Sunday, July 19, 2009

Questions about Capitalism

Question: You say you are in favor of the free market—but can't big corporations interfere with free competition? Can't they force employees, distributors, and suppliers to accept their terms? So isn't government force, such as antitrust prosecution, necessary to protect individuals from this "economic force"?

Answer: As private corporations, business has no power to force anyone. The entire claim that businessmen can coercive their customers (and, indeed, the entire case for the antitrust laws) is based on equation between economic power and political power. The difference between these two forms of power must be kept strictly in mind—for it is a difference with life-and-death consequences.

In "The Dollar and the Gun" (The Objectivist Forum, June 1983), philosopher Harry Binswanger defines the difference between these two forms of power:

"'Political power' refers to the power of the government. The special nature of that power is what differentiates government from all other social institutions. That which makes government government, its essential attribute, is its monopoly on the use of physical force. Only a government can make laws—i.e., rules of social conduct backed up by physical force. ...The penalty for breaking the law is fines, imprisonment, and ultimately, death. The symbol of political power is a gun.

"Economic power, on the other hand, is the ability to produce material values and offer them for sale. E.g., the power of Big Oil is the power to discover, drill, and bring to market a large amount of oil. Economic power lies in assets—i.e., the factors of production, the inventory, and the cash possessed by businesses. The symbol of economic power is the dollar.

"A business can only make you an offer, thereby expanding the possibilities open to you. The alternative a business presents you with in a free market is: 'increase your well-being by trading with us, or go your own way.' The alternative a government, or any force-user, presents you with is: 'do as we order, or forfeit your liberty, property, or life.'"

The only power a business has to induce customers to give it money is the value of its products. If a business started to produce an inferior product, it would eventually lose its customers. By contrast, the only power that the government has to offer is a threat: "We'll dictate what businessmen can and cannot do—and businessmen better toe the line or we'll throw them in jail."

From: Frequently Asked Questions about Capitalism

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