Saturday, 4 February 2012

The beauty of capitalism

There is a never ending history of blaming capitalism for all evils in society. The vigilantes are always out there looking for market failures and externalities to "prove" the limitations of capitalism.

The most recent accusation is that capitalism is responsible for obesity because the food industry is driven to profit from what Ken Rogoff called coronary capitalism.

The idea that capitalism promotes vice at the expense of virtue is an historical nonsense. Otherwise, after 200 years of capitalism, western economies would now be dominated by casinos and brothels. Yet, these vice industries are still niche industries.

It is true that capitalism is affected by market failures and externalities, but these are the exception not the rule. It is also true that it may cause some unhealthy patterns in terms of consumption. But in market capitalism these imbalances are necessarily temporary; while they are bound to be perpetuated under other economic systems and government rule.

In fact the food industry provides a unique proof of this principle. As soon as the junk food became dominant and inefficient a growing number of enterprising capitalists stepped in to offer all sorts of alternatives; ranging from the organic food industry to the keep fit and health clubs without any government intervention.

Indeed if the fast-food industry still caters for so many people that is because of governmental failures rather than market failures. It is because of government failures that we have an ever growing number of families living on social security and low-cost dinners. It is because governments provide lousy school meals that children acquire unhealthy eating habits. And, it is also because of government´s inadequate funding for scientific research in food and health that we have so much voodoo science in what relates to healthy eating habits.

On the contrary, capitalism is part of the solution for these government failures. By competing to provide low income families with affordable and varied meals it facilitates the acquisition of good eating lifestyles.

That is really the beauty of market capitalism. Instead of raising regulatory barriers to protect the incumbents in the food industry competition ensures that they will be under permanent challenge. So, it corrects not only its own imbalances but also those created by either devious or well-meaning paternalistic governments.

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