The Capitalism Scapegoat

What is a human being?

We're rational animals. Unlike every other species, we don't survive by instinct. We survive by thinking. We must figure out how to feed ourselves, shelter ourselves, protect ourselves from nature and sometimes each other. We transform our environment through intellectual effort. Everything we need to live, from the simplest tool to the most complex technology, comes from the human mind applied to the problem of survival and flourishing.

This fact has profound implications. If humans survive by thinking, then humans need freedom to think, to act on their thinking, to trade the products of their thinking with others, and to keep what they produce. Human dignity requires the freedom to direct your own life, make your own choices, pursue your own goals, and live by your own judgment.

Capitalism is the only economic system built on this reality. It's the only system that treats humans as thinking beings who need freedom to exercise their rational capacity. Every attack on capitalism is, at root, an attack on human nature itself.

People blame capitalism for everything from high housing prices to environmental degradation. But these criticisms misattribute problems caused by government interference, cronyism, and distorted incentives to the free market itself. Economists have shown again and again that capitalism outperforms every alternative. Ayn Rand clearly articulated the moral case. History gave us the Soviet Union's collapse and North Korea's ongoing nightmare as proof in practice.

Yet somehow, socialism keeps getting rehabilitated while capitalism takes the blame for every crisis.

The 2008 housing crisis? Capitalism's fault.

Rising healthcare costs? Free market greed.

Student debt crisis? Predatory capitalism.

Income inequality? Capitalist exploitation.

Environmental problems? Capitalism destroying the planet.

Every single one of these accusations is wrong. They get capitalism exactly backwards.

What looks like "market failure" is government failure with better PR. When markets can't function because government broke the pricing mechanism, that's not the market's fault.

What Capitalism Actually Means

Capitalism isn't just an economic system. It's the social recognition of what humans are and what we need to survive.

Because humans live by reason, we need the freedom to think and act on our thinking.

Because we produce values through mental and physical effort, we need the right to keep what we produce. Because we benefit from cooperation and trade, we need the freedom to deal with others voluntarily. Because we make mistakes and must learn from them, we need to bear the consequences of our choices.

Strip away the jargon and capitalism is the economic expression of human nature:

• Freedom to produce what you want

• Freedom to trade with whom you want

• Freedom to keep what you earn

• Freedom to contract on mutually agreeable terms

This is why property rights, contract enforcement, and legal adjudication of disputes when rights are violated are the only legitimate functions of government in the economic sphere. Everything beyond that (subsidies, bailouts, regulations that pick winners, government stakes in private companies) treats humans as means to political ends rather than ends in themselves. It substitutes bureaucratic judgment for individual judgment. It replaces voluntary cooperation with force.

Your freedom to swing your arms ends where someone else's nose begins. That's the entire principle. Don't initiate force against others. Don't defraud them. Beyond that, leave people free to think, produce, and trade.

The dignity of earning your own way. The dignity of being judged by your merit. The dignity of voluntary exchange. The dignity of rising as high as your ability takes you. These dignities exist only under capitalism.

We understand empirically what happens when humans are free: the closer we get to universal freedom of trade, production, and association, the better things become. We understand what intellect and effort can do. We understand what production is, what freedom of trade accomplishes. The evidence is overwhelming.

What We Actually Have Today

We don't have capitalism in America today. We have a mixed economy that's been moving steadily away from capitalism since at least the New Deal, probably earlier.

Consider what happened under Trump, supposedly a "capitalist" president:

• Government buying stakes in private companies like Intel

• Tariffs on furniture to "rescue North Carolina"

• Proposed 100% tariffs on foreign-made movies

• Threatening companies like Carrier

• Demanding lower interest rates to "spark economic growth"

• Taking 15% stakes from companies trading with China

That's not capitalism. Trump is not a capitalist, and we need to say that clearly.

Now consider the Democrats:

• Pushing for expanded Obamacare subsidies

• Increasing Medicaid funding

• More state aid programs

• Government-funded college

• Wealth redistribution schemes

That's obviously not capitalism either. That's coercive wealth transfer and government control.

Both parties have abandoned capitalism. One promotes outright socialism. The other promotes fascistic economic control: nominal private ownership but government direction. Neither respects free markets or individual economic liberty.

Yet when problems emerge from this mixed system, capitalism takes the blame.

The 2008 Housing Crisis

This is perhaps the most egregious example of capitalism getting scapegoated for government failure, other than the Great Depression itself.

The story we're told: Greedy Wall Street banks, operating in an unregulated free market, made predatory loans, packaged them into toxic securities, and triggered a global collapse. This proves capitalism needs heavy regulation.

The reality: The crisis emerged from government interventions that systematically distorted market incentives, with Wall Street following those distorted signals straight off a cliff.

What actually created the crisis:

Federal Reserve monetary policy fueled the bubble. From 2000 to 2003, the Fed lowered the federal funds rate from 6.5% to 1.0%. This wasn't a free market in money; this was central planning of interest rates. When you artificially suppress the price of credit below market levels, you get excessive borrowing and asset bubbles. Even Bernanke acknowledged Fed policy contributed to housing price inflation.

Government-sponsored enterprises bought mountains of risky mortgages. Fannie Mae and Freddie Mac, with implicit taxpayer guarantees, purchased huge volumes of subprime mortgages. That safety net let banks offload risk they'd never have held in a free market. These weren't private companies operating in free markets; they were government-sponsored entities with taxpayer backstops, distorting market incentives.

"Too big to fail" was a government creation. The regulations that allowed certain institutions to become "too big to fail" were government-created. The expectation of bailouts was government-created. The moral hazard (take big risks knowing taxpayers will cover losses) was government-created. In true capitalism, companies that make catastrophically bad decisions go bankrupt. But we had government bailouts that rewarded failure instead.

Regulatory gaps and failures. The shadow banking system operated with inadequate oversight. Unregulated mortgage originators made the riskiest loans. Private-label securitization by Wall Street firms, not subject to the same scrutiny as banks, drove much of the subprime boom. Government regulatory failures left gaping holes while heavily regulating other areas, creating the conditions for crisis.

Take away government-manipulated interest rates, government-sponsored entities creating markets for bad debt, government-created moral hazard through bailout expectations, and government regulatory failures, and the crisis looks very different.

What collapsed wasn't capitalism. It was a heavily manipulated credit market propped up by government guarantees and distorted by government policy. The housing crisis wasn't capitalism failing. It was government intervention creating perverse incentives at multiple levels, with private actors responding to those incentives in predictably destructive ways.

High Housing Prices and Affordability

Beyond the 2008 crash, critics often point to skyrocketing housing prices and rents as evidence of capitalism's failure, arguing that profit-driven investors and corporations commodify homes, leading to unaffordability and homelessness. They claim the market prioritizes shareholder returns over human needs, creating bubbles in essential goods like shelter.

But this criticism doesn't hold water. High housing costs are primarily driven by government policies that restrict supply and inflate demand, not free-market dynamics. Zoning laws, building regulations, and NIMBY (Not In My Backyard) policies limit new construction, creating artificial shortages that drive up prices. Mass immigration policies increase demand without corresponding supply increases, further exacerbating the issue. Rent control and other "well-intentioned" interventions discourage investment in new housing, leading to hoarding of existing units and even higher costs over time.

Monetary policy plays a role too: fiat money printing erodes currency value, pushing people to store wealth in assets like real estate, inflating prices beyond what's needed for living. Investors like BlackRock aren't the root cause; they're responding to distorted incentives created by low interest rates and regulatory barriers that prevent smaller builders from competing.

In a true capitalist system, without these government distortions, developers would respond to demand by building more, competition would lower prices, and affordability would improve through innovation and efficiency. Capitalism creates surplus, evidenced by the fact that we have more homes than needed in many areas, but governance failures prevent efficient allocation.

Blaming the market ignores how interventions like certificate-of-need laws in related sectors (e.g., healthcare) mirror housing restrictions, stifling competition everywhere.

Rising Healthcare Costs

People look at American healthcare (the high costs, the complexity, the waste) and blame the free market. They point to other countries with socialized medicine and say, "See? We need government healthcare because the market failed."

American healthcare has been systematically corrupted by government intervention for decades, with each intervention building on the last until what remains barely resembles a market at all.

Why do Americans get health insurance through employers instead of buying it themselves like car insurance or home insurance?

Tax policy. During World War II, wage controls prevented companies from competing for workers with higher wages. So they started offering health insurance as a benefit, and the government made it tax-deductible for employers but not for individuals.

This created the entire employer-based system. It disconnected the person receiving care from the person paying for care. It eliminated price sensitivity and normal market discipline. That's not capitalism. That's a tax policy distortion that fundamentally warped the entire market structure.

How government intervention destroyed healthcare markets:

Medicare and Medicaid destroy price signals. When government pays for healthcare through Medicare and Medicaid, providers don't compete on price for those patients. They compete on how effectively they can navigate government payment systems. Government payment rates don't reflect actual costs or value; they're set by bureaucrats and lobbying. Hospitals charge different prices to different payers (insured patients subsidize government-paid patients). Nobody knows what anything actually costs. Price signals, the mechanism by which markets allocate resources efficiently, are destroyed.

Certificate-of-need laws prevent competition. In many states, you need government permission to open a hospital or buy major medical equipment. Want to open a competing hospital to provide better service at lower prices? Too bad. The existing hospital will argue there's no "need" for competition, and the government will deny your application. That's not a free market. That's government-enforced monopoly.

The FDA limits supply and drives up costs. The FDA approval process costs hundreds of millions of dollars and takes years. This prevents cheaper generic drugs from entering the market quickly. It prevents innovation in drug development. It keeps prices high. The FDA also prevents Americans from buying cheaper drugs from other countries. You can't shop internationally for better prices; the government won't let you.

Licensing requirements limit supply. To practice medicine, you need a license. To get a license, you need to go to an accredited medical school. The number of accredited medical schools is limited. The number of residency positions is limited and largely funded by government. This artificially restricts the supply of doctors. Limited supply plus growing demand equals higher prices. That's not market failure; that's government-created shortage.

Every major problem in American healthcare traces to government intervention: high costs (tax policy, lack of price competition, government payment distortions, restricted supply), complexity (regulatory compliance, insurance regulations, government payment systems), waste (third-party payment, lack of price signals, perverse incentives).

What would actual healthcare markets look like?

Look at cosmetic surgery and LASIK. Both have gotten dramatically better and cheaper over time. Why? Because they operate in relatively free markets. Patients pay directly, providers compete on price and quality, and there's no insurance or government payment distorting incentives. That's what healthcare competition produces when government doesn't break the pricing mechanism.

Yet people blame capitalism and demand more government control. It's insane.

Student Debt Crisis

The student debt crisis is a great example of government intervention creating a disaster that gets blamed on capitalism.

Think about what's happened here. Young people, at the age when they should be learning to make independent judgments about value and cost, are instead taught that education is something government finances regardless of price. They're encouraged to borrow unlimited amounts for credentials of questionable value. They graduate buried in debt they can't discharge, spending years or decades paying for decisions they made when they had no market feedback about whether those decisions made sense.

This isn't dignified. This is treating young adults as incapable of making rational economic decisions, while simultaneously making them bear all the consequences of the irrational system created for them.

When the government guarantees student loans, banks make them regardless of whether the student will be able to pay them back. The normal market discipline (will this person be able to repay?) disappears.

How government created the crisis:

Government-backed loans flooded universities with money. Undergraduate borrowing is capped, but graduate and professional students can use federal Grad PLUS loans to borrow up to the full cost of attendance each year. There's no test of future earning potential, so money is effectively available for almost any program at almost any price. When schools know the government will underwrite any loan, they raise prices. It isn't greed; it's economics. Unlimited demand drives unlimited cost.

Administrative bloat exploded. With money flooding in, universities hired administrators. Lots of administrators. Assistant deans, diversity officers, student life coordinators, Title IX officers. The ratio of administrators to students has exploded. The ratio of administrators to faculty has exploded. All paid for with borrowed money students can't discharge in bankruptcy.

Credential inflation devalued degrees. When everyone can afford to go to college (by borrowing), college degrees become less valuable. So now you need a master's degree for jobs that used to require a bachelor's. You need a bachelor's for jobs that used to require a high school diploma. This is credential inflation, directly caused by government subsidies making college "accessible" to everyone regardless of ability to pay.

What a free market would look like:

• Lenders would assess risk before lending

• They'd consider degree programs and job prospects

• Students couldn't borrow unlimited amounts

• Universities would have to keep costs reasonable or students couldn't afford to attend

• Alternative credentials would compete with traditional degrees

• Prices would reflect actual value

Instead, government intervention created unlimited demand at any price, universities responded predictably by raising prices, and students are buried in debt.

Yet capitalism gets blamed, and the "solution" proposed is more government intervention: loan forgiveness, free college, more subsidies. The very thing that caused the problem.

Income Inequality

People see income inequality and blame capitalism. They see billionaires getting richer while middle-class wages stagnate and conclude that free markets concentrate wealth unfairly.

They're looking at cronyism and calling it capitalism.

Here's the fundamental issue: In a free market, you get rich by serving other people. You create something they value enough to voluntarily trade for it. This respects human agency on both sides. The buyer exercises his judgment about value. The seller exercises his judgment about production. Both benefit from the exchange or it wouldn't happen.

Some inequality in free markets is legitimate and necessary. Someone who invents something millions of people want should get rich. Network effects and economies of scale create natural advantages for successful companies. The entrepreneur who risks everything and builds something valuable deserves to profit enormously from that. This kind of inequality emerges from human creativity, effort, and value creation.

But look at who's getting rich today: defense contractors living off government spending, pharmaceutical companies with government-protected patents and FDA-enforced barriers to competition, banks that get bailouts when their bets go bad, tech companies that lobby for regulations their competitors can't afford to comply with, real estate developers who manipulate zoning boards, industries that capture their regulators and use them to crush competition.

This inequality doesn't come from serving customers. It comes from manipulating government power. It treats humans as means to political ends rather than as voluntary traders. It substitutes force for persuasion, political connections for productive achievement.

That's not market-based inequality. That's political inequality.

The gap between "entrepreneur who builds something valuable" and "connected executive who extracts wealth through government favor" is the difference between legitimate and illegitimate inequality.

Free markets create unequal outcomes based on value creation. Cronyism creates unequal outcomes based on political connections. We have the second system and call it the first.

Who benefits most from government intervention?

• Large corporations that can afford regulatory compliance costs. Small businesses can't afford teams of lawyers and accountants to navigate complex regulations. Large corporations can. Regulations become barriers to entry that protect incumbents.

• Wealthy individuals who can hire tax attorneys and financial advisors. Complex tax systems with special deductions, credits, and loopholes favor those who can afford expert advice.

• Connected businesses that get subsidies, favorable regulations, and government contracts. Companies with political connections get advantages that have nothing to do with serving customers better.

• Wall Street firms that get bailouts when their bets go bad. "Too big to fail" means profits are private but losses are socialized. That's not capitalism; that's corporate welfare.

In true capitalism, you get rich by serving customers better than competitors. You create something people value enough to voluntarily pay for it. You can't force anyone to buy from you. You can't prevent competitors from offering alternatives. You succeed only by offering more value.

What creates illegitimate inequality:

• Government grants you monopolies through patents that last too long, occupational licenses, or regulatory barriers

• Government subsidizes your business or industry

• Government bails you out when you fail

• Government manipulates interest rates and money supply, creating bubbles that benefit those closest to the money creation

What we have isn't capitalism producing inequality. It's cronyism producing inequality: regulations that favor large corporations over small businesses, tax codes that favor sophisticated tax planning over productive work, subsidies that flow to politically connected industries, bailouts for financial firms, monetary policy that inflates asset prices benefiting asset owners.

The perverse incentive: When you can get rich through political connections rather than serving customers, you invest in political connections. You hire lobbyists. You fund politicians. You work to shape regulations in your favor. This diverts resources from productive activity (serving customers) to rent-seeking activity (securing government favors).

Yet people see the resulting inequality and blame capitalism. They demand more government intervention to address inequality, the very thing causing the problem.

Hunger, Poverty, and Mental Health

Critics also fault capitalism for commodifying essentials like food, leading to hunger despite abundance, and fostering poverty through low wages and exploitation. They argue it creates mental health issues by promoting alienation, job insecurity, and a consumerist culture that breeds unhappiness.

These don't hold up either. Poverty and hunger are alleviated by capitalism's productivity gains. Global poverty has plummeted in market-oriented economies, while socialist systems like the USSR and North Korea saw famines from central planning failures. Low wages stem from regulations like minimum wage laws that price out low-skilled workers, occupational licensing that limits job entry, and inflation from monetary policy that erodes purchasing power.

Mental health struggles are worsened by government-induced instability, such as welfare traps that discourage work or lockdowns that isolated people, not inherent to free markets. In true capitalism, innovation and voluntary charity address these, without the coercive failures of state programs.

Environmental Problems

Environmental problems get blamed on capitalism constantly. Pollution, climate change, resource depletion, all attributed to greedy capitalists destroying the planet for profit.

But look at actual environmental disasters. Where do they occur?

The worst environmental catastrophes were government-created: Chernobyl (government-owned nuclear plant with no private property rights, no tort liability, no market discipline), the Aral Sea disaster (Soviet central planning diverted rivers for irrigation, destroying one of the world's largest lakes), China's pollution crisis (government-owned industries with no property rights, no tort liability, no market accountability), Soviet industrial pollution (so bad that life expectancy dropped and entire regions became uninhabitable).

The pattern is clear: the worst environmental disasters happen where government controls resources and there are no property rights.

Property rights matter because they recognize human judgment and human consequences. When you own something, you have both the authority to make decisions about it and the responsibility to bear the consequences of those decisions. You have every incentive to maintain its long-term value. You can't dump costs on others without their consent.

But what about Industrial Revolution England? Strong property rights, relatively free markets, terrible pollution.

Property rights weren't enforced for environmental damage during the Industrial Revolution because courts gave railroads and factories special exemptions. They literally changed common law to prevent nuisance suits against industrial polluters. Judges decided that economic development was more important than protecting property rights from pollution.

That wasn't capitalism failing. That was government intervention creating the pollution problem by removing the legal remedies that would have stopped it. When someone asks "what about Victorian London's smog?" the answer is: that's what happens when government protects polluters from lawsuits. Property rights only work when they're enforced.

Real capitalism requires well-defined and enforced property rights. When someone damages your property, you can sue them. This creates incentive to avoid causing damage. If a factory pollutes your land or water, you can take them to court for damages. The threat of liability creates incentive to prevent pollution.

But this only works when property rights exist and are enforced.

The tragedy of the commons: When nobody owns something, nobody has incentive to preserve it. Everyone has incentive to exploit it. Ocean fisheries get overfished because they're common resources. No one owns the fish until they're caught, so everyone rushes to catch as many as possible before someone else does. This isn't capitalism; it's the absence of property rights.

Where fisheries are privatized or effectively owned through transferable quotas, overfishing stops. Owners have incentive to maintain sustainable populations because that maximizes long-term value.

Government often prevents market solutions:

• Can't sue the government for pollution (sovereign immunity prevents it)

• Can't establish property rights in many resources because government owns them or declares them "public"

• Can't use tort law to address pollution because government regulations preempt common law remedies

• Innovation solves environmental problems. In capitalism, solving environmental problems creates profit opportunities. Develop cleaner technology, you can outcompete dirty technology. Find more efficient ways to use resources, you reduce costs. LED lights replaced incandescents because they became cheaper and better (though government efficiency standards accelerated this). Electric cars are succeeding where they make economic sense.

The profit motive drives innovation that solves problems, including environmental ones.

People see pollution in mixed economies with unclear property rights, government ownership of resources, and regulatory regimes that prevent tort liability. They blame capitalism. Then they propose government solutions, the very thing that caused the problems.

The Scam: How Problems Caused by Government Get Blamed on Capitalism

Here's the scam in one sentence: Government breaks markets, capitalism gets blamed, government gains more power to break more markets.

This isn't accidental. It's incentive-compatible for politicians. Create a problem, blame the private sector, position yourself as the solution. Every intervention generates new problems that justify the next intervention. The system is designed to grow.

And it works because most people never trace the problem back to its source. They see the visible crisis (foreclosures, medical bankruptcies, student debt) and never look at the invisible policy decisions made years earlier that created the conditions for crisis.

Look at the pattern across every major problem blamed on capitalism:

Financial crises: Blamed on capitalism, but fueled by government guarantees, central bank manipulation of interest rates, and bailout expectations.

Healthcare costs: Blamed on greed, but created by tax policy distortions, government payment systems, licensing restrictions, and regulatory barriers to competition.

Housing affordability: Blamed on corporate greed, but caused by zoning, regulation, and monetary inflation limiting supply and inflating demand.

Hunger and poverty: Blamed on profit motives, but mitigated by market abundance and worsened by interventionist policies.

Mental health: Blamed on consumerism, but exacerbated by government-induced economic distortions and social controls.

Student debt: Blamed on capitalism, but created by federal loan guarantees that flood universities with unlimited money.

Inequality: Blamed on markets, but fueled by cronyism, regulatory barriers that protect incumbents, and subsidies for politically connected industries.

Environmental damage: Blamed on capitalism, but worst under central planning, state ownership, and where property rights aren't enforced.

And here's where it gets truly perverse: these problems then become the justification for more government intervention.

Housing crisis caused by Fed policy, GSEs, and bailouts? The solution: more regulation, more government control.

Healthcare crisis caused by tax policy, licensing, and Medicare? The solution: socialized medicine.

Student debt caused by government loan guarantees? The solution: loan forgiveness and free college.

Inequality caused by cronyism and subsidies? The solution: wealth redistribution and more regulation.

Environmental problems caused by lack of enforced property rights? The solution: government control of resources.

Each round of intervention creates new problems that justify the next round of intervention. The diagnosis is always "market failure." The prescription is always "more government control."

And capitalism, which never got a chance to work properly in the first place, takes the blame at every step.

The Real Choice

We don't have capitalism today. We have a mixed economy leaning increasingly toward control. The choice now is between moving toward more freedom or more control.

And this choice is ultimately about how we see human beings.

Do we see humans as rational beings capable of directing their own lives? Or as helpless creatures who need to be managed by experts?

Do we see humans as ends in themselves, with the right to pursue their own happiness? Or as means to collective ends, to be sacrificed for "society" or "the common good"?

Do we believe humans flourish through freedom, or through control?

More freedom means:

• Removing government barriers to competition

• Ending subsidies and bailouts

• Eliminating regulations that protect incumbents

• Allowing prices to signal real costs and value

• Enforcing property rights and tort liability

• Letting failures fail and success succeed

More control means:

• More regulations creating more distortions

• More subsidies creating more misallocation

• More intervention creating more problems

• More bailouts creating more moral hazard

• More complexity creating more confusion

• More cronyism benefiting the politically connected

Every problem blamed on capitalism is actually an argument for capitalism. These problems prove that government intervention in markets creates disaster.

The answer isn't more intervention. The answer is freedom.

Systems that claim to be more "compassionate" than capitalism actually deny what makes us human. They treat people as helpless beings who need to be directed and controlled. They substitute the judgment of bureaucrats for individual choice. They replace voluntary cooperation with coercion.

That's not compassion. That's contempt for human nature dressed up in benevolent language.

True compassion recognizes that people need freedom to exercise their rational faculty, to pursue their own goals, to create their own values, and to keep the products of their effort. True compassion creates the conditions for human flourishing by protecting the rights that make flourishing possible.

Capitalism respects what humans are. It's built on the reality of human nature. It treats people as thinking beings who survive by thought and need freedom to think, act, produce, and trade.

Capitalism isn't the disease. It's the cure. And we keep rejecting it based on symptoms caused by the poison of government intervention.