Karl Marx said that capitalism carries the seeds of its own destruction. I think this is partly true. In my opinion, every human endeavor carries with it the seeds of its own destruction, because humans are fallible and not all-knowing. It follows then that any system – be it economic, social, governance, business, or whatever – will fall short of perfection and thus be susceptible to failure.
Ironically, socialism/communism – Marx’s own invention and proposed solution to all human struggles – is a perfect example of this. It’s a historical fact that socialism/communism (one and the same) has failed every time it has been tried throughout human history and across the globe due to many of its intrinsic principles and qualities. But, I digress.
Capitalism may not be a flawless economic system; however, it must be recognized as the best, most productive, enriching, and beneficial system for human flourishing so far devised by man.
The biggest weakness of capitalism is its susceptibility to corruption and abuse by the very sociopolitical system on which it depends for its existence: liberal democracy. In order for free-market capitalism to properly function, it requires an environment of liberal democracy. Yet, it is that very environment that will eventually strangle and kill both capitalism and democracy.
More so than capitalism, it is liberal democracy which carries the seeds of its own destruction. Those seeds are nourished and cultivated by their creeping influence and effect on capitalism. The self-destructive tendency of democracy corrupts markets. It inhibits their ability and incentives to self-correct and perverts and transforms capitalism into a parasitic monster which devours its host.
The Scottish historian Alexander Tytler (1747-1813) said, “A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.”
He went on to say that the world’s greatest civilizations have an average life span of approximately 200 years in which they follow a cycle from bondage to liberty, which leads to abundance and complacency, and finally back to bondage.
This is proving true today in the United States of America and elsewhere. The only way to fund the insatiable appetite for public funds is for government to continually and increasingly interfere and intervene in markets via taxation, subsidies, and regulation. These prevent the free function of markets, which enables abuses and destructive outcomes, which lead to the demise of both capitalism and democracy.
There is no middle ground between capitalism and socialism. There is no such thing as a “mixed economy.” It is by definition either one or the other, because it can’t be both.
What so many today preach as the failure of capitalism are not so at all. They are failures of democracy, plain and simple. The corruption of capitalism is merely a symptom of the failure of individuals who comprise democratic societies to exercise self-control, personal responsibility, fiscal discipline, and adherence to first principles of liberty.