Thursday, August 16, 2007

Capitalism 101

Tonight on The Daily Show John Oliver and Jon Stewart jokingly argued that China's use of lead paint in toys is an example of how "they do capitalism better than we do." Not bothering with oversight or quality control, the Chinese factories (and the American consumer) can save a great deal of money.

If only they knew how much they were joking. Contrary popular belief, capitalism is not merely about reducing costs but reducing costs while still providing people with something they want. And this is why capitalism works. It's not that bad decisions won't happen, it's that they won't be rewarded. And already we see capitalism working as Chinese factories become less popular and are put under pressure to raise their standards. It's a loss for the manufacturer, but yet another victory for markets.

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