CAPITALISM WORKS ONLY WITH CREATIVE DESTRUCTION

CAPITALISM WORKS ONLY WITH CREATIVE DESTRUCTION

By Domenick J. Maglio Ph.D. Traditional Realist

On November 2016, the day after Donald Trump became president, Nobel prize recipient, Paul Krugman stated, “it really does look like President Trump and the markets are plunging…the question is when markets will recover a first-pass, I think the answer is never.” Although he was the preeminent anti-Trump economist, he was one of many doomsday prognosticators who unleashed their “insightful knowledge” by agreeing that Trump’s economic policy would be a disaster. Instead of the economy unraveling it has reached the heights that no one was able or willing to predict: so much for economics as a scientific field of study.

The deregulation of the economy, significant corporate tax reduction that brought back billions of offshore dollars and the realization that President Trump’s future economic policies will continue to strengthen the United States’ financial power has created positive momentum for all American businesses. The progressives whok were again predicting that private businesses would selfishly keep the money for their shareholders and their own self-interest were wrong. The surprise for them was that large numbers of businesses voluntarily started to institute raises and bonuses for their employees.

The difference is that progressives have a distorted view of capitalism. They view big business as the selfish enemies of the people and government.  They see themselves as the protector of the non-productive and even illegal immigrants. These elites fail to understand that without productive citizens there would be little tax money to collect and distribute to their primary voting base and lobbyists. Without these funds they cannot gain favor with the electorate and win elections.

The last administration’s attempt to control the private sector by picking winners and losers, pay to play, increasing regulation and selectively enforcing the law had crippled the US economy. It remained at a 2% level for 8 years.  This direct attempt to interfere with the invisible hand of the free market turned us further from a capitalist economy to an anti capitalistic one named “crony capitalism.” This translates into the administration’s use of tax revenue and power influence to “save” certain corporations and not bail out others. This symbiotic relationship between huge corporations and a centralized government that employs government regulations and does not administer the corporate laws justly is a breeding ground for corruption. These are ingredients for creating a fascist state.

Entrepreneurs are innovators who develop new technologies and production methods that replace the old with better ideas and products. Some of these include developing distributing systems like UPS and Amazon or advanced technology in fiber optics, microchips, satellites or a host of other business arenas.  Replacing the old with the new necessitates a world of incessant change. The government should not direct this change for political purposes but allow and encourage the indirect process of consumers freely selecting the best products at the right price is the most efficient means of economic development. Competition in the marketplace ultimately should determine who flourishes and who self-destructs.

New innovative devices or means of production lead to better products at a reasonable price. When the best product is surpassed by a better one the challenged company either innovates and improves or goes out of business. There should not be government interference in this process since the changes will be political rather than economically motivated. Millions of consumers should have the ultimate decision making power through studying the products and choosing what they consider the best of many. The results of many millions of purchases should be the factor that determines the viability of the item, not a government bureaucracy.

The products that are bypassed by the consumers either develop a better product to compete with the other companies or lose their market share and eventually go out of business. This creative destruction process allows a capitalist economy to be super efficient, which creates vast capital for any nation’s economy. The economic pie grows giving each of us a bigger slice of personal assets while the need for physical human labor decreases.

The creation of national wealth has been accomplished by capitalist societies and has been squandered by redistributing (robbing) individual assets through taxes. Cuba, Venezuela, North Korea, Laos, Zimbabwe, Soviet Union and others ruled by centrally controlled governments and have been ruined by corrupt rulers at the top. These nations have experienced the total deterioration of their economy. The lack of allowing capitalist market forces such as creative destruction to operate unrestricted by political considerations has resulted in out-of-control disastrous economies. Political dictators cannot efficiently and effectively micromanage the complexities of a modern international economy.

Domenick Maglio, PhD. is a columnist carried by various newspapers, an author of several books and owner/director of Wider Horizons School, a college prep program. Dr. Maglio is an author of weekly newspaper articles, INVASION WITHIN  and a new just published book, entitled, IN CHARGE PARENTING In a PC World. You can visit Dr. Maglio at www.drmaglio.blogspot.com.