It Is A Myth That Capitalism Shuts Down Social Mobility

By Andrew Lepore | United States


As we know, those on the left of the political spectrum who are in favor of socialist policy aim to “even out the playing field” through policies designed to redistribute wealth. Of course, participation in these programs are involuntary; you have no say in where your money goes, or how efficiently it’s spent. These programs include the minimum wage, the welfare state, and mandating employers to provide benefits which previously were bargained for as incentives for employment.

One common argument in favor of the implementation of these forced mandates is the myth that capitalism and the free market prohibit social mobility. They say that the rich get richer and the poor get poorer in capitalism. That the game is naturally rigged in favor of the rich. They say in “pure capitalism,” corporations will only grow larger and larger, that the price to live will go up and standard of living will go down. That eventually the economy will devolve into some form of monopolistic feudalism. This is a good scare story, but it is factually incorrect and easily debunked on multiple levels.

This myth cannot be further from the truth. In fact, just the opposite is true. No system throughout history has provided the poor with a better opportunity to ascend to the middle and upper classes than the free market. In feudal society, before capitalism, you were either an aristocrat or a peasant who served them, with almost nothing in between. Before capitalism, you did not have the equal opportunity to sell your labor to the highest bidder, accumulate wealth, and move up the social ladder. Your social status was set in stone. No matter how productive or competent. If you were born a peasant you would die a peasant, if you were born a noble you would die a noble. The market did not determine winners and losers based on competence. This was, perhaps, one of the main reasons people lived in dirt poverty for so many thousands of years.

The free market itself is the system which created equal opportunity. The free market itself is the equal playing field. If you’re in the upper-class supply/demand and the laws of economics still apply to you. Regardless of social status, the individual who provides the highest quality services at the lowest cost will beat his competitors. The Idea that corporations will get so large that they will have the ability to pay their workers 2$ an hour, minimize quality, and maximize price, and that nobody could do anything about it because they are “too big to fail” is utterly absurd and flies in the face of economic reality.

If a corporation attempted to follow that business model it would only be a matter of time before they go completely bankrupt. It’s only a matter of time before some entrepreneur comes around and fills the gap in the market by offering better prices, better quality and better incentive for their workers. No rational person would choose to give business or even work for a company with such an idiotic business model. Without the state there to provide subsidies and bailouts (which does not happen in a free market system), unproductive service providers will collapse under their own weight.

Now, it is true that due to government involvement in the economy, we have devolved into a form of corporatism or “crony capitalism.” This is far different than the laissez-faire, free-market system that Adam Smith envisioned. In our system corporations buy favors from politicians that tilt the market in their favor through force and at the cost of the rest of the economy. This is not free market capitalism. This is aspects of socialism implanted into the capitalist system: it is welfare for the rich.

The free market truly is survival of the fittest. It doesn’t care how rich or poor you are to start off, it only cares about who can best serve their fellow man. It only cares about who can satisfy the most consumers with the highest quality and lowest prices. Just as a rich man can easily become poor if he’s not responsible, a poor man can become rich if he is responsible.

This is the very foundation of the market, capitalism, and competition. I find it highly ironic that those who say the game is naturally tilted in favor of the rich are almost always on the left of the political spectrum. The very basis of their philosophy is actually taking the power to determine winners and losers away from the market, and giving it to the state. They complain about the rich buying favors from politicians (which is a problem) but their solution to the problem is more government involvement? It doesn’t make sense. There is no social mobility under socialism, and especially not under communism. The free market itself is the source of social mobility, not the prohibitor of it.