The Magazine

Capitalism and Its Discontents

The worst economic system, except for all the ­others.

Dec 10, 2012, Vol. 18, No. 13 • By IRWIN M. STELZER
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The wonderful thing about capitalism is that in the absence of government, union, or monopoly interference, if we are willing to pay, someone will spring up to provide the service. That is what is happening in health care—boutiques will for a fee actually provide access to real doctors. Wireless carriers are wooing customers away from landlines with increasingly varied offers. Google and Verizon are leading a costly charge to provide a full alternative to your local cable company, already suffering from assaults by Netflix. As for the airlines, we have Amtrak’s Acela trains on the East Coast, and newly automated check-in procedures that will make it unnecessary to confront a representative who has just had her pension reduced and wants to take it out on you. 

Competition and technology—not all you might want, but in our capitalist system they provide alternatives, unless government can make such market entry impossible, as it tries to do in the case of many things, from hairdressing to taxi service to burial services. Or unless the state owns the incumbent (China in many instances and in the case of electric service on Long Island, the state of New York), or the business is a friend of the ruler (Russia), or one needs some license to go into business (Greece et al.). Then the incumbent is protected.

There is a lesson here. Or several.

♦  You get what you pay for in many cases. Champagne does not sell at beer prices, and big first-class seats cost more to provide than cramped economy-class ones.

♦ High switching costs can make it more economical to suffer indignities inflicted by existing suppliers than to bear the costs of changing.

♦ It’s well worth the fight to eliminate barriers to entry, such as monopolies on slots at airports, bogus health and safety regulations that prevent fledgling entrepreneurs from offering a better mousetrap, and anticompetitive practices by entrenched incumbents.

♦ Consumers should support the efforts of nonbanks trying to compete with the hoary old sort, but prevented from doing so by “consumer protection” regulations that are actually designed to protect incumbents.

Most of all, consider what life might be like if even the imperfectly functioning markets that frustrate us on a regular basis were replaced in our economy by the single-provider systems so beloved of the liberal left. That might make you view capitalism a bit more kindly, its flaws notwithstanding.

Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).


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