Capitalism Does not Exist-part 1

This post will be multiple parts as it grows. The idea is to show when people talk about free market or capitalism it is a myth and does not exist. It is to show how it cannot solve problems like many political people will say. "Get government out of business or the market place, the market will solve the problem" Other statements like this are just not true. Adam Smith the founder of capitalism or modern economics came up with the idea of capitalism and the invisible hand. He was arguing for capitalism versus mercantilism. Adam Smith believed in the idea of competition and the role of the government was to protect property rights, resolve property right disputes and prevent monopolies. At his time the East India Trading Company was the largest company in the world and had monopolies in multiple areas. Free enterprise and capitalism is where people and firms answer the 3 basic economic questions and own the factors of production. Characteristics of capitalism is voluntary exchange, limited government, private property, competition, price system, profit motive and economic freedom. Now most would say we have voluntary exchange, private property, profit motive and economic freedom. The areas that kill capitalism is the lack of competition which is key. My conservatives would say that government is not limited and is too active in the economy. The price system is modified by government is some industries but for the most part would be a characteristic that works for capitalism. Perfect competition markets have four characteristics and none of them truly exist in any industry or market in the US. Number one rule or evidence of perfect competition is that no company or person controls the price. The market will set the price. You can see this characteristic in that there is no menu or set price, but people and firms negotiate prices. The products are identical or very similar in that the buyer does not care who he or she buys from. I can buy from anyone and the product is roughly the same. There is open and free information about the product and prices. It is easy to get information about all products, all companies and quality. Another characteristic is that firms can enter and exit the industry very easily. If profits are large in an industry, a firm will see this and join the industry or market to make the product. This entrance will in effect lower prices and improve quality as more companies are competing for the sales. The last characteristic is that there are many buyers and sellers and this is key. There are not 1, 3, 5 or 20 firms selling the products but thousands or millions. The more companies the better. It is better to have buyers and sellers be close to equal but not required. All of these characteristics and ideas are to improve the product quality and lower the price. With this situation, innovation will occur and even wages will increase as there is competition for workers to innovate and make better products. There is no industry that has these characteristics but most economic classes will point to agriculture, restaurants like pizza or maybe the stock market to visualize this concept. Most of the United States industries have monopolies with one firm in the industry, oligopolies with 3-4 companies controlling a market or monopolistic competition with 5-20 companies controlling industries. Each of these types causes less competition, higher prices, less output or sales and less innovation. They restrict competition and encourage and want higher prices. These industries are oil, cars, breakfast cereals, TV or computers, software, utilities, movies and entertainment, airlines and all of the US economy. We do not have perfect competition or free enterprise. The role of government would be to limit mergers and generate competition. The anti trust busting needs to come back to the US. The not allowing any merger and to make too big to fail a reality. Companies should be cut up to have competition. Most people are against this and do not believe this should be done as it is against people's freedom of enterprise even though it goes against competition. Name one company that wants competition? They want to kill the competition and gobble up the competition. In the early days of the US, the government was involved in business and markets. The railroads could not have been built without the government. Government gave corporations charters, created rules, created tariffs to protect business and gave subsidies to companies to survive. The US government has always been involved in business. Business have been great in marking free enterprise while taking subsidies and grants to make more money. Does EXXON need subsidies? United? Walmart? GE? Agribusiness? The government not only bails out companies but gives free money to companies. Lets get over the idea we are capitalist or have a free market. We don't. It is an economic theory like communism. Just remember one of the US's greatest achievements-winning World War II or landing on the Moon were government controlled and manipulated. I will cover racism and discrimination, innovation and new industries, free trade, privitization government functions, public goods, rules to improve capitalism or how to make it work for everyone and income inequality. Let's discuss the issues and problems with capitalism. Let's learn and make rules that don't change daily. Let's make it work for everyone. Let's stop saying the free market will solve the problem.