Capitalism a Problem?

My daughter has just started college at BYUI. She is taking a sociology class and sent me a text that said "I need help with a sociology question: Why does the rise of capitalism effect how our society functions and how can we stop capitalism from becoming a problem?"

My jaw dropped; I didn't even know where to start. I felt slightly better to hear that it was a question from another student that she was supposed to respond to and not from the instructor. What I find so disturbing about this question is that it comes from a student at BYUI, because the student is most likely LDS and we believe (and teach) that the Constitution of The United States was inspired by God. Our Constitution is what sets up capitalism, because in order to have liberty you must also have economic liberty. Without the freedom to engage in commerce (or not); freedom to try; freedom to buy; freedom to sell; and freedom to fail there really is not liberty. Capitalism is fundamental to liberty- liberty does not really exist without it.

Let's take a look at that question in its parts- "Why does the rise of capitalism effect how our society functions..." Why? Because it is an integral part of our society from the beginning. It is the economic system that was brought into existence by the Constitution. Why? It is the only economic system that leaves all people free to improve their station in life. To move during a lifetime from the poor to the middle class to the wealthy is only possible under capitalism. Under all other ism's people are segregated into classes and the opportunity to move upwardly is nearly impossible. The question seems to be asked as if it is a bad thing that capitalism impacts our society, but on the contrary, its impact is positive. With this system products and services are offered based on the demands of the customer rather than a central planned economy where products and services are provided at the direction of a government bureaucrat.

The next part of the question "... how can we stop capitalism from becoming a problem?" It doesn't become a problem, however, there probably is some confusion on this given all the recent economic trouble our country has experienced. Our economic meltdown was caused, not by capitalism, but by government regulation, interference, and medaling in the markets. Yes greed becomes a problem when, driven by government mandates, men act in ways that they would not otherwise act. Very quickly- the government and regulators were threatening banks if they did not start lending more to minorities and poor action would be taken against them. When coupled with pressure from the government and implied associations that if it all went bad that the government would bail them out, many were driven to behave in non-capitalistic ways. The whole housing finance economic meltdown is a perfect example of the serious dangers when you leave capitalism and embrace government involvement in the markets. Under capitalism the decision to give someone a loan is solely based on an individual's ability to pay- this is not how lending institutions were behaving.

Capitalism is what made the USA a great nation. It is the system we have brought to many parts of the world and, to the extent that other countries have instituted capitalist principles, they have prospered. For more on the Lord's economic plan check out my blog with that title.