: Of course, Betty isn't a real capitalist. She's a small shop owner. There are a lot of differences, one is that Betty really IS responsible for her own business. If she quits going to work everyday, if she screws up and orders way too much food which will go sour, if she takes all the money and blows it at the horse races, then Betty is the one who will suffer the consequences. In short, if Betty's business fails then Betty's in trouble. That's not the way it is for capitalists.
We have here a fairly good indictment of the mixed economy. Notice that each of your points below includes one crucial common element: the government. None of the little tricks Betty Inc. is able to theoretically play would have been possible if the government weren't interfering in the economy. Congratulations! You've discovered anarcho-capitalism!
: If Betty's shop became Betty Inc., (that is, if Betty was a full-blown capitalist) Betty could
: 1) Be like Archer-Daniels Midland and et the government to pay her to make sandwiches then throw them away.
Not possible without the government extorting funds from the citizens through taxation in order to funnel them over to Betty Inc.
: 2) Be like Boeing, Raytheon, Motorola and other "defense" industries and get the government to give her half of all the government's discretionary funds to make sandwiches that nobody will ever eat. (Or, to switch metaphors, to make poison sandwiches.)
: 3) Be like Ford, GM and Chrysler and sell sandwiches in which she suspects might rotten meat but then she calculates the cost of removing the meat or warning the customers is more than the likely lawsuits, so she leaves the meat in. Then Betty will get the government to tarry in enforcing its own consumer safety laws.
Wouldn't be possible if the government hadn't effectively monopolized the consumer-safety market, thereby making the regulation of safety standards subject to the same problems of any government-run institution: ever-lowered standards, willingness to look the other way when desperately needed money is offered.
: 4) Get the government infiltrate her employees' unions and, if necessary, to beat up any of her employees who try to stop Betty from hiring scab workers.
Not possible without a government which has monopolized and validated the use of force and is accountable to no one.
: 5) Give Betty tax breaks while increasing the taxes on her employees.
See response to points 1 and 2
: 6) Get the government to look the other way when Betty pollutes our air, rivers and oceans. After all, cleaning up the environment is expensive, and Rush Limbaugh says there's no problem anyway.
see response to point 3.
: Betty isn't a capitalist, and her little story isn't the story of capitalism.
Well, her story is the story of capitalism in it's pure form: anarcho-capitalism. Sadly, it doesn't work that way in our mixed economy. Your proposed Betty, Inc. is a monster which could only have been created by a system which has corrupted capitalism with socialist ideals. Call it a mixed-economy, welfare-state liberalism, the Clinton/Blair "Third Way", whatever you like. It doesn't work, and the problems with it consistently come from government interference in what could have been a free market, interference which is usually championed by the left.