Capitalism is about the allocation of capital, shorting a stock helps alert the market to the possibility that the stock is a poor place to put your capital. P

Capitalism is about the allocation of capital, shorting a stock helps alert the market to the possibility that the stock is a poor place to put your capital. Profiting from a market collapse is the preservation of capital which is exactly what capitalism is supposed to do. This kind of profiting would be disallowed by a less free market system and thus the populace would suffer a worse fate as more capital is destroyed via mismanagement. Capitalism is not the idea that stocks and other investments go upwards infinitely. Capitalism is about the idea that we live a better life when capital is allocated efficiently. It's a good thing that we don't allocate very much capital to buggy whip manufacture. Allocation of capital to those concerns would beget the production of goods we don't need. Similarly, the market is allocating capital away from national governments who wastefully spend it and allocating it to governments who can put the capital to good use and return a profit from the proper stewardship of their capital.