Billionaire businessman Warren Buffett gave his full endorsement of capitalism, saying no other economic system unleashes peoples’ creativity and better allocates resources than the free market.
CNBC’s Becky Quick asked the world’s third wealthiest person to compare capitalism to socialism during the annual shareholders meeting for the Berkshire Hathaway corporation in Omaha, Nebraska, over the weekend.
“I don’t think people exactly even know what they’re talking about,” when they say they support socialism, in many cases, Buffett argued.
“It isn’t that capitalism is perfect, but if you look at what was here in 1776 and look at what is here now, this country has done an incredible job in the deployment of resources and human ingenuity. That is a product of the (capitalist) system,” he said.
The “Oracle of Omaha” added that does not mean he is against government regulation to address costs to society the free market system alone would not take into account.
“But the idea of people unleashing their potential, using the resources they have to create what we have now from what was here 240 years ago, it’s absolutely a miracle,” said Buffett.
“If you compare that with any centralized planned economy, I think we win hands down.”
Billionaire investor Charles Munger, who sat on the CNBC panel with Buffett and Microsoft founder Bill Gates, pointed to the example of China, which has a billion people more than the United States, but an economy that is over $7 trillion smaller.
He noted it was not until China adopted some capitalist principles in addition to its communist/socialist, government-mandated model that its economy really took off and large numbers of its people began to be lifted out of poverty.
Like Buffett, Gates — the world’s second richest person — affirmed the merits of the capitalist system, though contending the wealthiest Americans could pay a higher tax rate.
Buffett has highlighted in the past that his tax rate is lower than his secretary’s. This outcome is because he — like many corporate CEOs — is paid, at least in part, in company stock, which is taxed at the capital gains rate of 15 percent when the shares are sold.
The top income tax rate is currently 37 percent, which is down slightly from under President Barack Obama, when it was 39.6 percent.
Buffett’s arguments for the merits of the capitalism over socialism are reminiscent of an exchange Nobel Prize-winning economist Milton Friedman had with talk show host Phil Donahue in 1979.
“When you see around the globe, the mal-distribution of wealth, a desperate plight of millions of people in underdeveloped countries. When you see so few ‘haves’ and so many ‘have-nots.’ When you see the greed and the concentration of power. Did you ever have a moment of doubt about capitalism and whether greed is a good idea to run on?” Donahue asked.
Friedman responded by first noting that greed is still in play in the government-run economies like those of communist China and the Soviet Union. The greed just manifests in different ways.
“The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way,” said Friedman, who served as a top economic adviser to President Ronald Reagan in the 1980s.
“In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about – the only cases in recorded history – are where they have had capitalism and largely free trade.”
The economist then observed that the “masses are worst off,” where governments have departed from capitalism.
“So that the record of history is absolutely crystal clear that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system,” Friedman said.
“Is it really true that political self-interest is nobler somehow than economic self-interest?” he asked Donahue.
“You know, I think you’re taking a lot of things for granted. Just tell me where in the world you find these angels who are going to organize society for us?
“Well, I don’t even trust you to do that.”
Truth and Accuracy
We are committed to truth and accuracy in all of our journalism. Read our editorial standards.