abe because they are getting a little taste of the action. Campaign contributions, under the table money, book deals, speaker fees, etc.
In a free market capitalism system, everyone does well. Standards of living rise steadily. The organizers/management do a little better than the workers. In a crony capitalist system there are obscene wealth disparities. The guys at the top make obscene profits while the workers get little relative to the bosses.
Government, as always, is the culprit. Not capitalism.
