The great virtue of free-market capitalism is that it has lifted more people out of poverty than any other economic system in the history of mankind.1 Throughout history, until the last couple of hundred years, people have suffered under various forms of political despotism and feudal and mercantile systems of economics. Only a very few enjoyed wealth and plenty, while the vast majority were lucky to have barely enough to keep them alive for a short number of years.
Adam Smith’s The Wealth of Nations, published in 1776, chronicled the birth of capitalism, the notion that accumulated capital could purchase machinery that could substitute for human labor and produce “more for less.” The Anglo-American system of “rule of law” and “property rights” allowed capitalists to enjoy the fruits of their enterprise, re-invest in even more labor-saving methods of production, and increase the tempo of the “rising tide which lifts all boats.” Life expectancy grew with increases in income, which allowed for better nutrition, health care, sanitation, etc.
While it is true that new goods and services are generally introduced at high prices and are only affordable for the rich, the real money is to be made in selling thousands of units to the middle- and working-classes, not dozens of units only to the rich. As long as competition is not outlawed, overly regulated, or otherwise hampered by political favoritism (sometimes referred to as “crony capitalism,” but more appropriately labeled “crony socialism”), those who want to get in on the bonanza made possible by the new good or service force down the prices as continual improvements are made in the production and distribution of the new products. Hence the use of the term “industrial capitalism” to describe how the process has changed over time.
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