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Questions About Capitalism

"We are still in the throws of this process. Eventually the efficiencies brought about by the capitalist system, if allowed to operate in a free environment, will provide a high standard of living for most of the world."

Could you explain how this will work. To me, it seems that capitalism now is doing nothing but exploiting as many untapped sources of cheap labor as possible. NAFTA is turning into CAFTA because Mexico became too expensive. I do not see many small businesses being developed in Mexico.

Looking forward to hearing from you. Thanks for the opportunity to discuss.

Andrew

Response:

Dear Andrew,

It is true that some of the major manufacturers tend to flow to the cheapest labor. They are, though, bringing income and technology to every part of the world. As this happens, more and more areas will become more and more skilled. The cheap labor also makes the cost of goods less expensive for everyone. That being said, the effect of bringing these industries into the more impoverished areas of the world is to also bring the people involved experience in how business and manufacturing work. So when they do find an opportunity or a need to be filled they know how to do it.

Truthfully, I don't know that much about Mexico, but I have read that it is difficult to start up business there because of red-tape within the government. I even have some personal knowledge of it regarding some landfill operators who were endeavoring to start a recycling business there and were stifled at every turn. Even in the U.S. it is not as easy to start a business as it should be. In the statement you quoted, I did say that the environment for capitalism must be free.

I am not saying that capitalism will make a perfect world. However, it is the best possible, given human nature.

Cordially,

WJR

Thank you for replying. I'm currently discussing the Age of Revolution with my sixth graders here in Texas, so your opinions will help me teach my class. I have a few more questions for you if you don't mind.

Do you think that a completely open market would be good for the U.S.? Would it not mean massive unemployment due to goods being produced in another country? Also, you mentioned workers being able to act when they found a need to be filled. What about super retailers like WalMart that completely eliminate competition. Do you think that it would be possible to compete with a corporation can control every aspect of production, distribution, and sales?

Thanks again,

Andrew

Dear Andrew,

A completely open market is a scary thought to many. There would be economic adjustments - the destruction of jobs, and also the creation of jobs to deal with the changes. Even so, the benefits would accrue to all nations as lower prices and efficiencies came into play, giving access to high-quality, low-priced goods to more people.

The U.S. has inherent advantages in competition in a wide open market. We have a highly skilled labor force, access to technology and financial resources. These would, of course, equalize over time in a wide open market. But they would cushion the initial changes to U.S. workers.

As for Wal-Mart, they are not all things to all people. I have found that specialty retailers can compete quite effectively with them. For example, my wife has a toy store. She can be much more selective than Wal-Mart in her inventory. She can give better customer service and tailor her service to the clientele of the area. Her store provides higher quality than Wal-mart ever could, because Wal-Mart is a huge organization that must inherently contain inefficiencies that will be taken advantage of by the small retailers having the guts to take advantage of it.

Hope this answers your questions.

Thanks for writing.

WJR

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