Free markets encourage entrepreneurship. Free markets create conditions that not only make entrepreneurs possible, but inevitable, as the entrepreneurship is the only way to get rich and stay rich in a free market system.
Entrepreneurs not only create wealth, they also cause redistribution of the existing wealth. Those who use their existing wealth to invest in the ideas of the entrepreneurs, gain over those who don’t. In fact, the new ventures of the entrepreneurs may in fact force existing ventures to decline or may even render them worthless, causing erosion or disappearance of the wealth of the currently wealthy sections of the society. Success of one entrepreneur in disrupting the existing order gives rise to hitherto unknown occupations, giving rise to even more entrepreneurs. This causes what is known as ‘circulation of elites.’ That is, there is an elite, but now different people are in it. Workers also gain in that they get better jobs, and better paying jobs. Job of a security guard at the entrance of a mall is better, and better paying than that of a farm worker.
As opposed to this, Socialism makes entrepreneurs all but impossible. Because the enterprises are regulated, the new entrant doesn’t know how to cut through the maze of the regulations. He doesn’t know whom to bribe, how much to bribe, to bribe or not. Bureaucrats are also wary of dealing with a new face, so they stick to the tried and tested existing businessmen for their daily dose of bribes. Of course exceptions are there, like DBA, the courageous souls who simply blast through the bureaucratic and political doors with too large a bribe, who beat the existing businessmen at the game of bribery itself.
Since the whole economy is regulated, the existing businessmen have assured profits. Therefore they do not feel any need for innovations and research. In fact they positively discourage both. Therefore the ‘business elite’ is not circulating, it is fixed generation after generation. The wealth does not grow, employment does not grow, and if the population of the country is increasing, a huge army of unemployed soon develops, giving rise to social tensions and social problems.
Even more pernicious are two other systems of wealth accumulation. Lottery and सुदख़ोरी।
In lottery also, no creation of wealth takes place, what takes place is only transfer of wealth from a large number of individuals to the handful of the individuals picked up by chance. In सुदख़ोरी, the सुदख़ोर presides over a large population of impoverished, who never get out of poverty because they never get to accumulate wealth, and the सुदख़ोर never starts any industries or enterprises, as he doesn’t feel any need, and in fact thinks that industries and enterprises may in fact let people get free of his clutches. Of the two, lottery and सुदख़ोरी, सुदख़ोरी is really dehumanising, as it originates in misery, and thrives in misery, and creates ever more misery. There are rich in a society of सुदख़ोर, but there are no industries or enterprises.
In socialism, the businessmen are permanent, and they want to keep socialism going, so they fund the politicians who make it possible. So, only the socialist politicians get funding. Since socialism also means a large poor population, so the people become vulnerable to inducement of the freebies. So the politicians also become entrenched, and the political Dynasties start ruling the roost. Because of the lack of funding, new blood in politics becomes difficult to the point of becoming impossible. Socialist politicians of course also redistribute wealth, but they distribute it among those who soon cause it to disappear, unlike the entrepreneurs who make it grow. (Wealth disappears, just as it gets created, depending upon how and to whom it gets transferred.)
So look carefully: All socialist countries have political Dynasties and industrial Dynasties, and in the Capitalist countries the Dynasties are rare, and never last beyond a couple of generations, if at all. In fact as the US has turned to soft socialism of Welfare State, political Dynasties have made appearance.
Of the three non-Free Market systems of wealth redistribution, viz., socialism, lottery, and सुदख़ोरी, सुदख़ोरी is really cancer like. सुदख़ोरी may keep a country a place of few rich and a mass of wretchedly poor, for many centuries, the poor toiling to keep the सुदख़ोर rich century after century. The सुदख़ोर has the money with which he ensures that the political forces keep the system going, by employing brute force on his behalf, or look the other way when he himself uses force.
In the same class as सुदख़ोरी is that curse of our society: dowry, the दहेज। Dowry is also transfer of wealth without any creation of wealth involved, and it has such diabolical social consequences, that it merits a full length article all on itself.
By now you must have realised why our country, India, is such a wretchedly poor, mediocre place despite having a long memory of wealth creation and trade, and a talented population with long traditions of entrepreneurship and education, the education too in mathematics. Because India is cursed with not one, not two, but three destructive systems of wealth redistribution: socialism, सुदख़ोरी, and दहेज।