Voice For Liberty

Tag: Capitalism

  • Pragmatism must recognize reality

    Any editorial that starts with “Karl Marx was right about at least one thing …” deserves close examination, especially when it appears in Kansas’ largest newspaper and is written by that newspaper’s former editor. The thrust of Davis Merritt’s article is that the theory of free markets hasn’t worked: “We’re painfully experiencing right now the unraveling of neat free-market theory.” (Pragmatism needs to trump ideology, November 18, 2008 Wichita Eagle)

    Here’s the first problem with Mr. Merritt’s argument: what we live in is anything but a free market society. George Reisman details just how far removed we are from anything resembling free markets in The Myth that Laissez Faire Is Responsible for Our Present Crisis.

    Then, Mr. Merritt warns that free market theory is doomed to fail because “perfect theories require perfect people.” I don’t know precisely who he refers to as not perfect, but judging from the tone of the article, I think he’s condemning greedy businesspeople who are the cause of the present financial crisis. In particular, investment bankers. Demonizing these people on general grounds doesn’t help. Instead: Did they steal from their shareholders? Did they commit fraud when they issued sub-prime loans? These acts are illegal, and to the extent they were committed, let’s prosecute them.

    Greed — human self-interest — is a constant factor. It’s what drives people to expend tremendous effort to accomplish great things for the betterment of mankind. It can also drive people to accept a sub-prime mortgage loan that they can’t repay in order to buy a house they can’t afford — but, greedily, want nonetheless. It works both ways. So we need good rules that prevent people from using theft, force, and fraud to unjustly enrich themselves. These good rules are easier to create and enforce, and more reliable, than a false hope the people will start behaving “good.”

    Besides, couldn’t we also say that good government requires good politicians, bureaucrats, and administrators? I’m surprised that an editor of a newspaper — someone who must have experienced the political process close-up — would have such confidence in government instead of people.

    Mr. Merritt cites the “hands-off, no-regulation attitude of the current administration” as bad for people and economic welfare. If we had been experiencing a period of reductions in regulation, we might have evidence for this claim. The Heritage Foundation report Red Tape Rising: Regulatory Trends in the Bush Years debunks the myth that regulation has decreased during the presidency of George W. Bush: “Far from shrinking to dangerously low levels, regulation has actually grown substantially during the Bush years. By almost every measure, regulatory burdens are up.”

    Mr. Merritt’s editorial, if its advice is taken, will lead us towards more regulation and reliance on government. That’s not what we need.

  • Joe Scarborough: Please Stop Saying Laissez-faire

    I’m listening to Joe Scarborough on MSNBC, and he says: “Laissez-faire capitalism is a wonderful thing except in this case …”

    I’ve heard stuff like this over and over the past few months: A politician says “I’m a big free-market guy, but …”

    What’s sad to realize is that these people think that what we have in American is free markets and laissez-faire capitalism. We don’t have these. See my post The Myth that Laissez Faire Is Responsible for Our Present Crisis.

    The sooner that we understand that it is largely government that is the cause of the present crisis, we can realize that relying on government for a cure is dangerous and predetermined to fail.

    Resources: The Bailout Reader at the Ludwig von Mises Institute and Global Financial Crisis at the Cato Institute.

  • Pencils Reveal the Impossibility of Government Planning

    I, Pencil is one of the most important and influential writings that explain the necessity for limited government. A simple object that we may not give much thought to, the story of the pencil illustrates the importance of markets and the impossibility of centralized economic planning.

    The size and scope of government, both at the national and local level, has been growing. Now our country is entering a period where the possibility of even larger and more intrusive government, growing faster than it has been, is very real. Those who love liberty must keep principles like those illuminated in I, Pencil at the forefront of debate.

    From the afterword to I, Pencil by Milton Friedman:

    Leonard E. Read’s delightful story, “I, Pencil,” has become a classic, and deservedly so. I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith’s invisible hand — the possibility of cooperation without coercion — and Friedrich Hayek’s emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to do.”

    Link to a pdf of I, Pencil: http://www.fee.org/pdf/books/I,%20Pencil%202006.pdf

    Link to Leonard E. Read reading I, Pencil: http://www.fee.org/events/detail.asp?id=6239

  • Pat Buchanan: Comrade Obama?

    Pat Buchanan’s recent column Comrade Obama? contains much I agree with, keeping me liking and admiring him, even through I disagree with a few of his positions.

    This column accurately describes the current political landscape, and it’s not complimentary to Barack Obama, Democrats, or Republicans. A few excerpts:

    Indeed, how do Republicans who call Obama a socialist explain their support for Social Security, Medicare, Medicaid, food stamps, welfare and the Earned Income Tax Credit? …

    Since August, the Bush-Paulson team has seized our biggest S&L, Washington Mutual, and largest insurance company, AIG. It has nationalized Fannie and Freddie, pumped scores of billions into our banks, bailed out GM, Ford and Chrysler, and paid the $29 billion dowry for Bear Stearns to enter its shotgun marriage with JPMorgan Chase. And with federal, state and local taxes taking a third of gross domestic product, and government regulating businesses with wage-and-hour laws, civil rights laws, environmental laws, and occupational health and safety laws, what are we living under, if not a mixed socialist-capitalist system?

    And then this:

    Norman Thomas is said to have quit running for president on the Socialist ticket after six campaigns because the Democratic Party had stolen all his ideas and written them into its platforms.

    This is the same Norman Thomas who said “The American people will never knowingly adopt socialism, but under the name of liberalism, they will adopt every fragment of the socialist program until one day America will be a socialist nation without ever knowing how it happened.”

  • Some Articles Worth Reading

    Making Social Security More Harmful. From the Foundation for Economic Education. “Consider first that ever since Social Security was enacted in 1935 Americans have been told that their ‘contributions’ are being deposited into their own account to pay for their retirement benefits. … The other fraudulent claim made about Social Security (again, from the very beginning of the program) is that employees pay only half the cost, with employers paying the other half.”

    Banking Without Regulation. Another fine article from FEE. Could banking be done without regulation? It has been done in the past.

    The Election Choice: Unions. “Obama’s pro-union agenda is the most ambitious in decades.”

    Labor Unions Prolonged the Depression. Obama wants a new Wagner Act. “As Amity Shlaes observed in her recent history of the Great Depression, ‘The Forgotten Man,’ within a few months after the Wagner Act was upheld, industrial production began to plummet and “the jobs started to disappear, with unemployment moving back to 1931 levels,” even as the number of workers under union control was ‘growing astoundingly.’”

    Money For Nothing. “The urge to spend lavishly on schools is part of the Democratic Party’s DNA. But fatter budgets would not be balanced by accountability, higher standards or parental choice.”

  • The Myth that Laissez Faire Is Responsible for Our Present Crisis

    Professor George Reisman contributes the excellent (and lengthy) article The Myth that Laissez Faire Is Responsible for Our Present Crisis. I’ve had the distinct honor of attending a number of Professor Reisman’s lectures at the Ludwig von Mises Institute, and I’m slowly working my way through his monumental book Capitalism: A Treatise on Economics. Here’s a few excerpts from this article:

    “Laissez-faire capitalism is a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force.”

    Then Professor Reisman lists some of the ways in which our present system is far removed from anything resembling laissez-faire capitalism:

    The utter absurdity of statements claiming that the present political-economic environment of the United States in some sense represents laissez-faire capitalism becomes as glaringly obvious as anything can be when one keeps in mind the extremely limited role of government under laissez-faire and then considers the following facts about the present-day United States: 1. Government spending in the United States currently equals more than forty percent of national income … 2. There are presently fifteen federal cabinet departments, nine of which exist for the very purpose of respectively interfering with housing, transportation, healthcare, education, energy, mining, agriculture, labor, and commerce … 3. The economic interference of today’s cabinet departments is reinforced and amplified by more than one hundred federal agencies and commissions … 4. the Federal Register contained fully seventy-three thousand pages of detailed government regulations. This is an increase of more than ten thousand pages since 1978, the very years during which our system, according to one of The New York Times articles quoted above, has been “tilted in favor of business deregulation and against new rules.” 5. And, of course, to all of this must be added the further massive apparatus of laws, departments, agencies, and regulations at the state and local level.

    What this brief account has shown is that the politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.

    Then, under the heading “Government Intervention Actually Responsible for the Crisis:”

    Beyond all this is the further fact that the actual responsibility for our financial crisis lies precisely with massive government intervention, above all the intervention of the Federal Reserve System in attempting to create capital out of thin air, in the belief that the mere creation of money and its being made available in the loan market is a substitute for capital created by producing and saving. This is a policy it has pursued since its founding, but with exceptional vigor since 2001, in its efforts to overcome the collapse of the stock market bubble whose creation it had previously inspired.

    I could go on for some time with more quotes from this article, but it is well worth reading the entire piece. Please do so at The Myth that Laissez Faire Is Responsible for Our Present Crisis.

  • Our Economic Past — Equality, Markets, and Morality

    Free markets may yield odd results and certainly unequal outcomes, but the greater opportunities and prosperity have made the tradeoff worthwhile for American society.

    From Our Economic Past ~ Equality, Markets, and Morality by Burton Folsom, Jr., posted at the Foundation for Economic Education.

  • Laissez faire in Washington? On what planet?

    Sheldon Richman of the Foundation for Economic Education contributes analysis of the current economic situation in the article Government Failure. A few quotes:

    Laissez faire in Washington? On what planet? Governments at all levels have regulated the financial industry from the time of the founding. …

    At the Division of Labour blog, economist Lawrence H. White asks: “What deregulation have we had in the last decade? Please tell me.” …

    What about greed? Here White also has something important to say: “If an unusually large number of airplanes crash during a given week, do you blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of crashes is higher than usual.” Likewise, greed (however you define this essentially useless concept) can’t explain the current economic troubles. Why didn’t these troubles occur earlier? Were people less greedy then? …

    What about irresponsibility? Now we are getting to the crux of the matter. There was irresponsibility — but only because the government for decades has pursued a policy of relieving big companies of the responsibility that otherwise would have been imposed by market discipline and competition. …

    Good intentions count for nothing in this context. The laws of human action (praxeology) can’t be repealed or got around.

    Praxeology. Ludwig von Mises has an explanation for everything, it seems.

  • Wichita Mayor Carl Brewer saves us from covered wagons

    On August 12, 2008, at a meeting of the Wichita City Council, Wichita Mayor Carl Brewer delivered remarks that I found … well, I’m still trying to find the words that fully describe my astonishment. You can read my transcription of his remarks in this post: Wichita Mayor Carl Brewer, August 12, 2008.

    The context of these remarks is that John Todd and I had just testified against the city establishing a tax increment financing (TIF) district that benefits a local developer. Mayor Brewer believes it is the city’s firm duty to guide and subsidize economic development. His remarks on July 1, 2008 (Mayor Brewer Warren Theatre [sic] Statement) leave no doubt about this. So I wasn’t too surprised that the mayor ignored John’s and my advice and supported the formation of this TIF district.

    What surprised me was when the mayor said that without the city’s “role in guiding and identifying how the city was going to grow … we would still be in covered wagons and horses.”

    When I heard him say that, I thought he’s just using a rhetorical flourish to emphasize a point. But later on he said this: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

    So I think it’s fair to say that the mayor believes that without the city’s role in economic development, we would soon return to the stone age (okay, there I exaggerate a bit).

    Many people in Wichita, including the mayor and many on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

    Today this rugged heritage is disappearing in favor of the public-private partnership and programs like Visioneering Wichita. We don’t have long before the entrepreneurial spirit in Wichita is totally extinguished. What can we do to return power to the people instead of surrendering it to government?