Is capitalism really the best economic system?

From the time we were children, we have been indoctrinated to think of capitalism as the best economic system on the planet, synonymous with “freedom and democracy” and even America itself. Capitalism is the “American way,” and it holds out the promise to ordinary people, that if they apply themselves, they too can become wealthy. So, no surprise there’s a taboo when it comes to looking critically at how our economic system is organized and at whom it actually serves. To question capitalism, or to suggest other economic systems might be more humane and effective at helping everyone, is considered deeply un-American.

If there is poverty, we are taught, it is caused by individual lack of initiative and effort, or by social problems like racism, or by bad parenting, not by the economic system itself. This view is repeated in classrooms and churches, and woven into advertising and media. University economics programs assume capitalism as a given, and corporate owned media rarely questions capitalism as a system. Even those who call themselves “liberal” or “progressive” wholeheartedly support capitalism. We are taught that this system is superior because anyone has a chance to make it, and if you don’t make it, it’s your fault. “Making it” is defined narrowly as making a lot of money and owning the material possessions that go along with that. All the other intangibles that make life worth living are left out of the equation.

Capitalism creates poverty

In the United States, where we have the “best economic system on the planet” the level of poverty is startling. We are a country of absolutely enormous wealth, yet, according to the census bureau, more than one in every six people in the United States lives in poverty or near-poverty. Poverty is defined as living on $23,000 for a family of four—a ridiculously low and unrealistic figure. It’s nearly impossible to survive on this without government subsidies. Here’s a summary of Census data on poverty from Wikipedia:

In November 2012 the U.S. Census Bureau said more than 16% of the population lived in poverty, including almost 20% of American children, up from 14.3% (approximately 43.6 million) in 2009 and to its highest level since 1993. In 2008, 13.2% (39.8 million) Americans lived in poverty. Starting in the 1980s, relative poverty rates have consistently exceeded those of other wealthy nations. California has a poverty rate of 23.5%, the highest of any state in the country.

In 2011, child poverty reached record high levels, with 16.7 million children living in food insecure households, about 35% more than 2007 levels. A 2013 UNICEF report ranked the U.S. as having the second highest relative child poverty rates in the developed world (behind Romania).

John Maynard Keynes capitalism quoteWhen we shift our focus from poverty as caused by individual failure, and look at the economic system itself, capitalism’s role in causing poverty is quite clear. Rather than being designed to provide economic wellbeing for everyone, from the beginning capitalism was organized to allow a small elite to control most of the wealth produced by working people, along with the means to produce that wealth—the factories, machinery and tools. The capitalist system as practiced in the United States today, with regulations gutted and tax loopholes expanded, gives a massive share of total wealth and income to a small elite and leaves the remainder to be competed for among the rest of the population. Even mainstream media has acknowledged that income and wealth inequality are growing.

Core capitalist myth: greed is good

It’s a core myth of capitalism that greed is the prime human motivator, a positive creative force that is justified because the wealth generated will “trickle down” to the majority. That myth persists even though a substantial level of poverty exists in the wealthiest country in the world.

Because the decision of what to produce is driven by considerations of return on investment, the effect that product or service has on the larger society is never considered. For example, corporations create unhealthy food products and contribute to climate change while spreading  lies and misinformation to the public to protect profits.

The elite and the politicians who represent their interests keep telling us that America is the land of opportunity and that greasing the skids of opportunity is the answer to income inequality. In this mythical world, they say they want everyone to “have a chance,” yet it is a chance in what they, and increasingly the general public, know to be a gamed system.

During the so-called “golden age of capitalism,” right after the war and up to the 60s, the tax rates on the wealthy were high and corporations and banks were regulated. But when those protections that allowed a middle class to flourish started to be unraveled, first under Carter, then under Reagan, Bush and Clinton, the middle and working classes stated to go under.

Capitalism only considers wellbeing of shareholders, not society at large

Capitalism as a system is designed to maximize profits, so it was only a matter of time before the system would assert itself again with force. In that system, and by law, there can be no consideration of the well being of anyone except shareholders. So absolutely everything is fair game, from undermining social programs in order to pay lower or no taxes, to dumping toxic chemicals into rivers, to destroying small businesses in communities, to keeping wages as low as possible, to producing a pesticide that destroys bees, to closing factories and outsourcing jobs to poorer countries, to spending enormous amounts of money to buy politicians who, in turn, enact laws that enhance their bottom line. This sociopathic behavior is considered rational and normal, and even expected, within the capitalist system. The bigger the SOB you are in the corporate world, the more you are admired and valued.

Given the socially irresponsible behavior of corporations and their owners within the capitalist system, it’s no surprise that, in the United States, one in 6 people live at or near the poverty level or live in fear of ending up there. Contrary to conservative views, the poor are not lacking in initiative or intelligence. Many are working three low paying jobs to stay afloat. This is what the capitalist system produces. Poverty happens when behemoth corporations controlling massive amounts of wealth have no responsibility to anyone but themselves and shareholders.

Public debate about poverty focuses on the individual rather than on the economic system in which it occurs

Public debate about poverty, what little there is, is almost always about the individual. Liberals want to help the individual, to shore them up with public programs, until they can get on their feet and get back into, or join, the capitalist system. Conservatives, pointing to the failure of government programs like welfare and food stamps to lift people out of poverty, want to gut those programs claiming they cause laziness and dependency. Both liberals and conservatives avoid looking at the capitalist system itself as a primary cause of poverty.

Individual effort is a factor in economic and social success, but we all participate in a capitalist system. Leaving the system itself out of public policy discussion completely ignores capitalism as a causative factor in poverty, and allows the myths and destructive aspects of the system to continue.

It’s time to have an honest discussion about how capitalism really works, and for whom it works, not how we imagine it works, or wished it worked. On a personal level we may have to examine our own tendency toward greed and our justification and rationalizations for it. We may find that capitalism, and the greed and hyper-individualism enshrined within it, is incompatible with a humane, just, and compassionate society.

If not capitalism, then what?

This will be the topic of future posts.

Madonna Gauding (278 Posts)

Madonna Gauding is a freelance writer, illustrator and book designer living in St. Louis. MO. She is the author of 10 books on a variety of "mind, body, spirit" topics.


  • Melanie

    Personally, I just want to move to one of the Nordic areas and live there, because they’re stable, and I won’t have to worry about all these American issues.

  • Disneygirl712

    I agree that capitalism is a serious problem in America. Businesses really use harmful tactics to protect their wealth, while the majority struggles to even survive. I’m not sure what system should replace capitalism in the future, but the one we have now has got to go.

  • Dwain Dibley

    How about we go back to the economic system we had before the ideology of capitalism corrupted and destroyed it. How about we go back to free/private enterprise and true free markets.

  • Bryan

    Capitalism is a true free market. We have croney capitalism in America which is where the government and big business collude.Propaganda is easily spread among the uneducated. I would like to have property rights and be able to make something of myself.

  • Dwain Dibley

    The ideology of Capitalism does not bestow upon you the right to own property, or the ability to make something of yourself.

  • Mark Magbanua

    Inevitably, socialism. A socialist society to be established by proletariats.

  • cera

    So what system made it the wealthiest country in the world?

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  • Steven

    Nice article. Capitalism has brought the U.S. out of a largely agrarian society, but now it seems as if massive acumulations of wealth are actually harming progress in our society. Certainly many people would agree that Capitalism works far better than any Communist model (true Marxism was never tried, only undeveloped nations made the conversion) that has ever been put in place. I talk about similar things on my website http://www.blogbyday.org (check it out). Again nice post.