This morning I said: without capitalism, there is no freedom. A couple of commenters took issue with that statement. They are wrong, and the explanation is vital.
Understanding the relationship of capitalism to freedom is fundamental to understanding why Obama’s handling of the economic crisis is such a disaster. Now that we’ve moved beyond the President firing corporate CEOs to Barney Frank seeking to set corporate salaries, we have to be crystal clear on this point.
Let me turn over the microphone to Thomas Sowell, who wrote in his book Basic Economics:
Too often a false contrast is made between the impersonal marketplace and the compassionate policies of various government programs. But both systems face the same scarcity of resources and both systems make choices within the constraints of that scarcity. The difference is that one system involves each individual making choices for himself or herself, while the other system involves a smaller number of people making choices for others.
It may be fashionable for journalists to refer to “the whim of the marketplace,” as if that were something different from the desires of people, just as it was once fashionable to refer to “production for use, rather than for profit” — as if profits could be made by producing things that people cannot use or do not want to use. The real contrast is between choices made by individuals for themselves and choices made for them by others who presume to define what these individuals “really” need.
Capitalism is each individual making choices for himself.
Socialism is those who claim to know best, making your choices for you.
The former is freedom. The latter is anything but.