Holcombe - Political Capitalism : How Political Influence Is Made and Maintained

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Political Capitalism

How Economic and Political Power Is Made and Maintained

Randall G. Holcombe

Florida State University

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Randall G. Holcombe 2018

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For Lora, Ross, Mark, and Connor

The Industrial Revolution, which began in the mid-1700s, brought about the largest ever increase in the material well-being of mankind. Prior to the Industrial Revolution, most people barely scraped by at a subsistence level of existence. As Thomas Robert Malthus noted, the size of the population was regulated by its ability to produce enough food to support itself, and starvation was a constant threat. In the twenty-first century, people who live in capitalist economies are more concerned about obesity than starvation, and even those below the poverty level enjoy amenities unimaginable a few decades earlier, such as mobile phones, microwave ovens, flat-screen televisions, and indoor plumbing. People who live in economies that are primarily market-oriented enjoy high standards of living, while those who do not are much poorer. Judged by its ability to produce material well-being, capitalism is an undeniable success.

Capitalism has its critics who point to periodic failures such as the Great Depression and the financial collapse that began in 2008, and, more generally, depict it as a system that leads to income inequality and allows some to use their privileged positions within the economic system to gain advantages over others. Regarding these more general criticisms, capitalism is well named, because it is the ownership of capital that conveys advantages to the economic elite. Capitalism, as an economic system, has taken the bulk of the criticism for the cronyism and favoritism that allows some to exploit the system for their own benefit.