Dear Friends,
It seems to me, the primary reason the market system works so well, is that a market based economy is organic in nature. In any ecological system there is a great diversity of inhabitants. The one thing they all have in common is fitness to survive. Evolution sometimes give an advantage and that organism makes the most of it. (Like an entrepreneur). Business work the exact same way. Under a lasses fair economic system, (lasses faire, but one that has, and enforces, standards), our material quality of life would be drastically improved.
Diversity in an ecosystem, is how a such a system, is able to maintain itself. In an ecosystem the many species all taking a niche, work together, one eating the other’s excrement, creating a circle for nutrients to travel. In an economic system there is a great number of different firms taking up various niches. The diversity of firms enables the flow of capital, services and goods in an economy to circle. As in the worker/business/saver/bank money circle. Capital flows through an economic system just as nutrients flow through an ecosystem.
In any ecosystem the fitness to survive is the utmost incentive. Those who are unfit are quickly done away with. Ecosystems have no heart and only seek efficiency. Economies that are run lasses faire are similar. If businesses are allowed to start easily and end easily then there will be a great deal of diversity in firms. This diversity will quickly cull any flawed business plans from the economy. Flaws such as stupid capitalism would be shown in stark detail.
Evolution can give this or that species an advantage over their neighbors. They have some advantage and they take advantage. In the short term the ecosystem is unbalanced. But in the long term even the most invasive species is tamed to a greater or lesser extent and the ecosystem is improved by it. Like when an entrepreneur implements a new idea. The idea gives their business an advantage and they take advantage. They grow their businesses until the economy comes up with a way of balancing. Another firm will open competing with them or another product that renders the old one outdated comes on the market. Creative destruction in action.
In the case of a country’s economy most of the diversity is small and medium businesses. They fill most of the economic niches. The larger the diversity of small and medium sized businesses the greater the resiliency of a country’s economy. Like a pond that has a fully filled out ecosystem can weather a drought, better than a mono culture pond can, an economy that has a fully filled out private sector can better withstand an economic downturn. Perhaps more importantly a natural pond and an economy with a large diversity in firms can bounce back far faster when conditions improve.
Oligarchal economic system are like mono culture ponds. Any introduction of a new virus will wipe out the mono culture leaving the pond dead. This can and has happened to many economies over the years. It has only been the countries that have allowed their economies the ability to evolve to meet the new needs of society that have succeeded. Governments that seek to protect local firms always harm small and medium businesses. Regulation to protect the golden haired firms, necessarily makes it hard to compete with them, or even start a business.
Socialist or planned economic systems consider a country’s economy as a fish tank. But, no matter how well a fish tank is kept, it must be cleaned sometime. Moreover, unless there is an outside source of food, a fish tank will die. It cannot sustain itself. There are some species that can manage to survive in such conditions but surviving is not thriving. Take those gold fish from the filthy tank and put them in an open pond and watch them thrive. Socialist economies must control every aspect of our lives, to hold down the necessary cleanings and they must have a source of outside funds, else they quickly fall into famine. Under socialism people don’t thrive and only few survive.
The analogy goes far beyond this. I have simply run out of space in this blog format. Economic systems mimic organic systems so closely it is spooky. Similarities are everywhere… if you only look. From micro economics to macro economic cycles, economic systems act and react, just as ecosystems. Consider the Mom and Pop Store as a micro organism, and GM as a T Rex, with every other business filling a different niche in between. Consider the way a business works, with inputs and outputs, cash flow and outlay, to any biological organism’s metabolic processes… The conclusion is; that market systems are organic in nature.
So, the only question remains, where would you rather live? An open pond, a mono culture pond or a fish tank? Others are choosing for you so you better choose fast.
