CAPITALISM: PROS AND CONS
The United States of America is the most prolific example of capitalism in the history of the world. But what exactly is capitalism? You can find many different definitions, but they all point to the fact that capitalism is an economic system in which individuals or corporate groups have the right to make private decisions and to acquire private property and capital goods based on their own work and competition in a free market. In recent years, there has been a lot of debate about whether a capitalist or socialist government would best suit the people of our nation. People are social creatures who prefer to work together, play together, eat together, and share together — but do the basic tenets of capitalism preclude these natural tendencies?
Many opponents of capitalism say that the capitalist system fosters greed and selfishness and does not look out for the welfare of one’s fellow man. If that were true, however, then the United States would have quickly dissolved into a hopelessly failed state instead of becoming the wealthiest and most powerful nation that the world has ever known.
You may be surprised to learn that it was the rapid rise of the United States as an economic power in the world that gave birth to the ideals of socialism. Many individuals in Europe and in other parts of the world were quite alarmed by the fact that relatively few people in America were making enormous sums of money while the great masses lived in poverty. They felt that it was quite unfair to have families such as the Vanderbilts, the Rockefellers, the Carnegies, the Mellons, the Kelloggs, and the Fords living lavishly, while the people around them suffered. Critics did acknowledge that these capitalists developed technologies that led to the creation of enormous wealth, but they felt that the level of wealth should be more fairly controlled and distributed by an overarching governmental agency. What those critics perhaps failed to understand is how much money each of the aforementioned families plowed back into the development of infrastructure and industries for our nation, creating an enormous number of jobs and opportunities for others to develop wealth.
Not only did America very quickly become a great economic and industrial power, but it also gave birth to the largest and most productive middle class the world had ever seen. In order for many of the businesses to succeed, it was necessary to produce in very large quantities, which of course required a great number of workers who had to be paid. Some companies were very fair to their workers and tended to do quite well; others had to be forced to be fair by unions, while still others were blatantly unfair and, in the long run, frequently suffered the consequences of such actions. Another phenomenon occurred in America which was unfamiliar to the Europeans — namely the advent of numerous charitable foundations created to aid the poor and to provide opportunities for the general populace. Obviously there was something different about the wealthy in America that distinguished them from the wealthy people in other parts of the world.
No matter how much of a fan of socialism or communism one is, it is difficult to deny the fact that entrepreneurship and inventive genius in America had a very profound effect on civilizations and living conditions throughout the world in a very short period of time. America had created an environment that provided incentive for people to come up with more and better ways of doing things. Jan Matzeliger, for example, was an African American who invented the shoe-lasting machine, revolutionizing the shoe industry and making shoes affordable by the masses with his 1883 patent.1
The establishment and protection of individual rights, woven into the founding values of our nation, extended into our business practices. The knowledge that you could acquire things for yourself and for your family by your own hard work and that those things would not be confiscated by another party was a powerful stimulus to economic activity, which quickly propelled America to the pinnacle of economic power in the world.
People throughout the world came to envy the American standard of living, and this country became the dream destination for poor immigrants everywhere.
GREED IS A FUNCTION OF THE HUMAN HEART
If the story ended there, the capitalist economic model would be declared the winner and we would all live happily ever after. Unfortunately, one of the tendencies of human nature, namely greed, often results in excessive profit taking at the expense of others.
Many years ago, a friend of mine received an academic scholarship to obtain his engineering degree at the City College of New York; however, the scholarship did not include room and board. So he was forced to live on the streets for a while, though he still maintained a healthy grade point average. For several months, he would even sneak into the professor’s lounge in the evening and hide behind one of the couches until the room was locked at night. There he would sleep behind the couch and then sneak out in the morning once the lounge was unlocked. Having access to water and a bathroom helped, but he was even more delighted when snacks were left in the lounge.
After he finished his engineering degree, he went to work for the Federal Aviation Administration (FAA). Once while traveling, as the plane was landing, he noticed that the lady sitting next to him was extremely frightened by the plane’s unstable descent. My friend is a very smart and creative young man, and he consequently designed a stabilization system for aircraft landing. For this magnificent invention with wide applications, he was given a $500 bonus by the FAA. Feeling that his talents were unappreciated and certainly not properly compensated, he decided to seek an engineering job in the private sector. On hearing about his experience with the FAA, his new employer assured him that if he came up with another great invention he would receive 20 percent of the profits.
Well, the young man did come up with another fabulous invention — one, in fact, that resulted in a $300 million profit for the company. To celebrate their success, the company held a ceremony, during which they were going to recognize my friend for his contribution. He invited his parents and many of his friends to be present when he would receive his check for $60 million. During the ceremony, the CEO of the company called him to the stage and presented him with a plaque and a glazed ham. The next day, the young man confronted the CEO in his office and asked about the $60 million. The CEO replied that it had been decided that they would invest that $60 million in the further development of the company and that it would all be made right with him in the long run. My inventor friend tendered his resignation immediately and started to walk away when the CEO stopped him, walked over to his desk, and wrote a check for $75,000, which he handed to him. My friend tore up the check, threw it in the CEO’s face, and walked out with the intention of starting his own company.
He quickly came to realize that his goal required significant capital, and that as a twenty-two-year-old black man with a bunch of ideas and very little collateral he was going to have a very difficult time realizing his dream. He went to ten different banks seeking a business loan and he was shut out on every occasion; however, he was offered an opportunity at each bank to receive a credit card with a $20,000 limit. He accepted all ten of the credit cards and used the credit of $200,000 to start his own engineering firm. As his inventive genius was given the opportunity it needed to succeed, his company grew and prospered, and he ultimately sold it for a nine-figure amount when he retired at age forty, which was his dream. Even though he is now extremely wealthy, he continues to work and engage in charitable endeavors to advance science and engineering education in America.
My friend’s story of being taken advantage of is only one example of how greed can manifest itself within the capitalist system. Unfortunately, however, greed is a significant drawback for any economic model, including communism and socialism. No one can justify ascribing a flaw in human character to one economic model or another, for greed is a human weakness seen in all societies.
In the Bible, God instituted a system of tithing, which meant giving 10 percent of one’s profits back to God. Since God is all powerful and owns everything, he certainly does not need any percentage of our profits. So why did he institute tithing? Co
uld it be that he understood that all human beings are subject to greed and that by requiring them to give away 10 percent of their profits they might learn a valuable lesson about not hoarding and about voluntarily sharing with others?
UP THE ECONOMIC LADDER
As a member of the Horatio Alger Association of Distinguished Americans,2 I could easily fill this entire book with others’ inspiring rags-to-riches stories. If you think long and hard enough, you probably know someone yourself with a wonderful success story. My inventor friend worked very hard and part of his motivation was his own financial independence. But on the way to achieving financial independence, he created many jobs, and I know others who also became financially independent because of their association with this man’s company. Sometimes the creation of jobs and the wealth that are side effects of someone else’s efforts and creativity get labeled as “trickle-down economics,” because inventing needed products creates jobs and opportunities for others and therefore should be encouraged if the aim is to have a prosperous society.
Many Americans understand this correlation between their own hard work and success, a cause-effect relationship that led to the can-do attitude that brought us to the economic table with the big boys of the world when we were still a fledgling nation barely fifty years old. As our country developed, so too did a sense of personal responsibility and pride in the ability to take care of oneself and one’s family. People were willing to take menial jobs in order to support their families with the intention of increasing their knowledge and skills, thus increasing their value and eventually moving them up the economic ladder. There were a variety of economic outcomes for persons depending on their productivity and value to an organization or to their community. In other words, the harder you worked and the more value you produced, the higher you moved up the economic ladder of financial success.
Of course, there are many in our society who bring only entertainment value, and American society is as enamored with celebrity as British society is with royalty. Although I have nothing against sports and entertainment, I believe there is a danger of getting lost in a fantasy world while neglecting the serious things in life such as education and productive work. The enormous salaries paid to sports stars and entertainers lead people to believe that they are the most important people in our society, or have the most important jobs. I believe they are as important as anyone else, but we must ask ourselves what will maintain the pinnacle position of our nation in the world: the ability to shoot a twenty-five-foot jump shot, or the ability to solve a quadratic equation.
Capitalism is a system that works extremely well for someone who is highly motivated and very energetic, but it is not a great system for someone who is not interested in working hard or for someone who feels no need to contribute to the economic well-being of their community. People in the latter group frequently rationalize about their value to society and develop a sense of entitlement to the fruits of other people’s labors. In fairness, I should add that some people work extremely hard and make significant contributions to society, yet choose low-paying careers or give away most of their resources to others. Such individuals form an important part of the capitalist model. For example, you are unlikely to meet any successful person who cannot point to a teacher who played a significant, positive role in their development. In some cases it is a minister, priest, rabbi, or other spiritual mentor. Many such individuals choose a life not overflowing with material things, because they receive incalculable non-tangible rewards through the work they choose.
However, the important word here is choose, since these people have a choice, understand the consequences of those choices, and are at peace with their decisions.
THE FREEDOM OF CHOICE
I had to make a very critical choice toward the end of my neurosurgical residency, deciding whether to stay in academic medicine or go into private practice where I would earn substantially more money. Having grown up in poverty, I felt drawn toward private practice and the dream of financial independence. At the same time, I felt that I could make a contribution to medicine if I became a full-time academic neurosurgeon at Johns Hopkins. After prayerful consideration, I chose the academic route, but after one and a half years, I was beginning to think I had made the wrong choice, because I was working very hard, fourteen to sixteen hours every day, doing a tremendous number of very stressful neurosurgical procedures, involving myself in several research endeavors, and making only $75,000 a year. I understand that to many readers that will seem like an enormous amount of money, but it really is a relatively meager salary for a fully trained neurosurgeon, even in an academic practice, who still has to pay off high medical school loans.
So I decided to join a private neurosurgical practice in Texas, which was going to pay me six times more than I was making at Hopkins. When I submitted my letter of resignation, it was not accepted and the powers that be convinced me that I was being hasty in my decision. They said that all of my grievances could easily be remedied and that a new salary incentive program was being implemented. I poured out my heart to God before I made the decision, trying to justify my reasons for leaving. But I felt strongly that I should stay and believed that I would be treated fairly and properly compensated for my work.
Ultimately I did decide to stay, and it turned out I could never have had the career that I’ve had if I had gone into private practice. Shortly thereafter I gained a great amount of international notoriety, which led to the writing of my first book, Gifted Hands, which has sold more than one million copies. I became a popular and well-compensated public speaker, and I was invited to sit on Fortune 500 corporate boards. The salary incentive program at Hopkins worked very well too. All of this put me in a much stronger financial position than if I had gone into private practice.
Using my God-given talents, listening to my heart, and working very hard in a capitalistic economy certainly paid large dividends for me. My wife, Candy, and I were able to realize our dream of starting a national scholarship program for children of all backgrounds, with the goal of inspiring a new generation of incredibly bright, ethical leaders to take the reins of our nation. I make no apologies for the fact that I am considered one of the rich in this nation, but I am proud of the fact that our single largest annual expense (excluding taxes) is charitable contributions, and I happen to know that that is the case with many of our personal friends who are also well-to-do.
Choice is vitally important in the capitalist economic model, for people must have the freedom to choose not only what they want to do, but how much effort they want to put into their work. It is truly a wonderful feeling to be able to voluntarily help someone who has financial needs, which they are trying unsuccessfully to resolve. It is considerably less pleasant to be forced to give your hard-earned resources to others regardless of their circumstances. Americans traditionally have been the most generous people in the world, and we should recognize and celebrate that rather than extinguish such a wonderful trait with unfair taxation. Not only should we be concerned about unfair taxation, but we also need to recognize the deleterious effect of unfair business practices and overregulation.
THE EARLY BIRD GETS THE WORM
When I was in college, one of my summer jobs was supervisor for highway cleanup crews. I directed groups of young men who picked up debris along the highway with huge plastic bags. It was quite a difficult job because the weather was so hot and there was very little shade along the expressway. Needless to say, the guys weren’t all that enthusiastic about the job. As the supervisor, I wanted us to do a good job, so I began to think of ways to give them incentives.
“You guys don’t really want to be picking up garbage in the hot sun, do you?” I asked one day after gathering them together.
“You got that right!” they shouted.
Then I said, “Why don’t we start when it’s cool out? How about six in the morning?”
“Six in the morning?” they shot back. “You must be crazy. What are they teaching you at t
hat fancy school?”
I then went on to explain that they could work much more efficiently during the cool weather, and that I would pay them for eight hours of work if they could fill a hundred bags with garbage in seven or even six hours. Whatever amount of time it took, I would still pay them for eight hours if they accomplished the task. Well, you have never seen people work like these young men worked from that point on. By eight o’clock in the morning they would have filled more than two hundred bags with garbage and cleaned whole stretches of highway.
Those in charge of the program were flabbergasted. They were always saying, “Carson’s crews are amazing, but we never see them.”
This, to a large extent, is what the capitalistic economic model is based on. Giving incentives to work hard not only worked for them, it works for society at large. Now, I could not give the men the rest of the day off because they had to punch timecards, but as a result of their hard work, I was able to allow them to have leisurely days with extended lunch breaks and walks in the park. If I’d had the authority to pay them more money for more work, they would have been happy to continue working to make more money. Without any incentives for productivity (capitalistic model), they were quite content do nothing, which unfortunately is the by-product of any system that bases wages solely on head counts (socialistic model).
THE PARABLE OF THE WORKERS
There is definitely room to argue about whether the fruits of one’s labors should be equally distributed throughout the society or whether one should be able to directly benefit from working harder than others around him. When I was an eight-year-old boy living in Boston, I had an opportunity to earn a whole dollar and a delicious-looking candy bar with nuts and caramel in exchange for shelling several bushels of peas for a neighbor who had just purchased them from the farmers’ market. Six of us agreed, and all we had to do was sit in the kitchen and shell peas. Although it was more fun to be outside playing, we didn’t have to sit in the hot sun and we could talk while we did the work, so it wasn’t as much of a chore as it could have been. The idea of earning money and getting a nice-sized candy bar to boot was more than enough incentive for us to agree. Four of us worked extremely hard all day while two boys did virtually nothing. I was among the hard workers and at the end of the day, when the rewards were handed out, I was somewhat dismayed to see that everyone received the same compensation. The four boys who did all the work protested, but the two other boys claimed that they had done just as much, and they prevailed.
America the Beautiful: Rediscovering What Made This Nation Great Page 8