Since I write about capitalism and crony capitalism and government and business every day I have the opportunity to read quite a lot about these subjects from various perspectives. I read libertarians, and conservatives, and liberals, and progressives, and just about anyone else who is interesting. I read the comments here at ACC, and at sites all over the web.
One of the things I am fascinated by is the degree to which some people are seriously afraid of free enterprise, the voluntary exchange of goods and services, of capitalism. It is bizarre to me as it seems pretty self evident that where free enterprise is allowed to flourish people also flourish. History has shown us this over and over and over. And yet people still fear.
Is it ignorance? Is it ingrained lessons from school? Is it an overall culture of statism? Is it the search for a religion in a world which often lacks religion? (I am convinced that “big government” is in fact a religion. I will admit this from the outset.)
There are probably dozens if not hundreds of reasons why some people fear free enterprise. Some reasons are more valid than others. I think however that there are some core reasons which can be readily identified and I’d like to take the space to explore some of them.
This essay will be an ongoing one which I will revisit periodically. Below are a few reasons why I believe people fear freedom and free enterprise. This is just the first batch.
I am unsure if the above headline is a bit of friendly advice, an ad, or a warning. Regardless the attached article offers an interesting window into the changing Cuban economy. There do seem to be opportunities to make money in the tropical worker’s paradise. But just understand that the cronies run the show. All of the show.
At least for the time being. Viva la revelucion capitalismo!
A very Happy Birthday Professor Mises!
By Ron Paul
This month marks the seventh anniversary of the bursting of the housing bubble and the subsequent economic meltdown. The mood in Congress following the meltdown resembled the panicked atmosphere that followed the September 11th attacks. As was the case after September 11th, Congress rushed to pass hastily written legislation that, instead of dealing with the real causes of the crisis, simply gave the government more power.
Just as few understood the role our interventionist foreign policy played in the September 11th attacks, few in Congress understood that the 2008 meltdown was caused by the Federal Reserve and Congress, not by unregulated capitalism. Not surprising to anyone familiar with economic history, the story of the 2008 meltdown starts with the bursting of the Fed-created tech bubble.
Following the collapse of the tech bubble, the Fed began aggressively pumping money into the economy. This money flooded into the housing market, creating the housing bubble. The Bush Administration and the Republican Congress also added fuel to the housing bubble. These so-called “free-market” conservatives expanded federal housing programs in hopes of creating an “ownership society.”
If Congress understood the Austrian theory of the business cycle, it would have allowed the recession that followed the housing bubble’s inevitable collapse to run its course. Recessions are the economy’s way of eliminating the distortions caused by the Federal Reserve. Attempts by Congress and the Fed to end a recession via inflation and government spending will only lead to future, and more severe, economic downturns.
As we have said before, many times, we are against crony capitalism and for capitalism not because “we just want to keep what’s ours.” Not because we feel some slavish devotion to an ethos of greed. (As some might call self interest.) But because the voluntary exchange of goods and services, capitalism, is the economic vehicle which raises more out of poverty and provides the most opportunity for everyday people. Where one can do business without the government or the local lord or mafia boss taking all the profits people can build wealth. They can then in turn invest this wealth. Which then in turn creates new jobs and new wealth creation and so on.
Where people can’t do business in an honest way wealth aggregates with cronies and eventually the broader economic system stagnates. Contracts aren’t respected. Investment wains. Jobs aren’t created or disappear. The everyday person is worse off. This is the reality of big government, and it creates poverty.
To deny this seemingly obvious reality (at least to us) is to condemn many people to lives of economic despair and social marginalization. We know the Pope doesn’t want that.
And the other 25% of the people polled were apparently legally blind.
One does get the sense that we as a country are teetering a little too much toward modified banana republic status. I wouldn’t say that we are completely there yet, but it seems the government and its cronies have steadily worked toward achieving such a status over the last couple of decades.
To be fair I think this number reflects Americans becoming more aware of the real nature of government. Government is not some benevolent force. It’s not your ally. It is there in a very real sense to distribute money from your pocket to those who are in and around the government apparatus. That’s the harsh reality. But at least more people are coming to see this.
Yup. Extremely well said. Voluntary exchange is moral and just. Legalized theft, facilitated by government via taxation and crony capitalism (often under the guise of “justice”) is immoral and unjust. We are either free people or we are not. Capitalism, or more exactly, “free enterprise” is the economics of free people. As Professor Williams explains.
Think of 2008 as a primer. A very difficult and disruptive primer. Nothing’s “fixed.” Markets never really cleared.
Additionally, as is explained below, the now 0% interest rates are almost locked there as the cost of serving US debt by the US government would explode upward with increased (and very likely closer to real market level) rates. That’s a sticky place to be to say the least.
But people will continue blissfully along, until they can’t. Then they’ll scream that “capitalism” messed everything up. Watch.
The way out of poverty is through capitalism, free enterprise, free markets, and free prices. But so many people who I believe honestly want to do good do not understand this. They believe that central planning and aid from “rich countries” will solve the world’s problems even though they have only worsened things in aggregate around the world for decades.
Where poor people can build wealth and enjoy property rights and honest pricing the tendency is toward prosperity. Where there is government intervention, where the government or connected cronies can just seize the limited wealth of the poor (often in the name of “justice”), where prices are obfuscated, there is poverty and misery.
We do not believe in free prices and free markets because we want to keep “what’s ours.” We believe in them because we know, and have seen, how much better capitalism is for everyday people than state intervention and its associated cronyism.
In order for a society to truly proper people need both personal liberty and economic liberty, which are actually one and the same. Capitalism allows for both and offers a path out of poverty. (Not that it is always easy.) But many people just refuse to see this. It fundamentally conflicts with everything they’ve been told, to date.
These protests are a massive reaction against a deeply crony and socialist government in Brazil. The economy is failing. The “Bolivarian” movement in South America embodied by the now dead Hugo Chavez is imploding. Wherever the statist cancer has spread, Venezuela, Brazil, Argentina, Bolivia, Ecuador, even Chile it has brought with it economic dysfunction. And that is saying something as this IS South America we are talking about.
But the anger exhibited above and below is not simply some Brazilian or South American phenomenon. The sentiment embodied in the streets of Sao Paulo, Rio, and Brasilia this week runs through the world. And it is increasing as middle class people are becoming more aware of the inner workings of their governments.
As the world economy continues to sputter (sputtering would be good) we will see more of this sort of thing in other parts of the globe. People are much better educated on political matters these days thanks to the Internet. They are sick of being abused. The veil of government has been lifted a bit and people, Brazilian, American, Chinese, European, Indian, do not like what they see.
These protesters don’t want bread (at least not now, and let’s hope that doesn’t ever become a concern) they want respect and transparency. It is their money that their government is giving away to the crony class.
Not all “intellectuals” but a good number of them. Many who populate sociology, and political science departments that’s for sure. And English, and, OK, pretty much every department except business, and even then.
OK, so you lose Ex-Im and the sweetheart deal which goes with it. So you decide to take your ball and go play – wherever – outside of the United States. Fine.
But it seems reasonable then, going forward, not to award Boeing any lucrative military projects. That’s only fair. Go live off the Swedish taxpayers. They like socialism.
As we’ve argued many times before, arbitrarily raising the minimum wage, particularly to a level which is far above the real wage rate is an idiotic move. It creates unemployment for low wage earners, and in many cases for the people who formerly employed low wage earners. A “living wage” sounds nice. It sells to economically unsophisticated people. But a job doesn’t suddenly become “worth” more just because the government declares that it is. One can not revoke gravity. Likewise one can not revoke supply and demand.
Magic is not real, no matter what the politicians say.
This is an old article, but given the current debate it is worthy of a post.
Ralph Nader is one our favorites here at ACC. We disagree with him on a myriad of issues. He likes government quite a lot. We, well are more skeptical of the state. Saying that though, there is no doubt that Mr. Nader is an enemy of crony capitalism and one of the good guys running around Washington. (There are a few.)
Below is a declaration. A call to town halls. A call to take the rhetorical fight directly to our elected officials during their summer recess. If our representatives are going to ignore us in DC they will have a much harder time ignoring us at community meetings and grandstanding events. Turn on your iPhones. Record responses to hard questions. See what happens.
They do work for us.
Obamacare is a giant jack. And no, single payer is not the solution. That is the last thing we need. Single payer is an excuse for all sorts of other cronyism. Not to mention that socializing healthcare in the 21st Century is just a backward idea. We should be opening up healthcare not centralizing it.