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The Case for Capitalism

Heather Bone
Year 1: University of Waterloo (Class of 2018)
Honours Arts and Business (Joint Major: Political Science and Economics)
533 Elizabeth Street, Brussels, ON, N0G 1H0
heather.lynn.bone@gmail.com
519-525-0378

In today's political climate, one of the most widely believed lies is that capitalism and corporatism are
synonymous. In reality, they could not be further apart. This belief was commonplace following the
2008 financial crisis, to which a lack of government regulation was often provided as a causal factor.
Proponents argued that the free market encouraged large financial institutions to make subprime loans,
causing a downward spiral to recession. Today, government-backed monopolies and corporate welfare
are both forms of corporatism known as crony capitalism. While crony capitalism may stimulate
growth in particular industries or companies, it does so at a cost. Taxpayers, consumers, other
industries, and future generations carry the burden.
Crony capitalism can be defined as using one's position of power to secure government
provided benefits in an industrial context. In her book Plutocrats, Chrystia Freeland correctly
distinguished between true capitalism and corporatism, saying that, Most lobbying is pro-business, in
the sense that it promotes the interests of existing business, not pro-market in the sense of fostering
truly free and open competition (2014, p. 262). The laws of supply and demand show that when
demand exceeds supply, the prices of goods and services are forced upward. However, when there are
no barriers to entry, firms can freely enter the market (and will, if there exists above-normal profits). As
this happens, the supply of goods and services will increase and their relative price will fall.
The Government of Canada has recently adjusted its policy on telecommunications. By
allowing more competition to enter the market, telecommunications services will be less expensive for
Canadians because the oligopoly composed of Bell, Rogers, and Telus will be challenged. It is clear
why Canada's telecommunications sector was outspokenly opposed to the new changes: It was bad for
their bottom line. In fact, in France, telecommunications prices fell 21.3% in direct response to a new
competitor entering the market because of liberalization (Brygger, 2014, para. 3). Supply management
is another manifestation of crony capitalism. It limits competition in two ways. It heavily restricts
foreign imports (of milk, cheese, eggs and poultry) through means of tariffs and it requires farmers to
limit production to a quota (purchased by the farmers), thus raising the price of the commodities by

limiting supply. According to Micheal Bloom of The Conference Board of Canada, the average
Canadian family spends $276 more on dairy products than consumers in other countries (Dowdall,
2014, para. 2). In addition, it also prevents middle-class Canadians from entering the agricultural
industry because they cannot afford to purchase quota. Instead of implementing redistributive programs
to tackle income inequality, barriers to entry should be reduced as crony capitalism diverts purchasing
power away from the consumer and into the hands of big business.
For believers in big government, equating capitalism with corporatism has facilitated lobbying
for the redistribution of wealth. Proponents claim that redistribution is justified, as in our current
system, the rich get wealthy at the expense of the poor. These people make free markets their enemy,
when crony capitalism is truly to blame. The capitalist solution encourages competition which causes
prices to fall. Corporations are then forced to fight for the taxpayer's dollar, instead of making profits at
their expense. For example, if supply management were abolished, the prices of dairy and poultry
would fall and the wealth would be distributed from the hands of farmers into the hands of the
consumer. This would be an ethical and an effective way to address income inequality from a capitalist
perspective.
In Economics in One Lesson, Henry Hazlitt argued that one of the largest economic mistakes is
for policy to focus on one group of people, while ignoring its implications for others. Specifically, he
said that, While certain public policies would in the long run benefit everybody, other policies would
benefit one group only at the expense of all other groups (1979, p. 15). Corporate welfare is a form of
crony capitalism that demonstrates this quite clearly.
Perhaps the best known example of corporate welfare is the 85-million dollar handout that was
given by the United States and Canadian governments to Ford, General Motors, and Chrysler at the
height of the 2008 financial crisis. While on a surface level, these bailouts were seen as necessary to
save automotive jobs, governments overlooked the negative implications for the taxpayer and the tax
burden on the future generations that will be paying the bill (with interest). For every dollar taken out

of the taxpayer's pocket, they have one less dollar to spend (or save in a bank), which would stimulate
investment and provide jobs nonetheless. The difference between these jobs and jobs saved through
bailouts is that they are harder to see as they are spread out over many industries. However, when the
money is left in the taxpayer's pocket, they are given the freedom to buy goods that they want, and the
market correctly discriminates against unproductive industries rather than allowing them to thrive
(Hazlitt, 1979, p. 102). The market therefore, provides jobs just as well, without any disrespect for the
taxpayer. It does so without a costly bureaucracy to facilitate the process, and the free-market solution
is best for our nation's future economic stability.
Our capitalist system has been blamed for a lot of economic turmoil today. However, many do
not acknowledge that the corporatist elements of our economy that are rightfully detested come from
economic planners, not true capitalists. There appears to be much confusion about what capitalism truly
is. Filmmaker Michael Moore described it as such:
Capitalism is an organized system to guarantee greed becomes the primary force of our
economic system and allows the few at the top to get very wealthy and has the rest of us riding
around thinking that we can be that way, too if we just work hard enough, sell enough
Tupperware and Amway products, we can get a pink Cadillac. (Kaufman, 2009, para. 4).
Indeed, attacks have been spewed at proponents of economic liberty for looking out for the old boys
club or only caring about the rich. Conversely, the rich actually benefit when private property is
disregarded, and profit from protectionist barriers. While capitalism certainly allows for the pursuit of
profit, it is built around the opportunity for all to pursue it. A false definition of capitalism has truly
been engrained in the minds of Canadians today. The crucial action for liberty-lovers today, therefore,
is to stand up against corporatism, and correctly define what capitalism is. By doing so, Canada will
take one large step towards economic freedom.

Works Cited
Brygger, R. (2014, May 7). Facts for liberty: French phone carrier prices drop
following
competition. Retrieved May 27, 2014, from
http://studentsforliberty.org/blog/2014/05/07/facts- for-liberty-french-phonecarrier-prices-drop-following-competition/
Dowdall, B. (2014, February 27). Dairy supply management costs consumers and farmers.
Retrieved May 27, 2014, from http://www.conferenceboard.ca/press/newsrelease/14-0227/dairy_supply_management_costs_consumers_and_farmers.aspx
Freeland, C. (2014). Plutocrats: The rise of the new global super-rich and the fall of everyone else.
Canada: Anchor Canada.
Hazlitt, H. (1979). Economics in one lesson. New York: Arlington House Publishers.
Kaufman, A. (2009, September 14). Michael Moore takes on Citibank, Goldman
Sachs in Capitalism: A Love Story. Retrieved May 27, 2014, from
http://blogs.wsj.com/speakeasy/2009/09/14/michael-moore-takes-oncitibank-goldman-sachsin-capitalism-a-love-story/