Free Market Capitalism

Many thanks to my opponent for beginning this debate. As many of you know, I can and have debated this issue (laissez-faire capitalism) from both sides. I love playing devil's advocate; my real views are probably somewhere scattered about the various debates I've done. Nevertheless, I'd appreciate all bias be put aside and for people to vote based on who performed overall better in the debate. Thanks and let's begin :) My opponent essentially has a few main arguments: 1. In order to remain competitive (profitable), company management keeps employee wages low 2. It is the government's responsibility to ensure employees have a decent living wage 3. Without government, free market capitalism would fail 4. The government must make sure its citizens know why it should expand and increase taxes If we look at the first point, it is absolutely true (and a fundamental law of economics) that one way to maximize monetary gains is to spend as little as possible. As such, it makes perfect sense for the CEO of a company to retain as much money as possible for himself. If he is able to do this (by negotiating low wages for his employees), he can invest his profits in other ventures - ventures that give people jobs - jobs that they can do in order to earn a living (monetary wage) that ensures and funds their survival [1]. Further, Con suggests that management "keeps" employees wages low, but how so? If an employee was not willing to work for a certain wage, he could refuse his labor and take a different job - or decide which was the better choice: taking the job, or trying to find his own way to survive. This seguways nicely into Con's second argument - that it is the government's responsibility to ensure that citizens have a decent living wage. The bare assertion fallacy tells us that we should not accept a statement to be true merely because it says it is true [2]. Why is it the government's responsibility to take on this task? Afterall, the U.S. is still a democratic nation (democratic republic, but still) involved in its government. In other words, we are the government, so who burdened us all with this responsibility? Who is to say that we are not solely responsible for our person? Moreover, I see no need for the 'government' to burden itself with something that the people can regulate (and regulate better) themselves. For instance, if an employee thinks that the employer's offered wage is too low, then he can negotiate a higher wage or choose a different employer. Because employees are essential to a profitable business, a mutual exchange with both satisfied parties can best determine the most appropriate wage between a group of individuals. Additionally, if employees are competing for employment, then an employer has the opportunity to hire the most qualified (or desired) employees to suit the needs of the public (customers) a.k.a. $$$. In this scenario, everyone wins. The customers enjoy the product and service so they spend money; the owner of the company profits; he or she is in turn able to compensate the employees for helping to generate profit. If the government intervenes in this simple process, it can wind up having worse rather than better effects. For instance, suppose the government tries to intervene at the lowest level and demands higher wages for the employees. Considering profit for the owners comes from investment, and investment is possible because of profit, then they are going to have to ensure they still profit enough to invest. In order to do this, they are going to have to charge higher prices for the goods and services they provide. This will have a domino effect that increases the prices of other goods and services in the market. As such, inflation occurs devaluing the newly raised minimum wage established for the employees. The result is a continuous cycle that inflates value and does not reflect a true and pure market [3]. So, let us suppose you want the government to step in at the intermediate level and set a specific price for goods - a.k.a. price ceiling. This has several negative repercussions on the market. First, it fails to allow the owner's to maximize their profts, which limits investment, which limits jobs (labor... for goods... to fuel the market). Second, when a price ceiling is set, a shortage occurs. For the price that the ceiling is set at, there is more demand than there is at the equilibrium price. There is also less supply than there is at the equilibrium price, thus there is more quantity demanded than quantity supplied. An inefficiency occurs since at the price ceiling quantity supplied the marginal benefit exceeds the marginal cost. This inefficiency is equal to the deadweight welfare loss [4]. Worse, a way to recover from this economic loss is for citizens to establish illegal trading on the black market. This just perpetuates crime which is bad for society and tax payers. As you may have already guessed, having the government intervene at the highest level and put a limit on a company's profit also hurts the market. It stifles competition which in turn does not guarantee the most productive (or best) quality of goods and services. It also interferes with determining the value of human capital. Furthermore, without compeition there is little incentive to improve and be efficient and effective. I will address any comments and criticism as they come up. For now, I'll address the third point: that capitalism would fail without the government. Of course, Con needs to expand on this point in order for me to refute it properly. Finally, Con mentions that the government must educate their people on why they must be stolen from (in the form of mandated taxes). While I agree that the people have every right to access this information, I'm more concerned as to the forced charity Con advocates on a nation. Nevertheless, that does not have much to do with the resolution: free market capitalism. So, to take a look at Con's burden in this debate, he must expand on why competition is a bad rather than good thing (he said compeition was bad in R1). He must also explain why the government is responsible for human welfare, and how the government can intervene and improve the process. If he fails any of these burdens, he cannot win this debate. That said, many thanks again to my opponent and good luck! [1] http://www.econlib.org... [2] http://en.academic.ru... [3] http://economics.fundamentalfinance.com... [4] http://economics.fundamentalfinance.com...