Having set out with this article to show that capitalism does not work, I found, after delving further into the writings of Adam Smith and Milton Friedman, that indeed it does work. I must admit that there is little doubt that in terms of efficiency in the allocation of resources and in the creation of societal as well as personal wealth, there is no system that can match capitalism. As Adam Smith writes in The Wealth of Nations :
"As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."
Ah yes, "an invisible hand" that works its magic in a manner unrecognized. He further remarks:
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."
However, in the same book, Smith acknowledges that some problems may be found in his system. He states, for example:
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."
He speaks also of the need of the "master" to suppress the wages of his laborers as much as possible, making laborers nothing more than commodities. We are to assume, I suppose, that altruism would carry the day over the generated greed, but is that a realistic assumption?
While Adam Smith may make such admissions of problems with the unfortunate realities that must ensue from his system, I could find nothing in Milton Friedman that would support them. Friedman's position is clearly stated thus:
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