Merriam Webster defines "capitalism" as an economic system characterized by private ownership of capital goods, by investments that are determined by private decision and by prices, production and the distribution of goods that are determined mainly by competition in a free market. Baby boomers have witnessed in their lifetime the dramatic victory of capitalism over communism, which may be as much a victory of freedom over totalitarianism. Some consider it a victory of goodness over evil.
Pieces of the former Soviet Union, now individual countries, have struggled with the challenges of newfound freedoms and of establishing governments and economic systems. Former Utah Attorney General Paul Van Dam, speaking to a graduating class of the University of Utah Law School in 1990, presciently observed: “Their dream is our history.” Capitalism coupled with a system of government that constitutionally guarantees basic freedoms has proven to be highly effective and generally a great blessing to our people.
The word capitalism is not found in our Constitution. The first known use of the term was in 1854, over 60 years after the U.S. Constitution was ratified. Its original meaning was “the condition of having capital.” Adam Smith (1723-1790), the Scottish author of “The Wealth of Nations,” is considered by some to be the founder of free market economics. He viewed enlightened self-interest or the “invisible hand” (competition) key to promoting efficiency in the accumulation of capital.
Many others have held varied views of the relative significance of capital and labor and government. These have included Ayn Rand and Milton Friedman, who basically insisted that there be no limits to the power of capital; and Douglass North and others who stressed the need for a legal framework for capitalism to function optimally; and John Keynes, who believed limited governmental intervention can result in improved efficiency, especially in situations of “market failure.”
The first three articles (of seven) of our Constitution define the three branches of our federal government and balance their power, thereby limiting that power. The Preamble to the Constitution is a statement of the purposes or goals the Founding Fathers had in creating the document, including “to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare and secure the blessings of liberty to ourselves and our posterity ….” While capitalism is not mentioned, it has been a powerful tool for our economy. It has, however, always had at least some limits placed upon it. The possession of capital was never meant to provide rights to bypass the laws of the land.
Perhaps the genius of capitalism is that it has powerful built-in incentives. It rewards hard work, discipline and intelligent risk taking. It is sharp and powerful, but it can be a two-edged sword. The direction of untempered capitalism would seem to follow the outcome of the classic game of "Monopoly." When this game is played to its conclusion, the end result is always the same: One player has all the money, and the rest are bankrupt. Capital begets capital in truly powerful ways, whether it is acquired through hard work, wise management, inheritance, gift or luck. The challenge is to maximize the benefits of capitalism while creating a level playing field and safety nets for those who have no other path. Historically, we have a mixed record in achieving this.
Over the years ,wise men and women have taken steps to temper our system. The Advancd English Dictionary defines "tempered" as “hardened, toughened, made especially hard or flexible or resilient.” Many of the most effective medications I use in my practice have significant side effects and risks. Improperly dosed, some can have lethal effects. Their use must be tempered. The automobiles we drive are powerful enough that if we didn’t temper that power through restraint and speed limits, we would destroy ourselves and each other on our highways.
Likely the only entity potentially powerful enough to provide such a tempering influence on our economic system is our government. Examples of tempering actions for capitalism include legislation relative to antitrust, truth in lending, banking, agriculture, labor standards, Social Security, health care and unemployment. Some of these programs were begun under President Theodore Roosevelt, a Republican, and further developed or begun under President Franklin D. Roosevelt, a Democrat. Other important factors tempering capitalism include public education and taxation policies.
A quarterly publication, The National Interest, observed: “FDR transformed the nation in the face of its worst economic crisis, then transformed the world in the face of a dark global crisis.” Arguably FDR saved capitalism by tempering it. In the process, he may have saved our nation as we know it. Thus he is rated with such leaders as the one who saved our republic by refusing to be king and the one who saved our country by refusing to have it divided over slavery.
In our day of hyperpartisan stands and rhetoric, reason and balance is critically needed. May we as a nation have the courage and the wisdom to temper and strengthen our remarkable system when it is necessary and appropriate.
Ed Allen is a practicing dermatologist in Ogden. He served on the clinical faculty at the University of Utah for approximately 30 years. He is a former member of the Utah State Senate (1999-2003).