Capitalism drives the economy and democracy further

A strong and robust free marketplace provides democratic societies with many important benefits. Some of these benefits are economic: free markets play a crucial and irreplaceable role in making democracies prosperous. Some of these benefits are political: free markets protect us against certain forms of political domination and authoritarianism. And some of these benefits are moral: free markets motivate and reward people who contribute to their society’s welfare. A good way to appreciate the social benefits of markets is to consider the difficulties manifest in societies that try to abandon them in favor of a command economy— that is, an economic system in which a society’s productive efforts and resource allocations are determined and mandated by a governing authority. Karl Marx’s core argument was that free-market capitalism was an effective way to turn an agrarian feudal society into an industrial liberal society but that it suffered from internal structural flaws (or “contradictions”) that made it incapable of managing a successful advanced economy. In retrospect, however, the actual historical trajectory of the world’s largest and most important officially Marxist countries, the Soviet Union and China, suggests that he got it backwards. Over the first two or three decades following the terrible destruction of the Second World War, the Soviet Union proved that a highly authoritarian regime with a government-controlled command economy could successfully build the necessary infrastructure for an industrial society. By dragooning industrial armies, as it were, and extracting necessary capital from forced labor, the Soviet Union built huge dams, electrified almost the entire country, created agricultural communes, and built many factories. The collective farm system never worked well: the standing joke was that Soviet agriculture— according to the regime— had suffered decades of unusually bad weather. But rapid industrialization had in fact been achieved. In fact, during the sixties and seventies authorities in the United States looked on with real concern and trepidation as the economic growth rate of the Soviet Union continually exceeded our own. In the late seventies and eighties, however, the Soviet Union economy seemed to hit a wall; and by the late eighties and nineties its apparent inability to deal with the demands of running an advanced consumer economy contributed greatly to the dissolution of the Soviet Union regime.