To understand why capitalism works in USA, let’s go back in history a little to the founder of modern capitalism, Adam Smith.
In 1776 Adam Smith published “The Wealth of Nations”
The book offers one of the world’s first collected descriptions of what builds nations’ wealth, and is today a fundamental work in classical economics.
The Wealth of Nations remains the most referenced guide to prosperity because of its moral force. Smith is quoted as saying, “The freest markets are led by an invisible hand benefiting everyone, not just the individuals and companies motivated by their own profit.”
Examples of how capitalism works in USA.
A good example of this is the nation’s ability to weather global events. American free enterprise has had the greatest growth in the developed world. Even since 2009, where they have been able to post annual gross domestic product gains.
In the 8 year global financial crisis, the U.S. was the only non-emerging market economy with a record GDP.
The U.S. has experienced growth exceeding the Group of Eight leading industrial countries every year since 2012. This trend is expected to continue well into 2020.
The economy has a great trend but also since 2009 the U.S. unemployment rate has plunged to 3.7 percent, from 10 percent.
This was the sharpest drop in any developed economy during the same period. California has been the leader in job creation since July 2009, has created over 2.9 million jobs. This number also gets reflected with more than half of U.S. technology sales coming from California.
California in 2017 overtook the U.K. to become the world’s fifth largest economy. No one in the developed countries has been able to surpass California since 2013 in the growth area of personal income and job creation.
To be fair, growth in China and India has been faster than the U.S., largely because they have adopted a free-market reform over the past couple of decades.
With the financial crisis, the U.S. did see a huge loss for its housing industry.
During the financial crisis, corporate America was diminished, the financial crisis triggered more than $37 trillion in losses in the global equity market. What happened is that for a while this saw 3 of worlds top 10 most valuable companies become Chinese. In the crisis, what proved to be the right move, was to spend more than 10 percent of a company’s revenue on research and development.
This is how companies like Microsoft Corp and Johnson & Johnson have remained in the top 10.
This adoption saw a turnaround and by the end of 2016, all the largest 10 companies were American.
Unfortunately, the growth has yet to make a shift in the U.S. poverty rate. Standing at 16.8 percent it is the third highest among countries of the Organization for Economic Cooperation and Development. This is more than twice France’s poverty rate.
The government does play a role, even in the freest capitalist society.
The U.S is now seeing wages increase faster than in any other in the developed world. Cleaner energy, health care, and general well-being are seeing more commitment in resources from state and local governments. An even progress has yet to occur, for example in New York Medicaid has been expanded is seeing only 8 percent of non-elderly adults who are uninsured. But meanwhile, in Florida this number is at 18 percent.
Even if is not 100 percent perfect, none of these measures would be possible without the growth that is being generated by capitalists who are free to pursue their ideas.
The success of Amazon over the last 24 years is only possible because of Jeff Bezos’ dream.
Let us also look at Elon Musk, who created Tesla. His visions in Smiths standards would be a great example of a capitalist. Musk a serial entrepreneur has changed the world not just with Tesla but with SpaceX and helping to create Paypal.
Smith would have likely loved it when the 2008 market crash happened and Musk injected $90 million into his company. This is what a true capitalist does. He invested in his business and the prospect that the economy would rebound.
American capitalism is really just about the ease of doing business.
The U.S. is sixth in global competitiveness as stated by the World Bank Group. The U.S. is behind smaller economies, which are Hong Kong, South Korea, Denmark, Singapore, and New Zealand. The key is having business-friendly policies. This makes it easier to start a business, get credit, trade across borders and manage insolvent companies.
Each of the top six grew 47 percent while the rest of the worlds GDP rose only 34 percent in nearly a decade. (World Bank data).
Capitalism in the U.S. is further enabled by bankruptcy law, lower taxes and safeguards for intellectual property.
Capitalism in the U.S. has a definite edge with the country’s public and private institutions of higher education.
The U.S. education results have shown up in the number of Nobel Prizes being awarded. Since 1901 the U.S. had 67 percent of the awards and since 2000 this number has risen to 73 percent.
Also with this higher education comes capitalists that can spot some of the weaknesses in the current American society.
With political issues and trades policies hampering growth. Even though things are not perfect the U.S. is getting stronger and not weaker. To the core of American capitalism still is, “The invisible hand benefiting everyone.”. This is clearly visible in the U.S. and it isn’t about to change anytime soon.
Sonia Rina Landry is a passionate entrepreneur, speaker, author, and personal development coach. She is an outspoken advocate of the free market economy and has helped countless clients identify their core values, envision and realize goals that resonate with those values. She oversees several businesses online and offline.