Capitalism and Unfair advantage

What people call “crony-capitalism” is a private party gaining an unfair advantage in the marketplace over his competitors by the means of governmental intervention in trade. This happens by lobbying the Government to pass trade regulations in their favour, creating state sponsored monopolies. But when the Government is accorded such power to intervene in the market, by the citizens, the market is no longer free, and the political-economic system is not Capitalism.

Allowing governmental interference in trade activity will incentivise the private parties to lobby, and makes the bribery of governmental officials possible. Absent governmental interference, there is no way an individual can have an unfair advantage in the market.

Observe that “fairness“ doesn’t mean “equality”. Fairness is a concept to be understood in the context of economic freedom. A free trade is fair trade. It means that the consumer is choosing by his free and voluntary will, with his complete knowledge, the best product in the market he can afford, from the producer he wishes to buy from. The choice is not unfair, if it is not forced upon him.

Competence makes wealth possible, not the other way around. In a capitalist system, wealth is produced through competence, and lost through incompetence. How the individual spends his wealth is completely his choice. If a poor producer is not able to compete with a rich producer in creating and selling a better product at a lower price, it is not unfairness. It is unfairness if you are forced to buy from the poor producer, by the government, because he needs money, though he is incompetent. It is unfairness if any producer, poor or rich, is not allowed to sell his product in the marketplace through governmental interference. It is unfair because then, your choice to trade is no longer free.

In a Capitalist society, the institution that protects the individuals against the abuse by a producer who sells his goods to his customers by cheating or stealing, or by physically forcing his customers to buy from him, or by forcing his competitors out of the market by physical violence, is Government.

Individual rights are the means of preserving an individual’s morality in the society. They are the principles that protect an individual from the immoral choices of his neighbours. The only proper purpose of Government is to protect the individual rights: Life, Liberty and Property, whose meaning is in essence, to safeguard the freedom of action of the individual.

Capitalism is the only morally proper system of economy, because it is the only system that is made possible by, and works on the principle of individual rights.

– Avinash Kumar.

Note: This article is originally my answer to the question on Quora: How can capitalism be a success in India if there are too many people in India who lack proper morals & ethics and thus misuse capitalism to promote crony capitalism in order to cheat and abuse people for their own benefits?

The meaning of political equality

Political equality means that the individual rights of all the citizens are equally recognised, and protected by the Government. It is the essential condition for existence of a free society, and the only kind of equality possible between individuals.

Remember that the concept, “rights” only pertain to the Freedom to take actions: the individual’s freedom to live, to think, and consequently take actions to produce and trade values, without compulsion or intrusion from other individuals, including and especially, the Government.

If a group of individuals is accorded any exclusive rights, that are denied to others, its meaning and unavoidable logical consequence is a state-sponsored monopoly on production and trade.

Observe that the violation of your freedom to produce and trade, by others(especially the government), essentially implies and requires the violation of all your rights: It implies the violation of your right to think(since the purpose of thinking is to take action, and your freedom to think is redundant if you are not free to act and produce values in accordance with your judgements), and the violation of your right to live(your life, ie., a life proper to man: a non-parasitic life, requires that you think and act to produce and trade values, in order to sustain your own life). This is the reason why a free mind and a free market necessitate each other.

In this context, economic equality may be understood only in the sense that all men must possess the same political-economic right: the right to free trade. ie., the freedom to produce and trade any values with other individuals, with the voluntary consent of both the parties involved in the trade.

This doesn’t mean that all the individuals should be equally wealthy. It only means that all the individuals must possess the same freedom to think and act, to produce and to trade: the same freedom to live. In a laissez faire capitalist society, —ie., a society where individual rights are absolutely protected, and the government is completely separated from trade: making the state-sponsored monopolies impossible— your wealth is a consequence of your competence in exercising your freedom to produce.

– Avinash Kumar, 7 June 2020.

Note: This article is originally my answer on Quora to the question: “What is the relationship between political equality and economic equality?”