Capitalism vs. Statism: Envy; Unleashing the Unimagined; Safety Nets

#8 in a series of Think Right or Wrong, Not Left or Right: A 21st Century Citizen Guide (2nd Expanded Edition)

Note to readers: The serial continues with another three sections addressing the virtues of capitalism and vices of statism. I’m working on a couple of new articles, one on an aspect of the tragedy of the commons that is little understood, and another inspired by Kim Strassel’s recent column in the WSJ The GOP’s Self Defeating Spending Habit. Until then, enjoy your summer.

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5.5 Envy Is Politically Impotent Under Capitalism

Envy is an emotion that, in part, tells us that someone has something that we want—an object, a career, a loving family, a circle of friends, a trait, etc. Although emotions can be helpful tools to figure out your values, likes, and dislikes, unchecked envy grows dangerous. There is nothing wrong with admiring what others have and drawing inspiration from others’ achievements to better pursue one’s own values. But spiteful or destructive envy can eat away at your mental health, your moral bearings, and your healthy pursuit of values. Sometimes envy sneaks up on us, sometimes it long festers.

When we experience envy two paths are open to us. We can take something positive from it and pursue the genuine value that we recognize in others and realize we want. We can work harder to afford something, pursue a career, reconnect or deepen our relationship with family and friends, acquire or hone a trait, etc. Or we can feed the beast of envy and seek to take away values from others. If we let our envy fester rather than take positive action to achieve our values, we come to resent those who have what we want.

This is a citizen guide. Why the psychology lesson? In a statist society, politicians are acutely aware of and really good at using the power of envy as a tool to garner support for their agenda. They rarely say it outright, instead cloaking their message in collectivist terms. Few people want to admit that they’re envious, but if a politician indirectly appeals to our envy by means of collectivist slogans, chances are that we will bite. Often calls to “tax the rich”—or, today, even to “eat the rich” or “guillotine the rich”—manifest envy.

Since a capitalist social system creates political equality by limiting the role of government, rights-violating taxation, redistribution, and regulation are banned. People banding together in collectives or groups to seek political advantages by violating the individual rights of others don’t have a way to achieve their agenda. And without these options, politicians don’t have anything to gain by campaigning on collectivist slogans appealing to our envy. Consequently, envy becomes politically impotent under capitalism, and does not influence the degree of control you have over your life.

5.6 Capitalism Unleashes the Unimagined

Ten years before Thomas Edison invented the first commercially viable incandescent lightbulb in 1878, few people could have imagined its existence or how it would improve people’s lives within a few decades.

Before Henry Ford launched the Model–T in 1908, cars were reserved for only the most prosperous members of society. Owning a car was an unimaginable luxury for the vast majority of Americans in 1907, when fewer than 2 in 1,000 people drove a car. Yet, within a decade that number grew to 50, and within two decades it grew to 200. Today it is estimated to be around 840.6

Just a few years before Steve Jobs and Apple launched the first touchscreen smartphone in 2007, hardly anyone could have envisioned where it would take us in the 15 years since.

What Edison, Ford, and Jobs had in common, apart from their passion and energy, was that they were left mostly free to pursue their vision without being shackled by statist policies. Sure, they lived in statist societies, Steve Jobs more so than Thomas Edison and Henry Ford. But, as we explained earlier, Apple grew to prominence in an area of society—information technology—where regulatory rights violations were less severe.

Probably the hardest aspect of selling capitalism is conveying the unimaginable discoveries and improvements to our lives that lie in the future—if our social system enables them. It is difficult to imagine the talent, passion, and energy unleashed on a grand scale when people’s individual rights are respected, and they’re free to pursue their vision without being bogged down by taxes, subsidies, tariffs, and government regulations.

Humanity has experienced unprecedented progress over the past 200 years. But if individual rights had been more respected and protected around the world, much more could have been achieved, and many more lives could have been saved and prolonged and made better. This is evident by comparing the progress in information and digital technology over the past 50 years with the progress (or lack thereof) in most other industries which have been subject to more and more government regulations. Statism not only has directly killed countless millions, but also indirectly shortened both the length and quality of most people’s lives by shackling the pursuit of progress.

It is obviously no use to cry over spilled milk—or even oceans of wealth that haven’t materialized. But imagining what could have been might inspire us to move towards a capitalist social system that enables the geniuses to improve life for all of us and that allows the rest of us to realize our potential without statist interference.

5.7 Safety Nets Flourish Under Capitalism

Welfare statist societies are frequently lauded for providing a safety net for their members. Here in the U.S., Social Security ensures that we have funds to live on in retirement, Medicare gives us access to healthcare once we turn 65, the Affordable Care Act (ObamaCare) provides health insurance and care for the uninsured, and Medicaid provides welfare assistance for those who cannot afford to pay for healthcare. Government regulations abound in these areas trying to guarantee good quality and reasonable prices. And in other areas, regulations try to ensure that the food we eat is not harmful, the medications we take don’t have life-threatening side-effects, airplanes don’t fall out of the sky, alcohol and addictive drugs are not too readily available, banks and financial institutions don’t cheat us of our savings, utilities don’t charge too much for electricity, gas, and water, and so on. What’s not to like? Capitalism surely cannot beat this, right?

Yes, it can, and in spades. But before we get into the details, let’s remind ourselves why the welfare state safety net is morally Wrong. Every “benefit” above violates your and others’ individual rights by preventing you from being fully in control. They prevent you from acting on your thinking when determining where your hard-earned money and savings should be spent. Without exception, in a welfare statist society, your fellow men control parts of your life, and you theirs, through the intermediary of a more or less unlimited government taxing and regulating everybody. Let’s look at the two main welfare statist safety net areas as examples—retirement and healthcare.

The retirement safety net forces you and your employer to each pay 6.2% out of every paycheck to Social Security (you see your contribution but not your employer’s part on your paycheck). The money doesn’t get deposited in an account towards your retirement years; instead, it funds the outlays for current retirees. If you are a government employee you’re most likely enrolled in a similar retirement scheme where your contributions pay the pension for current government retirees.

Likewise, the healthcare safety net forces both you and your employer to pay into Medicare to finance the healthcare needs of your retired parents and grandparents. And some of the federal income taxes you are forced to pay go to Medicaid and other welfare programs.

As for your own healthcare, regulations most likely lock you into a health plan offered by your employer. This makes it impossible to price and quality shop for the best care around. And if you’re not fortunate enough to have employer-sponsored healthcare, regulations guaranteeing coverage for a host of health conditions that will never apply to you make long-lasting, catastrophic health insurance unaffordable and hard to find. And government price regulations make competitive fee-for-service alternatives for routine checkups and minor health issues a rare commodity.

In general, regulations restrain the very people who provide the services constituting the welfare statist safety net: your financial advisor and financial institution, employer, health insurance provider, and doctor. Your safety net options are severely limited due to rights-violating taxes and regulations imposed in the name of “the public interest,” “the common good,” or some other statist slogan.

And in the end, a welfare statist safety net is not as foolproof as you may be led to believe. For example, your future Social Security payout and Medicare coverage depend on working people continuing to pay into the system. Both programs are massively underfunded long-term because of the swelling number of retirees. So really, how safe is the welfare statist safety net?

There is a much better way. Under capitalism, safety nets flourish. Private safety net providers compete to offer you the best deal for your healthcare, retirement, and other safety net dollars. And they do it without using force. Safety net sellers offer their unregulated wares in the marketplace and you and your family select the safety net options that best suit your preferences and wallet. In short, safety net products and services are no different, in policy terms, than other products and services sold and bought in the marketplace.

Let’s start with saving for retirement. From the day you enter the job market, you have an array of products and services to choose from to build your own customized retirement savings safety net. This is true even today in our mixed economy, although the taxes you pay for Social Security and other programs severely constrain your ability to plan for your own retirement.

In a capitalist social system, you don’t pay social security and other safety net taxes, so you have more money left to save out of each paycheck. You aren’t limited to your employer’s 401(k) or similar plan for additional savings because, with little or no rights-violating income taxes, tax-deferred savings plans are a thing of the past as there is nothing to defer. And financial institutions are free to innovate without the burden of regulations. This continuously drives down investment costs, again leaving more money for you. And on top of that, without taxes on interest, dividends, or capital gains, and with the power of compounding returns, your savings grow a lot faster. (as previously mentioned, we will discuss the absence of taxes in a capitalist society in more detail later).

Finally, if you’re worried about the potential future solvency of your financial institution, insurance companies offer inexpensive policies to address such concerns. And to protect their own interests, the insurance companies rate the financial institutions and charge insurance based on the risk level. Consequently, financial institutions have an incentive to not unduly risk your money, because that would mean higher insurance costs and customers taking their business elsewhere.

What about health insurance and healthcare? If you and your partner decide to bring a child into the world, under capitalism your regular health insurance policy may already cover pregnancy and the child. But if not, other providers line up to offer pregnancy insurance to cover the rare but potentially financially ruinous possibility of a medically intensive pregnancy or your child being born with, or later developing, a rare disease.

Insurers also offer you and your family catastrophic accident and health insurance in the event misfortune strikes. And for routine care and minor health issues, you shop around to find the best doctors, hospitals and other healthcare providers your money can buy. Perhaps you choose a monthly fee plan that covers the basics and that has guaranteed prices for non-catastrophic procedures and ER visits. Or perhaps you prefer to shop around each time you need to see a doctor.

And as you approach old age, the catastrophic accident and health insurance that you signed up for early in life is still in place to cover the increasing risk of serious illness. And those retirement savings that we talked about earlier are large enough to provide the final safety net to cover additional healthcare needs as the sunset nears.

Are you worried about oversight? Under capitalism, in every safety net related area, independent, market-based associations and companies provide varied and innovative oversight that far surpasses what the government regulatory monopoly forces on us today. The drivers for quality are the competitive pressure of the marketplace and the need to build up and maintain a good reputation. You don’t stay in business for long with less than a 4-star rating. Just as the information revolution has spawned a huge and constantly improving unregulated market for online ratings and reviews when it comes to such things as products, restaurants and Uber and Lyft drivers, in a capitalist social system independent associations, companies, and individuals meet the demand for watchdog and licensing services either for free or for a fee.

Obviously, this only gives a glimpse of the flourishing safety net that exists in a capitalist social system. One of the beauties with capitalism is that it unleashes the unimagined that we talked about earlier. Free of government regulations, scientists, innovators, entrepreneurs, and their collaborators follow their minds and pursue their vision, constantly raising the bar for what is possible. Over time, this results in better and cheaper retirement savings options, and, in healthcare, better and less expensive medical diagnostics, more effective and cheaper drugs, and amazing medical devices. The result is a longer, healthier, and more financially secure life for you and your loved ones. What more can you ask for?

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