Economics, Must Reads

The Clear Case for Capitalism

At dinner not long ago my daughter and I had a standoff. She refused to eat something—a calzone in this case—because it looked “gross.” I failed to convince her what was actually in the calzone until finally I cut it in half and into a triangle so it looked just like pizza. Once she learned what was in it she loved it.

I recalled this calzone a few weeks later when I got into a heated discussion with a friend. He is convinced that capitalism is the source of all of America’s problems. As the discussion progressed, it became clear to me that the source of our disagreement was definitional: we didn’t have an agreed-upon understanding of what capitalism is—or, in other words, what’s “in it.”

Perhaps this kind of disagreement isn’t surprising given that only 22 states require high school students to take a class in economics to graduate, less than 50 percent of high school students have any exposure to economics, and only three percent of colleges require an economics class (!). So I decided to compile my thoughts about what’s really “in” capitalism. I came up with three tenets that break capitalism down into something more digestible and debatable, each of which I’ll discuss further in what follows:

  1. Capitalism is trade, which creates wealth.
  2. Capitalism is competition, which spurs innovation & lowers prices.
  3. Capitalism is unselfish, which brings cooperation & peace. (I know, some readers will already think this is ridiculous. We’ll get there).

At a time when socialism and anti-capitalist populism are experiencing a resurgence, this is my attempt to turn the mysterious capitalist calzone into an appetizing capitalist pizza. Everyone loves pizza.

I. Capitalism Is Trade

When goods do not cross borders, soldiers will.
~
Frederic Bastiat

Consider the following:

  • I list a used car for sale on Craigslist for $5,000.
  • A buyer shows up and offers $4,000, but he’ll buy it on the spot if I accept.
  • After some negotiating, we settle on $4,500.

Who won this trade? We both did. He wanted the car more than $4,500, and I wanted $4,500 more than the car. Behind every fair trade, both parties get what they want. As a result of this simple transaction we’re both better off. And by better off, I mean we are both wealthier. To quote Paul Graham:

If you want to create wealth, it will help to understand what it is. Wealth is not the same thing as money. Wealth is as old as human history. Far older, in fact; ants have wealth. Money is a comparatively recent invention. Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. You can have wealth without having money…..You can make more wealth. Wealth has been getting created and destroyed (but on balance, created) for all of human history.

And once you realize this simple truth, that wealth can be created out of thin air, a few corollaries to this truth should also be clear:

  1. If wealth can be created from thin air, it is not zero-sum. To believe otherwise is to fall victim to the fixed-pie fallacy.
  2. This means that every single person on earth can be wealthy. And, as we’ll see, we’re on our way to exactly this outcome.
  3. Once something of value is created (i.e. ‘wealth’), it’s shared with others by selling it to them. In other words, wealth is shared via trade.

For an illustrative example of the value of trade, read about the man who tried to create a sandwich without trading for it:

Note that this same principle—gains from trade—also applies when countries trade with each other. This is where massive wealth gets created. Through billions of transactions with other countries, either as a buyer (of imported goods) or a seller (of exported goods), global wealth is maximized. If international trade is restricted, global wealth suffers.

That is why, when foolhardy politicians promise to stop trading with other countries, or to tax goods produced by those countries, we should probably worry (who do you think ends up paying those “tariffs”?). When other countries produce goods at a lower cost (including their opportunity cost) than we can produce ourselves the result is lower prices. And lower prices mean consumers are wealthier.

The debate, however, always focuses on the loss of jobs (i.e. the negative effect on the producer) not on the gains that come from cheaper goods (i.e. the positive effect on the consumer). When President Trump promises that he’ll force Apple to produce their products in the US—and nowhere else, he reasons that America will recover jobs lost to overseas manufacturers. He couldn’t be more wrong. If Apple has to produce the iPhone in the US, what do you think happens to the price of an iPhone? It skyrockets. Pick one of the following:

  • Buy a new iPhone (built where costs are lowest) for $650.
  • Buy a new iPhone (manufactured in the US) for, say, $3,000.

And if we must pay higher prices for everything, what does that do to our wealth? It wipes it out. Every iPhone owner becomes poorer than they would have been otherwise. The United States is enormously wealthy as a country because we buy from the lowest-cost producer, which creates tremendous value to the buyer. Furthermore, companies that export goods to foreign buyers tend to pay higher salaries than companies that only serve a domestic market. If you simply focus on the jobs lost to the foreign producer, you miss the other side of the coin.

But, you might wonder, which side of the coin is more important? Should we worry more about the loss of jobs to foreign competitors, or should we focus more on gains that come from trading with foreign partners? To quote a recent study from the Economist:

As it turns out, protectionism (preventing trade with foreign countries) hurts consumers and does little for workers. The worst-off benefit far more from trade than the rich. A study of 40 countries found that the richest consumers would lose 28 percent of their purchasing power if cross-border trade ended; but those in the bottom tenth would lose 63 percent (because they actually buy more imported goods).

The same is true for all industries where the US cannot profitably compete. An eternal rule of economics is that countries should focus production where they have a comparative advantage, and outsource everything else.

Rather than trying to restore jobs that are better done elsewhere, we should be focusing our energy on helping those workers that are displaced by foreign competition. This is much easier said than done, especially when dealing with people’s livelihoods. But it must be done.

Capitalism Is Competition

“But there are plenty of examples of companies taking advantage of their customers!” you might say. “Doesn’t that show that capitalism is bad and that greedy executives can get rich on the back of their customers?”

Look, for example, at Mylan—the pharmaceutical company that sells the EpiPen, a lifesaving product for those with severe allergies. Mylan recently made headlines by charging $600 for a product that costs less than $20 to make. Isn’t it ridiculous that a company can charge outrageous prices for a product that saves lives and only costs a few dollars to make? Yes, it is ridiculous. And capitalism would fix it, were it permitted to do so. This brings us to the second tenet of capitalism: that in true capitalist economies, competition means companies like Mylan can’t do what they are doing with the EpiPen.

In a normally functioning free economy, seeing Mylan screw over its customers would inspire an entrepreneur to create an EpiPen competitor and sell it for $590. A competitor then does the same and sells it for $500. And so on, until profits in the EpiPen industry are eroded away by this magical concept of competition. There are a few reasons why this doesn’t happen in the pharmaceutical industry. This post from Scott Alexander provides a great overview, but the short answer is that capitalism isn’t allowed to work. Instead, corporate cronyism—a type of fake capitalism—prevails, and monopolies like Mylan form as a result. As Milton Friedman observed:

The great danger to the consumer is the monopoly—whether private or governmental. His most effective protection is free competition at home and free trade throughout the world. The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him.

To summarize this second tenet: when companies are forced to compete to survive (which is what happens in a capitalist economy), the consumer wins big. This is because:

  • In order to compete, entrepreneurs must innovate.
  • Innovation usually means newer technology.
  • Newer technology often means lower prices.
  • And lower prices mean consumers get to capture more of the gains.

Yes, both parties are better off in a trade, but when capitalism prevails and trades happen at lower prices, consumers capture more of the gains than they would otherwise, and total gains (the sum of consumer gains plus producer gains) are maximized. Competition pushes the world forward, as risk-seeking intelligent inventors and entrepreneurs find ever more ingenious ways to compete with larger, established companies, bringing the market lower-cost and higher-quality products.

Three quick examples:

WhatsApp vs. SMS: Before WhatsApp, AT&T and others would charge customers anywhere from two to four cents for every text message sent. This produced billions in revenue each year. Then, along came a tiny software company offering FREE UNLIMITED messaging worldwide and….boom!:

Uber vs. Taxis: I have friends who tell me they used to be unable to reliably call a cab in NYC because they’re black. Not to mention the terrible service and high prices. Along came Uber, and now….well you know. The price is lower, the technology better, and my friends get picked up. The gains to consumers (also known as consumer surplus) are off the charts.

Spotify vs CDs: My kids will never know this, but I used to collect something called “compact discs.” They contained about 12 tracks, they were vulnerable to scratches and other damage, and they cost about $20 each. Then, along came Spotify, Apple Music, and Pandora and now every song ever created is at my fingertips—for less than the price of a CD.

As you might have heard, many people equate capitalism with being “good for big business.” But capitalism is great for the consumer. When you look at these changes, capitalism feels much more like a miracle we should celebrate than a scourge we should demonize. Take a look at the chart below:

Source: AEI

This chart outlines how prices have changed in various industries over the past 20 years. What stands out is that, in every market in which sellers must compete fiercely to win, technology (especially software) has a natural tendency to lower prices. As American entrepreneur Marc Andreessen has observed:

So you’ve got these sectors of the economy where there’s rapid productivity growth. Prices are falling fast. Those are the industries where everyone is worried that the jobs are going away—or to China or Japan or Mexico. People say there’s too much disruption—too much technological change. The Silicon Valley kids are wreaking havoc on the economy.

Then you have the sectors in which prices are rapidly rising: health care, education, construction, prescription drugs, elder care and child care. Here there’s very little technological innovation. Those are sectors with insufficient productivity growth, innovation, and disruption. You’ve got monopolies, oligopolies, cartels, government-run markets, price-fixing—all the dysfunctional behaviors that lead to rapid increase in prices.

The government injects more subsidies into those markets, but because those are inelastic markets, the subsidies just cause prices to go up further, which is what is happening with higher education.

Yes, capitalism indeed lowers prices.

Capitalism Is Unselfish

If you wish to prosper, let your customer prosper.
~Frederic Bastiat

This is probably the hardest claim to swallow. After all, maybe the greatest insight Adam Smith (the author of the Bible of Economics, The Wealth of Nations) offered was the power of self interest! As he put it:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

In other words, capitalism understands incentives, or the idea that people are naturally selfish. A person doesn’t create a business out of the kindness of their heart. They do it to feed themselves and their families. This selfishness is immeasurably powerful.

But in order to successfully create and sell a product, a businessman must actually look outside his own needs and consider the needs of the customer. A businessman has to create value for others before capturing value for himself. As a result, capitalism is the greatest incentive system in the world for focusing on others and their needs. And the result of that is empathy, understanding, and peace. Often, an entrepreneur’s net worth is merely the register of how much he has improved the lives of his fellow human beings.

I’ll summarize this section with two more quotes, the first from Milton Friedman:

The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.

And the second from John Maynard Keynes:

Dangerous human proclivities can be canalised into comparatively harmless channels by the existence of opportunities for money-making and private wealth, which, if they cannot be satisfied in this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandizement. It is better that a man should tyrannize over his bank balance than over his fellow-citizens; and whilst the former is sometimes denounced as being but a means to the latter, sometimes at least it is an alternative.

Now, you might say, if all this is true, and capitalism is so great, why is the world doing so poorly? Shouldn’t people be getting wealthier from trade? Shouldn’t technologies be increasing our standard of living?

To which the answers are: It’s not doing poorly. Yes. And yes.

Global poverty is at its lowest point ever:

Life expectancy is at its highest point ever:

And much of the improvement in quality of life is due to technology:

Also, people are wealthier (we enjoy a higher standard of living), as a whole, than ever before:

Lastly, the linchpin: every country that adopts this system of free trade, competition, and entrepreneurship is a rich country:

Objections

It would not be intellectually honest to present the case for capitalism without acknowledging the most common objections. The same economics class that teaches me the irrefutable truth of free trade also teaches me about tradeoffs. And capitalism has plenty of tradeoffs.

I’ve already discussed one: that trading with global partners often means losing jobs to them. Here are three more:

Capitalism Causes Wealth Inequality. While it’s true that inequality is increasing in the US, global wealth inequality is actually decreasing (because globally the very, very poor are getting wealthier at a much quicker rate than the rich are getting richer). I do suspect inequality is a real tradeoff of capitalism in the long-run, however. But as Winston Churchill observed: “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries.”

Capitalism Causes Wealth to Be Concentrated in the Hands of Just a Few. “Bad” wealth concentration often results from monopolies, which capitalism is extremely effective at removing. “Good” concentrated wealth—earned through truly breakthrough innovation (like Bill Gates’s wealth, for example)—is great and should be celebrated. Gates ought to be rewarded for all the value he’s created, and society should encourage it. And, by the way, look at all the good he does with that wealth:

Capitalism Incentivizes Business Owners to Pay Workers as Little as Possible. Employees simply trade with employers when they agree to work (trading their time and skills for a paycheck), and gains from trade certainly apply. Any worker who freely accepts a minimum-wage job from, say, Walmart, deems himself better off for doing so, otherwise he wouldn’t do it. Remember the principle: behind every fair trade, both parties get what they want. Just like a country must work its way up the opportunity-cost ladder from a manufacturing economy (producing goods like t-shirts and trinkets) to a services economy (producing goods like consulting and banking), workers must improve their value in the marketplace through education, specialization, and training. Also, just as firms compete with each other over consumers, they compete with each other over workers. If Wal-Mart is underpaying a great employee, and Costco believes that by offering an extra dollar per hour it will steal that employee from Walmart, capitalism says Costco will do it. Look no further than Silicon Valley to see the lengths companies will go to persuade scarce talent to work for them. Competition actually benefits the scarce worker, as it should. And it pays a commodity price for a commodity worker, as it should.

The genius of (and challenge for) America is that it provides a system that allows everyone equality of opportunity to succeed in moving from a commodity worker to a scarce worker. We have a long way to go here. I don’t think anything I’ve written here is controversial, although there may be some disagreements at the margins. And if you don’t buy my arguments, take note of hyper-capitalist Barack Obama, recently quoted in the Economist:

It is important to remember that capitalism has been the greatest driver of prosperity and opportunity the world has ever known.

Thanks, Obama. Calzones are pretty tasty after all.

 

Tyler Hogge works in technology and lives with his wife and three children in Silicon Valley, CA. You can follow him on Twitter @thogge

This is a slightly edited version of an article published on Medium in 2016.

326 Comments

  1. As always, this is a rationalisation of a system that is working for oneself at the moment, but which is inherently unjust, inhumane & – now most pressingly – UNSUSTAINABLE on our finite, vulnerable & overpopulated planet.

    We are all enslaved to the Matrix of state & capital, which we must liberate ourselves from if our civilisation is to survive this century. But before we can do that we must be red pilled into recognising the nature of state & capital & the delusions we are living under: https://twitter.com/rogerahicks/status/1035814311325782016

    • Locketopus says

      1) The planet is not overpopulated. You and yours have been riding that hobby horse for close to a century now, and we’re still not eating Soylent Green.
      2) Odd that the countries that are so “unjust and inhumane” are the very countries that everyone wants to live in, innit? Even if they have to break the law. Also odd that it’s only socialist paradises like Venezuela (most recently, but history gives plenty of other examples) where people are starving, while in the EEEEVULLL capitalist countries even the poor have plenty to eat (indeed, too much, in many cases).

      Nah, brah. 100 million victims of socialism is enough.

      • E. Olson says

        Good comment Locketopus. Funny how Leftists in Western countries increasingly support open borders as a humanitarian imperative to allow people to escape from repressive, corrupt, and coercive governments, while at the same time advocating/legislating/enforcing repressive and coercive public policies and defending corrupt politicians.

        • I’m having trouble believing you’re falling for Mr. Hogge’s propaganda.

          Hogge is working in Silicon Valley and seems to worship Gates and Obama. Hogge and his droogies have prospered simply because Gates had to the foresight to start buying politicians when they were cheap 20 years ago. Now our uber-capitalists simply assume that their trademarks, patents and copyrights will be extended forever, if that is what they want; they assume that the taxpayers in the US will continue to assume 100% of their global transaction costs while at the same milking the US tax payers of all their accumulated wealth by way of wage arbitrage; and they assume that all right thinking governments will make sure not to upset their global monopolies.

          As early as 1641, the settlers of New England had this to say about monopolies of all kinds in paragraph 9 of the Massachusetts Body of Liberties of 1641.

          “No monopolies shall be granted or allowed amongst us, but of such new Inventions that are profitable to the Countrie, and that for a short time.”

          In those days, a short time was five years and the test was benefit to the people at large, the nation or country, not to guarantee a windfall profit in perpetuity for the innovator.

          Presently, Silicon Valley simply drops a note to McConnell and Schumer and their patents and copyrights get extended when needed. Further, protecting their patents and copyrights has become a matter of national foreign policy. Further, minimizing their international transaction costs (freedom of navigation patrols, suppressing piracy, overthrowing hostile regimes, financial sanctions for counter-parties who don’t play nicely) have become the primary missions of the US’s armed forces and Treasury Department and the Department of Justice has not brought a significant anti-trust action in decades. We’re living in a glorified company town run by a horizontal trust; but not a word of that from Mr. Hogge.

          What does Silicone Valley pay for these services? As little as they can and nothing if possible. Capitalism has become parasitic and is close to killing the host but the aptly named Hogge sees nothing but goodness light for his kind in all this so capitalism is good.

          • Matui3 says

            I think what you gave is the precise example of Crony Capitalism. There is something wrong with our patent system. It’s debatable whether we should have patents or trade secrets. However competition has brought technology and lower prices in these sectors. You illustrate the problem quite well as government having the power to intervene in the affairs of business.

          • Your insult about Mr. Hogge’s name cancels out anything else you say, particularly since you lack the courage to use your own name.

          • Peter from Oz says

            Government corrupts business, not the other way around. Once you have grasped this you have the root of the matter.

          • david of Kirkland says

            So it’s not capitalism you dislike, but corrupt government officials who create unfair systems that benefit donors over voters, the special interest over the common one.

          • William Clapp says

            You are not arguing against capitalism. You’re argument is properly placed on the government. Please stop conflating one with the other. Right now there is a revolt against this corrupt government and it is being led by President Trump. A person for whom, I’m sure, you hold nothing but the deepest contempt. Get off your high horse and start making some sense. Start by criticizing the appropriate people, many of whom you currently support and have inappropriately voted for due to your ignorance. You want the government to stop extending patents, stop voting for the clowns that do the extending. That wouldn’t be Trump, he is in a different branch of government entirely. And don’t blame capitalists for trying to be successful either, the successful ones are the ones who use the rules and tools at their disposal to get on top and stay there as long as possible. It took, a long time to break up AT&T but look what we have now as a result. Start looking for politicians that aren’t in office purely for themselves, which includes entirely too many. Term limits are overdue for all of them. If you are stupid enough to vote for Michelle Obama in the next election then you deserve the doom you are asking for.

          • @Matui3

            I’m agnostic about economic systems and theories; to my mind, whatever benefits the governed is probably good whatever harms the governed is probably bad.

            But “free trade” presumes open markets. But only governments can create open markets. Open markets require the physical presence and security of a market place, some level of infrastructure necessary to attract and sustain the physical market, binding and impartial methods of dispute resolution and uniform standards of weights, measures and quality.

            All of this intimately connects government and commerce. They cannot be separated. The tendency of commerce to corrupt government is something that has been a recurring theme in the Anglosphere since at least the reign of Elizabeth I and, going back to 1800, has been a recurring theme in US politics.

          • @Peter from Oz

            I disagree for the reasons I’ve given above to Matui3.

            It also occurs to me that presently, governments and their favored economic systems are as tightly intertwined as were governments and their established religions were 300 years ago. It seems that economic orthodoxies have replaced religious orthodoxies as something that governments feel the need to defend and propagate.

            My chief complaint about Mr. Hogge’s piece is that it doesn’t rise above the level of secondary school propaganda and fails to address the obvious problems with capitalism as it has actually been practiced for the last 50 years.

          • Matui3 says

            @EK

            Yeah so that’s not quite how it works. There are always trade offs. Sometimes the best deal will benefit 95% of people but hurt 5% of the governed and badly. An open marketplace does not need a government. I mean as long as people can own and protect property you don’t need a government. I’m not an anarchist but the important aspect is property and trade. Yes Government and markets have always been together. They can separate. As long as government makes no intervening between voluntary trade and exchanges with property, there’s no problem. The only reason government involves itself is because some people refuse to leave it alone. So the never ending fight will always be between people who want to meddle in other’s affairs and those who wish to be left alone.

        • Ray Andrews says

          @E. Olson

          -We must let in the wretched, teaming masses.
          -The West is thoroughly rotten.
          – Therefore: the wretched, teaming masses must be invited to replace Western civilization with their own.

          One might consider it an exercise in logic to examine the above more closely.

          • Ray Andrews says

            @EK

            “The tendency of commerce to corrupt government is something that has been a recurring theme”

            The plutocrats corrupt the government and then say that the fault is not with them, but with the government. They say that, indeed, the government shouldn’t take their money, but they keep offering it. Rather like the preacher who gives his whore a sermon on why she should not be taking his money, sinner that she is, but would not consider the moral difficulty of his offering it.

            The SiFi author Heinlein took The Free Market to its logical conclusion and said that it was right and proper that the government be for sale to the highest bidder. He thought that all this papering over of ‘corruption’ was a waste of time and a pointless bother. Rather than the Koch brothers having to purchase their congressmen somewhat under the table, it would optimize market forces if congressmen would auction themselves off openly for all to see. That way, if the working poor, say, wanted some consideration from the government they would simply have to outbid the Koch brothers and purchase the congressmen for themselves. In the same way Heinlein thought that votes should be purchased. Money is the only possible measure of value, therefore if I want to vote, I’ll purchase a vote, and if the Koch brothers purchase a hundred million votes, that obviously means that’s how much they value votes, so of course they can have them. Perfectly fair.

          • Locketopus says

            Ray Andrews: > The SiFi author Heinlein took The Free Market to its logical conclusion and said that it was right and proper that the government be for sale to the highest bidder.

            Please provide a quote from one of Heinlein’s works that demonstrates that Heinlein himself actually supported this model as “right and proper” or else retract the statement.

            I don’t even recall one of his fictional characters making such a claim, much less Heinlein himself.

            I do recall him discussing a similar idea as one of a number of speculative alternative governmental systems. Another hypothetical system in the same discussion involved the outright elimination of male suffrage, and still another was limiting the franchise to those who would could manually extract the roots of a quadratic equation. I think there were some others, but it’s been quite a while since I read it and I don’t have the book at hand.

            I do not recall Heinlein seriously advocating this form of government, much less asserting that it was the One True “right and proper” model. Coming up with bizarre ideas like that is what science fiction writers do.

          • Locketopust says

            @ Ray Andrews:

            I found the piece online. It’s in the afterword to another piece which appeared in an SF magazine in 1980.

            https://archive.org/details/Destinies_v02n03_1980-Summer/page/n113

            Note that of the hypothetical franchise limitations he discusses, the one that he actually advocates, to the extent he seriously advocates any of them (i.e., not very) is the one where the right to vote is removed from men. NOT the one where one buys votes over the counter.

            So, were you mistaken or simply engaging in character assassination without the expectation that anyone would call you on it?

      • ga gamba says

        You and yours have been riding that hobby horse for close to a century now

        Far longer than that. Malthus predicted our imminent deaths from over population and resource depletion in 1798.

        • Locketopus says

          True enough. However, Malthus was making predictions according to the best data that he had (no widespread birth control, traditional agricultural methods), so I’d cut him a bit of slack there.

          The modern doomsayers deliberately ignore any evidence that is contrary to their religious beliefs.

          • david of Kirkland says

            No slack needed. If anybody can predict the future, they will be rich indeed. The reason predictions always fail is because we can only assume the future is just like the past, which was more or less true for millennia before capitalism took off.

        • Ray Andrews says

          @Locketopust

          I was not mistaken. You have not have found the correct quote. I read his complete works, and exactly where the quote is I really can’t remember. But your failure to find it does not mean it does not exist. Furthermore, if you’d met RAH, as I have, you’d not be worried about assassinating his character, the man was indestructible.

          • Locketopus says

            You have not have found the correct quote.

            Or maybe the Russian bots stole it. Or perhaps Trump.

            I read his complete works

            As have I, and I remember no such “quote”.

            But your failure to find it does not mean it does not exist.

            So my failure to find evidence that you aren’t a grey alien from Zeta Reticuli would constitute “evidence” that you are, in fact, a grey alien from Zeta Reticuli? That’s not how it works, Skippy.

            You’re the one who made the claim. The burden of proof is on you.

            You need to either provide a source or withdraw the claim.

          • Ray Andrews says

            @ Locketopus

            You occasionally have something interesting to say. Too bad you are also a jerk. We’re not in court and I don’t need to prove anything, I am sure of the quote, but it would take an age to find it. Meanwhile you can take it or leave it as you choose. Mind, if we could arrange it, being a bit angered as I am, I’d bet you a hundred bucks on it — but then of course I’d have to do all that work.

          • Thylacine says

            An assertion that can be made without evidence can be dismissed without evidence. -Hitchens.

      • Max says

        Overpopulation is not just about numbers but also about whether the planet can sustain the externalities of that number, which it can’t.

        And that 100 million figure is bullshit and has been exposed as such. That figure was established as a target by a group of authors who then went about reaching it any way they could. Since then, several of the authors have admitted so.

        • E. Olson says

          Max – Paul Ehrlich of Population Bomb fame thinks the maximum sustainable human population is less the 2 billion people. Of course he also predicted in 1968 that there would be mass starvation and millions of death during the 1970s as human population growth outstripped available food supplies, and yet here we are today with 7+ billion people and obesity is a major health problem even among the poor. Should we believe him this time, and if so which 5 billion people do you suggest we get rid of (and will you be part of that group)?

          As for the 100 million figure of deaths from Communism – if not 100 million how many was it? Only 30 million, or 50 million, 70 million?

          • Max says

            I’ve heard 2-4 billion without the advent of technology allowing for greater production. Like I said, the externalities of these technological advancements are often ignored factor. Speculation and prediction concerning mass die-off are just that, take them with a grain of salt, as I do.

            As far as casualty numbers are concerned, I would have to dig through my papers and research new analysis. What I do know, for a fact, is that the 100 million figure was a biased, premeditated deception.

          • Locketopus says

            Max: A well constructed response to my post. You may find the comments section at Breitbart more suitable.

            You made assertions without evidence, and I dismissed them, which is all that such assertions deserve.

            As far as casualty numbers are concerned, I would have to dig through my papers and research new analysis.

            Translation: you don’t want to answer the question.

          • Max says

            @Locketopus

            I will repeat my retort to a point someone else made further down the comments section.

            Those numbers are propaganda, plain an simple.

            1932-33 famine- roughly 4 million. This number is without consideration given to natural disasters.
            The Soviet Gulags- Roughly 1 million during the Stalinist period.
            Soviet executions, 1921-1953- Roughly 1 million.

            That’s a far cry from the figures you sourced from the widely debunked Black Book of Communism, whose authors have since admitted was an ideological fabrication.
            Now, if we applied The Black Book of Communism’s methodology, we would find that capitalism has amassed quite a staggering number of casualties.

          • Ray Andrews says

            @E. Olson

            That one survives a game of Russian roulette is not evidence that the game is not dangerous. The fact that humanity has avoided disaster a few times is certainly evidence of our resilience and one should always remember that prophecies of doom usually fail, but it would surely be imprudent to say that nothing can possibly go wrong. I’ve been 3/4 convinced that the situation we are heading for is fundamentally different because our former ability to expand seemingly infinitely is going to hit a brick wall. Merely the situation with aquifer water seems to be potentially catastrophic and there are a dozen similar. As I like to say, if Katla blows we are all doomed because we cannot survive two volcanic winters in a row, and that is certain.

        • Doctor Locketopus says

          Overpopulation is not just about numbers but also about whether the planet can sustain the externalities of that number, which it can’t.

          Nonsense.

          And that 100 million figure is bullshit and has been exposed as such.

          Nonsense on stilts.

          What’s your number for the victims of Marxism, then? How many millions?

          • ga gamba says

            What’s your number for the victims of Marxism, then?

            Zero. It wasn’t true Marxism after all. 😉

          • Max says

            A well constructed response to my post. You may find the comments section at Breitbart more suitable.

          • Ray Andrews says

            @ga gamba

            Ha! Yes, it’s amazing the problems you can solve by just redefining them. Thus there has never been an issue with Muslim terrorism because no terrorist is really a Muslim. Let’s see how far we can go with that: Germans had nothing to do with WWII because any person from Germany who did nasty things during WWII wasn’t really German even if he himself would insist that he was. We know better. How does that fly? Oh, and of course everyone does this. Thus is GWB wants to torture POWs he just relabels them as ‘illegal enemy combatants’. Get the irons.

        • Denying the slaughters perpetrated by Stalin and Mao is every bit as evil as denying Hitler’s Holocaust.

          • Locketopus says

            They are fundamentally identical, no matter how many “leftists” claim they were somehow “opposites”.

        • Locketopus says

          Max: 1932-33 famine- roughly 4 million. This number is without consideration given to natural disasters.
          The Soviet Gulags- Roughly 1 million during the Stalinist period.
          Soviet executions, 1921-1953- Roughly 1 million.

          1) The “disaster” was far from “natural”. The United States had the Dust Bowl around the same period, but somehow we didn’t have 4-10 million people starve to death.

          2) Even if one accepts your (ridiculous) low-ball numbers, you are conveniently overlooking the “Great Leap Forward”, the killing fields in Cambodia, the continuous famines in North Korea, the Derg famine in Ethiopia… and those are just the low lights. There were dozens of other Marxist-induced famines and reigns of terror, all the way up to the present famine in Venezuela. And, oddly, never once did the promised Marxist utopia come to pass. At this point a pragmatist (or, indeed, anyone capable of rational thought) would conclude that Marxism is a very bad idea.

          johntshea is right. You are in exactly the same moral position as a neo-Nazi denying the Holocaust. Exactly.

          • Max says

            @Locketopus

            Again, pulling figures out of your ass, which shouldn’t surprise me as that’s obviously where your head is firmly planted. In all honesty, I’m interested to know where you sourced 4-10 million.

            And if I decide to utilize the same methodology that was utilized to come to that 100 million casualty figure as a result of Communism, I can find roughly 5 million during the Vietnam war. Like I said, utilizing the methodology you’re undoubtedly adopting, I can come to similar figure by assessing the wars, interventions, backed coups, and so on, and that’s just the United States. If I wanted to go after capitalism, utilizing the same methodology, I could probably amass even higher casualty rates.

            But please, do continue to reference figures whose authors wont even stand by.

          • Locketopus says

            I’m interested to know where you sourced 4-10 million.

            Well, the 4 million is your own (unsourced) number, dude. What’s your “source” for that?

            As for the 10 million, try this:

            https://web.archive.org/web/20170313040724/http://repository.un.org/bitstream/handle/11176/246001/A_C.3_58_9-EN.pdf

            I can find roughly 5 million during the Vietnam war.

            Yeah, that’s about right, actually. A bunch more were murdered after the communists took over (which, of course, you’re also ignoring).

            Lots than that more perished in the war against the Marxist heresy known as National Socialism.

            What makes you think that being killed in a war is the same as being murdered by your own government?

            Hint: it isn’t.

            And you’re still ignoring the Great Leap Forward and all the others.

            You are a vile apologist for mass murder.

          • Max says

            @Locketopus

            Yet you give a response of 4-10 million.

            You’re not specifying the source of the casualties, merely the ideology. Again, utilizing the same methodology you’re using to get your 100 million figure, capitalism is at between 90-150 million as a result of the conquest of the Americas alone, that’s just western hemisphere.

            Your problem is your utilizing a flawed methodology to arrive at a figure and are not too pleased when indo the utilize the same methodolgy.

            And neither Marxism, Socialism, or Communism advocates for ethnic cleansing, so you’re Nazi reference bears no weight.

          • Locketopus says

            Yet you give a response of 4-10 million.

            I literally gave a link to a UN document that gives the 10 million figure. We’ve yet to see a source for your 4 million figure.

            capitalism is at between 90-150 million as a result of the conquest of the Americas alone, that’s just western hemisphere

            Nonsense.

            1) Most of the Native Americans who died were wiped out by disease, not “capitalism”.

            2) Most of those deaths occurred in the early colonial period, when the colonizing nations were operating on mercantilist economic theories, which had little to nothing in common with modern capitalism.

            You don’t actually know very much about history or economics, do you? Other than “Capitalism bad. Marx good”, I mean.

          • Max says

            @ Locketopus

            My figures is sourced from academic papers by Steven Wheatcrof, Mark Tauger, the paper Victims of the Soviet Penal System.

            http://carlbeckpapers.pitt.edu/ojs/index.php/cbp/article/view/89/90

            Again, utilizing the methodology the admittedly ideologically biased authors whose figure you’re stating, yes, I can most certainly attribute their deaths to capitalism. Colonizing was driven by a desire to find and acquire new lands and new riches, to continually expand sources of wealth. Yes, those indigenous peoples did die of disease, disease they were exposed to as a result of outsiders introducing it.

            If those indigenous peoples, and countless others, weren’t killed by capitalism then those countless others weren’t killed by Marx’ critiques either. You either admit individuals kill or ideologies kill, intentionally or otherwise. You can’t maintain a double-standard, which is what you’re doing.

            And nowhere have I said that capitalism was bad. It is deeply and inherently flawed, which is no more than Smith admitted.

          • ga gamba says

            And neither Marxism, Socialism, or Communism advocates for ethnic cleansing,

            This is the game of fixating on words and disregarding actions.

            Did the USSR ethnically cleanse? Undoubtedly it did, for example of ethnic Germans and Koreans, who were both shipped off to Central Asia. Between 1937 and 1950, Joseph Stalin deported millions people of 13 nationalities from their homelands to remote areas of the USSR. The man-made famines of the early 1930s are another example of cleansing.

            “Ethnically cleansing.” Whether cleansing is based on ethnicity, religion, or class, in the end it’s still cleansing, is it not?

            We find again and again the left will concoct boundaries that damn others whilst absolve themselves, for example the fabrication of the new cockamamie definition of racism = prejudice + power. The outcome for a person who states s/he doesn’t have power is that s/he is merely prejudiced and not racist. Their actions are based on the bad one and not the much more horrible other one. My question is this: what’s the difference in the outcome? Whether you are violently attacked based on the attacker’s prejudice or racism, you still have been attacked, right? The blows of prejudice do not fall 50% softer than those of racism. The result is the same. Some may reply that the motivations are different, i.e. one was prejudiced and the other racist? But are those the real motivations? Does hate not underlie both? Of course it does.

            Moving on, did Marx himself rule out violence? Of course he didn’t.

            “The weapon of criticism cannot, of course, replace criticism by weapons, material force must be overthrown by material force; but theory also becomes a material force as soon as it has gripped the masses.”

            On violence and terror: “… there is only one way in which the murderous death agonies of the old society and the bloody birth throes of the new society can be shortened, simplified and concentrated, and that way is revolutionary terror.”

            Some may say, “Look, Marx is proposing ways to shorten violence. Use terror instead.” OK, what was the result? Were the actions of the terrors short, simplified, and concentrated? The years and the body count prove otherwise.

            On religion, specifically Jews: “How is an opposition resolved? By making it impossible. How is religious opposition made impossible? By abolishing religion.”

            In the course of abolishing just about anything what actions do we see? Was abolishing slavery without violence? Indeed not. How about abolishing alcohol or drugs? Violence there too. I put it to you that abolishing something cherished and sacred to its believers, something central to their individual identity and their sense of community, which is religion, cannot be done peacefully. Marx was a student of history, and I’m confident he understood this.

        • david of Kirkland says

          Once Earth cannot sustain anything that befalls it (lots of humans, asteroids, bacteria…), then fewer will survive for as long. Good governance would use taxation for the common good to attempt to address negative externalities. This adds to the price, which is a key signal for capitalism to work.

          • Max says

            @GaGamba

            No, Marx did not rule out violence, however it was deemed unavoidable, which it is. What those who purged have done is take passages from Marx, interpret them in whatever manner serves their objective, and go forward. This method is not unlike those who have interpreted Judaism, Christianist, Islam, etc. in a manner that supported their objective. Those who interpret Marx as an advocate of violent revolution do so by ignoring everything else his philosophy teaches.

        • stevengregg says

          And if socialism killed only 50 million, that would be a better number, morally?

          • Max says

            It would be wonderful if no one died as a result of anything, however that’s not likely to come to fruition, is it? The issue is inflating figures to drive an ideologically biased narrative.

      • Andrew Cain says

        Why do you blame the collapse of Venezuela on socialism instead of on the collapse of the price of oil brought about by increased energy production in the US?

        • Locketopus says

          Saudi Arabia, Kuwait, the United Arab Emirates, Canada, and Norway (among many others) all derive a substantial proportion of their economy from oil sales (in some cases, a much higher proportion than Venezuela did).

          Some of them have had to tighten their belts, but none of them have collapsed. Just Venezuela. Sheer coincidence that Venezuela is also the only one that has a Marxist economy, I suppose?

    • Jay Lewis says

      Thank you for posting your “thoughts” from a device that would not exist without capitalism.

    • Paolo says

      Frankly, until a few years ago – I guess I was slow in recovering from youth dreamland – I thought exactly the same. Then gradually I opened my eyes to the data, and saw that the main narratives that are promoted by high culture, cinema, art, media, are detached from reality.

    • Northern Obsever says

      I think your anti capitalist opinion is immoral and anti human. Like other anti capitalist theoriest will destroy much and kill many. How can you hold such murderous opinions.

    • Thylacine says

      The only quibble I have with this (rather obvious) article is that wealth does not come out of “thin air.” Wealth is created whenever resources, including labor, are shifted from lesser-valued uses to higher-valued uses. There is no other way to create wealth, and any politician who tells you that printing money to stimulate the economy creates wealth is selling you a fantasy.

  2. DBruce says

    Yes on all counts BUT our tax system prevents capitalism from working in this way by forcing capital and labour to fund the unearned increment deriving from land.
    The Single Tax would fix that.

    • Peter from Oz says

      ”unearned increment deriving from land.”
      I’m always intrigued how people follow Mill’s shallow judgement and claim that the increased value of assets is somehow unearned. This entirely misses the point of capitalism. Earning doesn’t occur until there is an exchange of the asset for cash, or the asset is leased out or subject to royalties.
      The proper term is ”unrealised capital gain.”

      • david of Kirkland says

        It’s unearned when no value is added (like when you work to pay, it’s earned; when you crow crops on lands, or build a house, etc., you earn). Time occurs naturally, so holding something people want and then selling it later is both unrealized, but also unearned. Buying stocks is unearned, though a risk is taken, but the risk doesn’t even benefit the corporation that issues the stock except for the one time when it sells it, with all other trades adding no value (sure, liquidity is “some value” but tiny).

  3. E. Olson says

    Every social justice and/or socialist supporting politician and member of university communities should be forced to read this article, and challenged to provide empirical proof that refutes the pro-capitalist arguments presented.

    One further point not directly mentioned by the author. The richest capitalists are the ones that figure out a way to make luxury goods enjoyed by hundreds of wealthy consumers into mass-market products affordable to millions. Henry Royce died as a respected and wealthy founder and engineer of Rolls-Royce luxury cars, but Henry Ford died as one of the richest men in the world by putting the world on wheels with his Model T.

    • DBruce says

      The SJWs are right – there really is systemic unearned privilege, but they are wrong about what causes it – its not capitalism, its the tax system ie the state. We have capitalism but with a neo feudal tax system. We need to complete the project of classical liberalism – shift taxes from labour and capital onto land before we can really defend capitalism.

      • Peter from Oz says

        Leave land alone. If you tax it too highly you diminish fortunes by diminishing the value of land. Also any tax that is levied has to be capable of being passed on to those lower down the chain. Land tax on commercial property works because landowners can pass the tax on in the rent they charge to lessees. But tax on owner occupied dwellings is incapable of being passed on. The taxpayer then has no means of funding that tax, as it is not imposed on a cash flow.

    • Amin says

      @ E. Olson

      I doubt you read most of the articles you comment on…

      “Every social justice and/or socialist supporting politician and member of university communities should be forced to read this article, and challenged to provide empirical proof that refutes the pro-capitalist arguments presented.”

      Huh! What the FUCK do you think commies actually do? You really are a complete twat! Stop wasting time posting banalities… and you could actually try reading.

      • E. Olson says

        Amin – you so eloquently wrote: “What the FUCK do you think commies actually do? You really are a complete twat!”

        Actually what the commies do is what you do – ignore the argument and resort to violence (or in your case violent speech) to refute points they don’t like.

        • david of Kirkland says

          And also to think that we must believe whatever we read.
          #BelieveWrittenWords

        • Stephanie says

          E. Olsen provides some of the most concise, relevant, and informative comments on these fora. Amin, all you do is complain in the most crass ways.

          • Amin says

            @ Stephanie

            Look up the word “Bias”. It will help a lot. SInce it is you… likely not.

        • Amin says

          @ E. Olson

          In other words, anything challenged you are going ignore and pretend you are a “victim” now. But you know full well that you are in the habit of making up complete lies.

        • Amin says

          @ E. Olson

          You have got a nasty habit of making things up. Your silly little lies are easy to spot. You usually don’t bother to read the article. And you post up the same shit everywhere. It sticks out. Of course you are not going to reply to being challenged. You never do. You are ignorant and fairly dumb.

      • stevengregg says

        What commies really do is grasp for power, ignore any facts that stand in their way, and manufacture facts to justify themselves. For example, I’d be curious to know what facts and reason lead them to believe that the $15 min wage is practical. For most, they like the alliteration and that’s about it.

    • david of Kirkland says

      No, you need to tax gains in wealth (income). Wealth is created, so taxes can be paid. Land is fixed and thus not suitable for daily governmental needs. After all, income taxes and sales taxes are really the same thing, taxing the money given from a buyer to a seller. These are people who have the capital to make the trade, and thus have the cash to pay the tax. We just need to make the tax as flat and fair as possible (if progressive is really desired, keep it no higher than 40% to avoid tax evasion and political corruption).

    • Ray Andrews says

      @E. Olson

      Over centuries of practice, the capitalist just-so story has been refined to the point where is sounds self-evidently true. The Marxist just-so story sounds just as good. The truth is not able to be captured in a just-so story tho, it’s more complex and layered. The truth would not make a good bedtime story at all. No formula provides a Grand Unified Theory Of Everything.

      Much of what capitalist apologists say is absolutely true tho. But they tend to gloss over the glitches, and there are glitches. Opening our eyes, we see that the most prosperous societies are in fact mixed economies — they respect the vigor of capitalism while keeping it in check and also providing something for the common good. Some say that there is no such thing as the common good however, but I disagree and so do most people.

    • AllieG says

      What about the myriad of case studies/empirical work done by resource economists under the tradition of Elinor Ostrom? Capitalism is an ethical choice (admittedly a good one — sorry Gibson-Graham), but there are many other political economic arrangements through which we can exchange goods and ‘progress’, without inequality, ecological devastation…I point you to the work of Kevin Carson, Ivan Illich, distributists, etc. etc.

  4. Well said E. Olson

    However the dislocation between fact and fantasy in social issues has no bounds.

    • E. Olson says

      Thanks Anita, and I return the compliment as I greatly appreciate your many thoughtful comments.

    • Lightning Rose says

      The elephant (or 3rd rail?) in the room concerning “income inequality” is the social pathologies we’ve institutionalized since the LBJ administration. Minorities who reject marriage in favor of single motherhood, exacerbated by a culture promoting male irresponsibility in the guise of drug abuse, alcoholism, crime, and Thug As Role Model have virtually no chance at achieving the mainstream’s common life steps to comfortable affluence and financial security.

      The way off the “plantation” is simple, but it requires delayed gratification and CHARACTER:

      (1) Finish school.
      (2) Get a job–any kind of job.
      (3) Do not have children before you are married.

      The probability of a lifetime of poverty is only TWO PERCENT! if people follow these 3 little rules.
      Instead of lifting up rocks looking for systemic discrimination, which has not existed in decades, it’s time the whining ended and people helped THEMSELVES to the table of prosperity. It’s the only way things are ever going to change. No redistribution scheme can fix this from the top down.

      • E. Olson says

        LR – the sad part is that blacks were making far better social and economic progress during the Jim Crow era. Adversity makes people tougher and snuffs out the hopeless, victimhood makes people weaker and encourages the hopeless to multiple.

        • Ray Andrews says

          @E. Olson

          I saw a long video about that, from a black scholar no less. Enough to make you weep. Blacks doing better by every metric year by year. Legitimacy rates approaching that of whites. Employment better than whites. Stable families in decent neighborhoods even if segregated — and who cares anyway? All gone.

      • Peter from Oz says

        LN, you are correct. The problem has now of caourse become a feedback loop. Anti-racist activists declare that discrimination is the cause of all the black community’s problems. That exacerbates the problems because blacks then have no incentive to change things for themselves, but think political action will somehow earn them a comoftable life. We in the rest of the community who do not believe that racism is the real cause of the problem, and who are sick of the liberals calling us ‘racists’ then hold a political prejudice against blacks, which is justified by the fact that they vote 90% Democratic.
        The blacks take this political prejudoice to be racism, and so it goes on …
        The blacks could solve this all quite easily, by voting Republican in large numbers. By selling themselves to on party, they have mired themselves in a dependency culture which is guaranteed to cause resentment among others, resentment which will be mistaken as racism.
        The first step is to forget about race, which the left keep telling us is a social construct, but a construct they do their utmost to protect.

        • Ray Andrews says

          @Peter from Oz

          Well said, yes a feedback loop. Let me make a confession: the happiest years of my life were spent in a black culture. I was racist against whites. Now, after all the years of bitching and now ‘white privilege’ and ‘internalized whiteness’ and me being responsible for every failure of someone else … I’m starting to hate them. Hate all of them. God knows I shouldn’t. God knows I don’t want to, but I am being driven to it. The Warriors are slowly but surely making a real racist out of me. I think it’s deliberate. They feed of trouble.

      • david of Kirkland says

        The more people whine about their victimization, the more we tend to hold bias against such people. To end discrimination, become the adult rather than the child, and take care of your life first.

  5. john says

    “Capitalism Causes Wealth to Be Concentrated in the Hands of Just a Few”
    the common proposed solution for this is wealth redistribution by means of taxation.
    but a better way would be promoting the wealthy to have more children,
    then after they die their assets wil be divided among their children and the more they have the less each child has, who most likly squander it.
    and people have less objection to giving their money to their children than to strangers.

  6. Roman_01 says

    ” it provides a system that allows everyone equality of opportunity to succeed in moving from a commodity worker to a scarce worker.”

    But if everyone would be scarce worker, they would not be scarce. So in reality, majority of people will always be fucked up as workers in capitalism.

    • Mdc says

      Not necessarily. I think it ebbs and flows depending on the needs of people. Many things previously mass produced have shifted back to more artisinal focus. Wouldn’t shock me if in the next 50 years people began to specialise in little niches rather than stick to purely commodity work. May just take time. Perhaps commodity countries now will be more specialised in 50 years, with their own local markets driving product and service demand. Kind of like how it has been throughout human history.

      Article was good but I’d caution that it’s easy to fall into the trap of arguing for ‘real capitalism’ that doesn’t necessarily exist. Communists nowadays can suggest their utopia would work because it would be ‘real communism’, not like all the other cases in history. Looking at it now it seems their is not a lot of ‘real capitalism’. Everything has varying degrees of cronyism. It may be that true capitalism is just as unattainable as true communism.

      That said it’s still clearly contributed the most to improving the lives of billions of people.

    • Lydia says

      Roman, not at all. What screws them up is complacency in a protected job whether it’s as a bureaucrat, union worker or OTT HR regulations. there is absolutely no room for innovation and creativity in those worlds. It’s all right and no responsibilities. Socialistic thinking snuffs out creativity and innovation. Life is a risk, and all the bubble wrap in the world won’t protect people from that. Best to train them to be independent agents from childhood.

    • Matui3 says

      Scarce just means finite. If there are a lot of businesses and entrepreneurs in a given area, they compete for workers. Scarcity will always exist.

  7. Eduard says

    Well, I lived in a communist European country that tried socialism, and “we, the people,” shared in all the miseries such a “social justice” system brings to people. For about five years before I left for the United States, everything was rationed. We had small children, and I had to get up at 5 in the morning and stand in line for 2 liters of milk. Why? Because the centralized socialist agriculture was going into the tank. The manufacturing was in the same “great” state, hanging on life support, with all companies on subsidies from the government because they could never make it on their own.

    The worst thing, though, was the we were paid based on “need,” not on performance. I was doing the work of five people, and was paid as much as the slackers who barely moved around. I swore that I was not going to live like this, and came to the United States be prove myself and earn what I deserved – to be paid based on MERIT. Alas, socialism, “social justice,” and “equity” seem to follow me here, too. Already, “we, the people” are seeing injustice promoted in the false name of social equity with merit ignored, and “need” as the major criterion for wages.

    • Lydia says

      Eduard, thank you. I have been reading testimonials from people who fled socialist countries on #walkaway. And I love reading history so I am well aware of where this thinking goes. But nothing beats a personal experience with it.

    • E. Olson says

      Eduard – your inspiring story really should be used to set up some exchange programs with socialist countries. The US can send all it socialists to N. Korea, Cuba, Venezuela, Zimbabwe, etc. and we can take an equal number of people from those countries who have failed to appreciate the socialist paradise they were born into.

      • Ray Andrews says

        @E. Olson

        That’s the best idea I’ve heard for a long time.

    • Thanks for this! Direct experience and memory of Communist oppression is important. Unfortunately, the passing of time and people allows us to forget and bad old ideas can be repackaged and foisted on us anew.

    • Max says

      You’ve conflated Socialism with Communism, passed off centralization as a central tenet of both, and managed to attach the “social justice” to it as well. Bravo.

      For MY trick, I’ll be conflating capitalism with fascism, pass off ethnic cleansing as a central tenet, and finish by attaching religious freedom. Tada!

      • stevengregg says

        Fascism is a variant of socialism. Could you give us an example of Communism or Socialism that is decentralized?

        • Max says

          No, fascism is NOT a variant of socialism. And no, I can’t give you an example of Communism of Socialism that is decentralized because centralization is a tenet of neither.

      • Locketopus says

        For MY trick, I’ll be conflating capitalism with fascism

        Yes, you could TRY doing that, but you won’t fool anyone who knows that fascism is a type of socialism.

          • Locketopus says

            Or if you know the actual history of Mr. Mussolini and his vile philosophy.

            Fascism is absolutely an offshoot of socialism. Mussolini was a major Italian socialist until he was expelled from the party for advocating Italian interests (thus, “national socialism”, as opposed to the so-called “international socialism” which was run for Soviet interests).

            Hint: Mussolini is generally considered to be a fascist.

          • Max says

            @Locketopus

            Fascism: Fascism is a form of radical, right-wing, authoritarian ultranationalism, characterized by dictatorial power, forcible suppression of opposition, and strong regimentation of society and of the economy, which came to prominence in early 20th-century Europe. The first fascist movements emerged in Italy during World War I before it spread to other European countries. Opposed to liberalism, Marxism, and anarchism, fascism is placed on the far-right within the traditional left–right spectrum.

            Ouroboros…

          • Locketopus says

            Max: the whole “right-wing”/”left-wing” dichotomy is idiotic. It makes no sense whatsoever. It was descriptive for a short period at the beginning of the French Revolution. Since then it’s been utterly useless, other than to provide terms of abuse.

            Hint: libertarians don’t actually have all that much in common with Nazis. The Teamster’s Union doesn’t actually have that much in common with Leon Trotsky.

            And your “definition of fascism” is a contrived one, designed to somehow make communism and fascism “opposites”. Fascism is only “right-wing” if you are a Stalinist, which you apparently are.

            Mussolini was absolutely a socialist, and if Mussolini doesn’t count as a fascist, who does?

            Hitler’s 25 point program reads exactly like a Bernie Sanders speech, if you take out the Jew hatred.

            Of course now the “democratic socialists” like Ocasio-Cortez, Tlaib, and Omar are busily adding the Judenhass back in.

          • Max says

            @Locktopus

            So I’m to ignore everything I’ve read, to include the analysis of those tendencies undertaken by academics, and accept your analysis?

            You seem to be under the impression that your argument holds water simply because it’s your argument.

    • david of Kirkland says

      Why not just state the country’s name? Lack of such a simple detail raises doubt.

  8. Matt Taylor says

    This great explanation could reach even further if you drop the term Capitalism and defend Free Exchange. The system that works so well is based on the right to own what you have and exchange it freely with anyone else on terms you both agree. It’s a virtuous circle of consumers, workers, leaders and savers. We are all at least one of these and many of us are all of them at some time in our lives. We’re all involved. We all have a share in it.

    • codadmin says

      Couldn’t agree more. Drop the word Capitalism and use in place of ‘free exchange’, ‘open market’, ‘liberal market’ etc.

      And do the same with communism/socialism…’closed market’, ‘controlled market’, ‘illegal market’ etc

        • Stephanie says

          Codadmin, your typo wasn’t wrong, either, though. When controlled economies inevitably can’t meet demand, it creates a huge illegal economy to fill the gap. Ironically the emergence of a shadow capitalist economy extends the lifespan of controlled economies.

    • @matt, Yes, yes,yes! It’s associated with Marx in too many minds. I use Free Enterprise, Free Exchange, etc.

    • Peter from Oz says

      Matt Taylor

      Well said. have always explained to people that capitalism is not an ism at all, but just people acting naturally in their best interests.
      The trick of course is ensuring that the market is both open and honest. That is why we have regulations about weights and measures, the law of contract, product safety laws and the tort of negligence, as well intellectual property laws. The irony is that in order to be free the market needs rules.
      The real difference between those of us who believe in the benefit of free enterprise and the socialists is that we want to improve enterprise to drive progress and make things better whilst socialists want to control enterprise to make things ”fairer.”

    • david of Kirkland says

      That’s good overall, but capitalism is more than that. Capitalism tends to use lending to grow, rather than allowing only those with cash to produce/invest. Capital is the key. The same dollar goes on many balance sheets as production occurs. I invest $100 and get back $110. The producer spends $110 (the amount paid back) to build $200 in value when sold to those who want the goods/services. Capital markets depend upon investors as well as lenders.

  9. Have you ever had a song stuck in your head? Every time I hear socialism this song plays: greed & envy; greed & envy. It just gets stuck

    • Denny Sinnoh says

      I’ve got “Lovin’ in the Summertime” still stuck in my head.

  10. Norm Corin says

    The biggest actual threat from capitalists to wealth concentration is not capitalism, but inheritance. There’s no mention of this in the article, which then wittingly or unwittingly supports capitalists keeping on keeping on concentration.

    Although support of the right to inheritance is often lumped in with capitalism (as most supporters’ capitalist forbears benefited), there is simply no rationale for the passing on of (great) wealth. It flies directly in the face of a capitalist foundation: the earning of wealth. Inherited wealth is exactly analogous to inherited political power (nobility). Yet many on the U.S. right defend abolition of the ridiculously misnamed “death tax.”

    Certainly, one can persuasively argue that a government should not be the entity who monopolistically absorbs this wealth, even when it provides the lame excuse of spitting out (some of) it elsewhere to (someone’s) benefit.

    People no longer on this earth cannot take their material wealth with them, yet they are the only ones who earned it. What to do? That wealth must be inherited by all of us, by some improved mechanisms, to be worked out with the sweat and tears of democratic politics.

    It is the most obvious way to level the field.

    • E. Olson says

      Norm – you bring up an important issue, where there is no clear answer. How much of the drive that pushes entrepreneurs and captains of industry to invest in their own education, take risks, work long hours, and sacrifice time with family and leisure is driven by a desire to leave a fortune for a surviving spouse, children, grandchildren, or charities? If a heavy inheritance tax reduces that incentive to strive, how much does society lose from reduced innovation, entrepreneurship, and employment? Furthermore if paying a heavy inheritance tax also requires the dissolution/liquidation of a successful business or farm, does it really benefit society?

      On the other hand, perhaps incentives to strive might be higher still if income taxes were reduced on the living and government revenues relied more on taxing the fortunes of the dead. Personally I would prefer to keep and enjoy what I earn when I’m alive. Unfortunately, the behavior of many wealthy in shielding their estates from inheritance taxes through family and charitable trusts or establishing residence in a low tax location, or other legal loopholes also suggests that inheritance taxes are easier to dodge and hence a less reliable source of revenue to governments, which is likely why income and payroll taxes are the predominant sources of government revenues.

      • Norm Corin says

        Thanks – good points. But I’d say, “a desire to leave a fortune” is, really, not a civilized desire.

        Just as in the early second millenium we were still stuck believing in the divine right of kings, and later evolved to require public participation in government, so too are we blind today to the inhumanity of extreme wealth concentration. It’s time has come, and should be ushered out.

        “A heavy inheritance tax reduces that incentive to strive”
        1) I am not at all convinced this is true.
        – I think it is a theme advanced by the plutocrat class. Except to keep score, they don’t care how much they have, only that the masses are boxed in by poverty. You can’t “consume” a billion dollars (much less 100 billion), you can only wreak havoc on the world.
        – Do-ers gotta do. They’re gonna do it even if the tax rate is 90%, or they’re in jail, or they’re running companies on their deathbeds in their 90s. It is true today, and it was true in 1960, when the top tax rates were “confiscatory”.
        2) If this incentive is true, then, simply, we have decades-long work to evolve out of it. It’s like discovering in 1850 (or 1787) that slavery is wrong, but failing to act because it’s too hard to change.

        “[P]erhaps incentives to strive might be higher still if income taxes were reduced on the living and government revenues relied more on taxing the fortunes of the dead.”
        Bingo. I think might work in the real world. However, the process of convincing a majority is possibly a long road, as I mention above. Also, government (i.e. the permanent bureaucracy), as I’m sure you’ll agree, will need to be allowed only an enforcement role, not a fundamental or wide-latitude decision-making role.

        Also, I don’t mean that all wealth be completely confiscated. My own vote is that a reasonable continuity to one’s ancestors be allowed, – e.g. rights to keep or live in the (one) mansion, keep sentimental items, etc., but pay/get mortgage for a good part of it.

        • E. Olson says

          Norm – I see you are getting plenty of pushback on your desire to redistribute accumulated wealth through an inheritance tax. A good tax system does the least damage or distortion to efficient free-market exchanges, which implies that a good tax system should seek to collect no more than is necessary to fund necessary government functions.

          I think a very strong argument can be made that it is not the government’s function to redistribute wealth UNLESS it has been acquired through fraudulent or otherwise illegal activities, because there really is no moral reason to support the right of the state to take and redistribute wealth to people who have done nothing to deserve it. On the other hand, heirs are almost always more deserving because of the quality parental time they missed as their workaholic parent earned millions, or because they took care of the sick/elderly millionaire, or because they have worked hard in the family business with the expectation of inheriting it. Thus an inheritance tax that is used to fund national defense, police and the courts, elected representatives, and perhaps public schools, roads, and other infrastructure is likely to face far fewer objections from citizenry than taking the money from the makers and giving it to the takers, and and also is likely to be least distorting of the economy.

          As for keeping sentimental items – I’m sure most billionaires are very sentimental about the first $5 billion or $100 billion they earned.

          • Stephanie says

            Norm, the overwhelming human desire to take care of one’s children should not be viewed as something nefarious. Everyone tries to give their children the best possible life. Should those most successful at that be disproportionately punished? That does not seem to be an ethical impulse.

            It also incenvitizes money transfers while the parent is still alive, creating the perverse necessity for the most successful to embrace death and settle their affairs early to avoid confiscation by the State. The proposed tax would achieve nothing but exploiting tragically premature deaths.

            The beneficiaries of large inheritances often squander the wealth, unless they are sufficiently prudent. The fear that rich kids are sitting on piles of undeserved wealth is not bore out by statistics, and is based predominantly on envy of a lifestyle you wish you had.

        • Grant says

          You seem to have an idea that all that money just sits around collecting dust and paying for mansions and lobster dinners. Most very wealthy people give their wealth away or invest it. Taxes will be forever tweaked for a wide variety of reasons. Just because you feel better punishing whomever you decide is rich, doesn’t necessarily help anyone who is poor.

    • Martin Lawford says

      You would take an inheritance away from the decedent’s heirs, on the ground that they did not earn it, and divide it among the entire population, who also did not earn it. If you would deny the decedent the right to decide who would inherit his estate, and would force him to bequeath it to those you prefer instead of those he prefers, wouldn’t he take care to ensure that there will be no estate for you to confiscate?

      • “You would take an inheritance away from the decedent’s heirs, on the ground that they did not earn it, and divide it among the entire population, who also did not earn it.”

        Hear, hear! I wish I had made that point too.

      • Norm Corin says

        @ Martin Lawford

        Correct. The population does not “earn” it.

        Do we earn our exposure to the cultural riches of preceding generations – our language, our arts, our history, etc.? Do we earn the earth?

        Or should we require people to crawl out of the slime when they are born? As it is, most of us are born without a place simply to live – i.e. an empty plot of land – but we are blind to this extreme unnatural state.

        (As I mentioned earlier) I think the details need to be worked over time, out in public, to produce general agreement. Nothing quick and easy is needed here now, just need now to acknowledge it’s the right thing to be doing.
        (As just above in a later comment) I personally believe in enforcing rights to sentimental items, however that is to be done.

      • Locketopus says

        wouldn’t he take care to ensure that there will be no estate for you to confiscate?

        Indeed. In many cases, it’ll be megayachts, hookers, and blow. Maybe the wealth owner could rent an island for a ten year party for 40 or 50,000 of his close personal friends.

        Or maybe he’ll just convert it all to cash and drop it into a volcano from a helicopter.

    • dmm says

      It’s very clear you’re a wannabe thief. A person has every right to dispose of her wealth as she sees fit, before or after she dies. Inherited wealth is nothing like inherited power, notwithstanding your unsupported assertion.

      There is no level field and there cannot and should never be. A level field would would require us to all be clones born and raised identically. And you are still falling for the zero sum wealth assumption that the author debunked.

      • Norm Corin says

        @dmm

        “A person has every right to dispose of her wealth as she sees fit, before or after she dies.”
        – When she is dead, she has ceased to exist as a person. She has no opinion any more. That’s got to count — and I say, for a lot. Only her heirs have opinions. So, the question for society is “Who should be the heirs?”

        “Inherited wealth is nothing like inherited power”
        – Sorry, believing this is living in denial, or at best willful ignorance.

        “There is no level field and there cannot and should never be. A level field would would require us to all be clones born and raised identically.”
        – The only non-level field support that is morally unassailable (and only for the most part, and only thus far, possibly not in the mid-term future) is that an individual is born with her/his own biological features. Everything else is potentially mutable, and therefore open to debate.

        My interest is not in arguing how to carve up the pie and/or how to grow it, but how to ensure that the vast majority of the US (and evenutally the world) is not condemned to wage slavery. Humane population control has to be part of that, as well.

        No, it’s not morally defensible for the world to be a free-for-all. Power (including wealth) always concentrates, and unchecked power eventually concentrates to maximize inequality. That’s how, and why, revolutions happen. There’s got to be a better way.

        • Norm Corin says

          @ Martin Lawford and dmm

          One other point about “earning” things: The reason I mentioned it in my first place was simply that inheritance has nothing to do with capitalism, which is all about the justice of earning things. So it’s irrelevant that no heirs can possibly earn their inhertance.

          You can consistently be a libertarian, free-market capitalist and endorse radically egalitarian inheritance at the same time. In fact, it’s arguably more consistent than belief in bloodline inheritance, because it’s the best way to reduce unearned wealth to a minimum for any individual.

          • Farris says

            Without respect for private property capitalism dies. If one can accumulate wealth and property only to have to forfeit to the state upon death, does one really hold title? Inherited wealth was taxed as income, and capital gains, sales taxes were paid on material purchases, property taxes were paid on real estate to name a few. People often rail against greed. But what of government greed? Government wastes taxpayers funds, only to demand more. Other people’s money is fun to play with. Founding father Fisher Ames, who understood the the necessity of respecting private ownership, wondered what was to prevent the masses from voting themselves the property of the rich.

            https://fee.org/articles/fisher-ames-forgotten-defender-of-liberty/

        • ga gamba says

          Only her heirs have opinions

          Inaccurate. Most living people write wills that articulate their choices on how assets will be divvied up.

          You’ve disregarded their freedom of choice to disperse their assets, which are the manifestations of one’s labour, talent, and time, and prioritised the demand by the masses to seize simple because they exist. “I’m here. Gimme gimme gimme.”

          Heirs don’t earn anything. They are gifted it, by the choice of the person who actually earned it.

          Power (including wealth) always concentrates

          If that’s true, then why is the Roman Empire not around and running the show? Or the Akkadian Empire? Since they possessed unequal power over others, they should have easily tossed aside rivals.

          Revolution is not inevitable.

          unchecked power

          Other than North Korea, though I could make an argument that Kim’s power is checked informally, where is there unchecked power? We have numerous regulations that act as checks and balances on power.

          Whenever I see someone write “unchecked” and “unregulated” I know I’m dealing with a catastrophising fantasist who ignores the facts before his eyes.

          • Norm Corin says

            @ga gamba

            “”Only her heirs have opinions’
            Inaccurate. Most living people write wills that articulate their choices on how assets will be divvied up.”
            – Will writers have opinions up until the point they no longer exist (at least on this earth; the realm I’m examining here). Then, in point of fact, they simply don’t. I’m not saying they are irrelevant; ensuring their wishes are executed does matter to (some) heirs, and often others. But when the person who owned the wealth is gone, the existing people need to take primacy. And that is all of us. Obviously, opinions will differ. But my vote is that a will should not be absolute, if it is respected at all.

            “I’m here. Gimme gimme gimme.”
            – This appears to be a common misperception on the right: That the left is motivated primarily by “grabbing” intentions. (Not sure how inheritors are not “gimmeing” too, but I’ll leave it at that.) I can assure you that most people without wealth have no interest in wealth, per se, in hoarding it, in sucking on its teat, in being a “bum”. Those others whose morals have decayed to the point that they do not understand the value of work, or who are content stealing, are not relevant to this inheritance points I’m making. That is an entirely different problem, one exacerbated, I’m sure you will agree, from distortions engendered by poorly thought out and then never-corrected problems of the welfare state.

            “You’ve disregarded their freedom of choice to disperse their assets”
            – There are simply far more important needs. I’m arguing that a person who is no longer here should not have power over his or her former assets. I know that would be something of a paradigm shift in thought. My position is not at all an endorsement of (exclusively) government taking through taxes. So given the current state of affairs, I plan to give away as much as I possibly can before I die. I am simply questioning the practice of inheritance being directed by the decedent.

            “‘Power (including wealth) always concentrates
            If that’s true, then why is the Roman Empire not around and running the show? Or the Akkadian Empire? Since they possessed unequal power over others, they should have easily tossed aside rivals.”
            – I should have qualified it by saying something like: “Unimpeded, power concentrates. Usually, this perpetuates until a crisis is engendered due to the side effects from this concentration.” In other words, power simply doesn’t moderate itself (vs, e.g., Alan Greenspan’s fantasies). It needs to be held to account – e.g. in the US, by progressives of the first decade of the 1900s, socialists/communists in the 1930s, war protesters and social activists of the 60s, Reaganism vs the welfare state of the permanent Democratic congress in the 80s.

            “We have numerous regulations that act as checks and balances on power.”
            – Well, they don’t actually, not nearly as effectively as in decades past. Legal chicanery, through corruption and chutzpah, especially over the past 20 years, has effectively all but gutted the Bill of Rights (look up e.g. John Whitehead’s enumerations).

          • ga gamba says

            “grabbing”

            For starters, it’s the seizing they claim they want. Then we find more evidence of their grabbiness through their advocacy of set asides for preferred constituents, demands for equity, “free” this and that, and assertions that if one doesn’t support others they’re immoral.

            You’re a grabby person. You think others owe you things you haven’t earned. This is called mooching.

            But when the person who owned the wealth is gone, the existing people need to take primacy.

            Correct! The person’s heirs. They take primacy. All others can piss off.

            I’m arguing that a person who is no longer here should not have power over his or her former assets.

            No, by disregarding their wills, written when they were alive, you’re not making that argument. Upon his death those assets are transferred to other people, his/her heirs, in accordance to the person’s choice when s/he was of sound mind and body.

            If the person’s will stated s/he wanted to be cremated would you argue that’s null and void too because s/he is no longer alive? All post mortem actions in accordance to the person’s wishes expressed when s/he was living are invalid?

            I am simply questioning the practice of inheritance being directed by the decedent.

            You have things back to front, inside out, and upside down. The inheritance is directed by the benefactors. A benefactor could direct it be given to his beloved pet, a charity, or even a hitchhiker who provided some aid decades earlier. The descendant can’t direct otherwise unless s/he finds a court to issue an injunction staying the will and ruling on its validity.

            So given the current state of affairs, I plan to give away as much as I possibly can before I die.

            That’s fine. You earned it. It’s your choice how to disperse your assets. However, you have decided that your choice must prevail over others who make different choices on how they want to gave their assets. This makes you an authoritarian. It’s a bad look and reflects poorly on your character, though you try to conceal it in the flowery pleasantness of morals and humaneness.

            I can’t wait until some other busybody decides you dispersing your assets as you choose is unfair to those who aren’t recipients and makes demands to control that.

      • Max says

        Inherited wealth IS inherited power. Countless studies have proven that.

        • ga gamba says

          If I gave you, a complete stranger, a billion dollars as a gift, and I’m far from dead, is this gifted wealth different from inherited wealth? Have these countless studies you fail to cite found a difference between one type of wealth and another? For example, if I earned my wealth, is it more or less powerful than the money I gifted you? Further, is wealth power or what you do with it power? If you were the bury the money I gifted you, what power would you derive from that? “Hey everyone, pay attention to my ideas. I have a billion dollars in hole.” The attention you’d get is “Where is that hole?”, which I reckon is not the attention you’re looking for.

          I’m not disputing that wealth is a means to power, but there are many aspects to wealth and power and what one may do with it. By having enough money I can decide, no, I don’t want to do that, i.e. fuck you money. But this right of refusal isn’t absolute. I can spend all my wealth on TV adverts proclaiming my ideas, but who pays attention to TV adverts? I could buy internet adverts that aren’t seen by those who installed advert blockers. But, and this is important, let’s assume that many still view my adverts. Crucial to this is, are they believed? Viewership does not mean acceptance and belief. If that were the case, we’d all be drinking New Coke and Coca Cola Classic would have never been a thing.

          We are bombarded by all kinds of stimuli and messages. Some things may stick, others don’t.

          Increased wealth increases one’s purchasing power, but it doesn’t necessarily mean those purchases will be made. Does it mean I have the power to raise an army? Very unlikely. Taking a look at the cost of that, I find it’s in the many billions of dollars. Even funding an insurgency is very costly.

          Wealth may also mean headaches. You have all kinds of people coming to you with requests to fund this and that. I’ve witnessed some very bizarre behaviour by those who think they are more deserving of money, and also need not repay it, because the other guy is wealthy.

          Wealth doesn’t really mean power. If you have wealth, you may have more potentials. You still have to execute that and, depending on your choice, the success of it may be quite high, such as buying something, which is generally very easy to accomplish provided there’s a willing seller, or lower, such as persuading people.

          Often I find those who are upset by inherited wealth are also upset by earned wealth as well. It’s easier to make the attack on inherited wealth because many deem it undeserved. They even go so far to claim, again without substantiation, the inheritors say “I earned it.” I guess they’ve watched a lot of MTV’s My Super Sweet 16. Yes, those kids are spoilt, but they are not inheritors at the time. They are dependents. Needy, whiny children with their grabby hands out saying, “Gimme gimme gimme.”

    • Sean says

      I don’t think this is much of an issue as in the majority of cases wealth earned by an individual is lost within 3 generations.

      Anyway, the problem with inheritance tax, is that there will always be loopholes such as giving the money to children before the person dies.

      • Norm Corin says

        @ Sean

        Yes, there is entropy. But for the most part the widespread existence of unearned wealth, even for just a few generations, drastically insulates and distorts perspectives of both the high-born and low-born about the nature of life.

        There wouldn’t be loopholes if as a society we recognized what is going on. Those who use these tricks fight tooth and nail to preserve them and keep them hidden; everyone else, not so much. There’s no “conversation on inheritance.”

        • Norm Corin says

          @ ga gamba

          “‘Power (including wealth) always concentrates
          If that’s true, then why is the Roman Empire not around and running the show? Or the Akkadian Empire? Since they possessed unequal power over others, they should have easily tossed aside rivals.”
          – My previous argument on this is imprecise: By “unimpeded”, I should have said instead ceteris paribus, which would recognize that other forces, such as the various kinds of social decay, can interfere. The point is that the momentum of power is toward concentration, and too often it gets its way.

        • Farris says

          So a person dies and other than a few dollars for burial and a modest headstone (no fancy mausoleums that would unfair) and the rest of their estate escheats to the state?

          What is to prevent the elderly from giving away all their wealth and property to children, relatives and friends prior to death or would conveyances be banned like bequeaths?

          Inheritance forfeiture would mean no one really owns their property but are simply granted a Life Estate with the Remainder in the government.

          Thou shall not covet.

        • Ross Holloway says

          @ Norm

          From observation well-off people, people who are well-off over generations, are well aware of the pitfalls of unearned wealth.

          They will invest in their children’s education certainly, and do their best to equip them with the tools their children need to become well off all over again.

          They certainly won’t insulate them against having to pay the rent.

          They know such insulation against the hard realities leads to behaviours that result in ultimately loss of wealth.

    • Oh, you’re so right! Slaves must be denied personal wealth that passes by will or devise. Only state chartered entities are entitled to such a privilege.

    • Ron S says

      “no rationale for the passing on of (great) wealth”?

      The rationale is that one who has legitimately acquired property has the right to dispose of it as they choose.
      Else “private property” doesn’t really exist – property is then held only conditionally and at others’ sufferance.

      • True. And, if inheriting money and material is unfair, then inheriting genetic, mental and physical advantages is just as unfair.

    • Matui3 says

      I would never support something like that. That’s ridiculous. If someone works and earns their wealth, they should be able to give it as they see fit. No one has any right to their money or earnings. That wealth should go to whoever they wish. Some people deliberately work to create a better future to whom they will pass it onto. Sometimes that doesn’t include others. Inequality shouldn’t even be an issue as long as itt stems from voluntary transactions. I’m sorry I just only care about those close to me and am willing to only help and benefit them. Not random citizens in the same country as me.

    • david of Kirkland says

      Partly true, but nobility is coerced from others and imposed on others. Inheritance is voluntary.
      But a higher “death tax” would be a good idea in a democracy so that extreme wealth creation isn’t just hoarded, but shared with fellow citizens once the creator is gone. After all, gifts already allow a lot of wealth transfer, as does letting a family member help run a business.

  11. Russ says

    A lot of good stuff here.

    My only real objection is relying on that old bugaboo of “monopoly.” The distinction shouldn’t be between monopoly and no-monopoly but between government-enforced monopoly, e.g., Ma Bell, cable companies, power companies, highways, etc., and natural monopolies (one company is simply better at X than anyone else; also, at a simple level, everyone has a monopoly on his/her own labor).

    For example, Standard Oil had a vertically integrated near-monopoly of over 90% of the oil industry…yet prices for oil dropped! Rockefeller realized that he always faced competition from other energy sources and acted accordingly.

    Even in cases of less enlightened monopolists, competition won’t let that monopoly hold for long. The author makes that exact point regarding EpiPen prices but doesn’t apply the “monopoly” label to that situation. So a change in terminology/definition would fix this issue.

    The deeper “problem” here is that this is yet another in a long series of “pragmatic” or “utilitarian” defenses of the free market/free enterprise/capitalism. People have known all this for centuries. I mean, Bastiat refuted every objection to free trade back in the mid-1800s, yet here we still are with a president and large swaths of the country thinking tariffs are a good idea.

    The only way to fix this is to first focus on the moral case for capitalism. In essence, the only “practical” solution is the moral solution to economic problems. In the modern era, Ayn Rand focused on this in such works as Capitalism: The Unknown Ideal. We need that every time someone seeks to convince others of the fact that we should be more free, not less, in our economics.

    Because when push comes to shove, almost everyone will choose the “moral” system (if their morality is based on collectivism and Comtean-style altruism) over the “pragmatic” system (if they think capitalism is inherently evil because it is “selfish” and individualistic).

    Unless and until this false worldview is corrected, articles like this will be like pissing into the wind (viz., the collectivist/statist negative responses left above).

    • Have we ever had free trade? . Most “free trade” agreements are foreign policy carrots or bribes and 10,000 pages. Some are charity— at our expense. Why should I be forced help totalitarian China to advance with unbalanced trade deals that are not win/win? Of course, slave like labor is cheaper. H1B’s are cheaper. It’s why so many in Congress have donors who want open borders and more H1B workers.. It’s the same old slavery argument revised for today. .

      The problem is government is too involved in business. It was FDR who dreamed up withholding. Because it’s harder to get people to write a check to the IRS. it Was the unions who tied benefits to the job back when they were cheaper. And guaranteed pensions are not portable guaranting the mediocre stay to the bitter end.

      In my opinion each person should act as an independent agent negotiating work for pay. Not a ward of the company or state.

      • Russ says

        We came pretty close to free trade in the 19th Century. But there have always been people trying to violate the Constitution and use the government for special favors.

        You seem to be arguing against me, but for the life of me, I can’t figure out what I wrote that you’re arguing against.

        Of course, there should be no bribes, etc. or regulation or agreements. Free trade requires only that the government not interfere with the freedom of association and freedom of contract of individual people and/or the companies they form.

        Bastiat showed long ago that even unilateral (real) free trade benefits those who don’t try to protect one group of people at the expense of everyone else.

        Tariffs are like: that other country is shooting itself in the leg, so I’ll shoot myself in the foot. That’ll show ’em!

        I agree that we should not have tax withholding (though I believe that it was actually Milton Friedman who came up with that idea). If you’re going to have immoral income taxation, make everyone write a check — as you say — when the tax is due.

        So it seems we’re (mostly) agreement (with some differences I’ll ignore for the moment).

        • E. Olson says

          Russ – you wrote “Tariffs are like: that other country is shooting itself in the leg, so I’ll shoot myself in the foot. That’ll show ’em!”

          I would tend to agree UNLESS the goal of the “show em” tariff is to get the other side to reduce or eliminate their restrictions on imports, which is what I believe/hope Trump is doing. The theory of comparative advantage is stymied to a large degree by mercantilism that seeks to encourage exports but stop imports, since it harms the ability of a trading partner to benefit from their comparative advantage and earn export revenues.

          Many of the bad trade deals that the US has suffered are WWII and Cold War remnants when the big strong USA desired to prop up allies by allowing them to export unhindered to the vast US market, while looking the other way as they put up tariff and non-tariff barriers to US imports. Europe, China, Japan no longer suffer from war ruined economies, but of course once a country or a country’s industry gets used to having various protections against profit ruining foreigners, they are very reluctant to give them up.

          • Lydia says

            @Olson,

            Yes! So much of our foreign policy and trade are operating from post WW2 paradigms that no longer fit the current situation.

          • Russ says

            As I said, Bastiat answered these objections long ago. If you really want an answer to this, I suggest his Economic Sophisms. He covered these issues six ways from Sunday.

        • Lydia says

          I read that FDR got the idea from Macy, the dept store magnet. Wish I could remember the source.

          I don’t have time to go into it now but I don’t have a problem with tariffs when they are used to balance the playing field. And ours have been out of balance for a long time.

        • david of Kirkland says

          @Russ – Indeed. The issues they mention are not capitalism, but corrupted government that has too much power over us. Unfair tax rates? Government does that? Most monopolies? Government creates them. Unfair trade? Government is there (why else would someone trade to be worse off?).

      • ga gamba says

        Have we ever had free trade? Most “free trade” agreements are foreign policy carrots or bribes and 10,000 pages.

        Capitalism is one of my favourite topics – I’ve commented on it frequently here and elsewhere, and I’m going to re-use a lot of what I wrote before. As much as I appreciate the freedom, the vigour, the excitement, the creativity, the dynamism, and even the diversity, I recognise it has flaws, though many of these exist because capitalism is poorly understood and unduly feared.

        As Lydia rightly states, we don’t have free trade. We have the misnomer which I think is intended to bamboozle people to think it exists. Add that to the list of rhetorical tricks perpetrated.

        We live in a managed trade system, one that violates the Ricardian principle of comparative advantage on which the logic of free trade rests.

        Undoubtedly US consumers benefit from lower costs, which Mr Hogge correctly documents, but Americans also have to pick up the financial and social costs of lost jobs, economic deprivation, substance and domestic abuse, increased policing, etc. You don’t see see these on the TV’s price tag, do you? There are also national security concerns; fighter jets require high-quality aluminium, but only one US smelter of its five (down from thirteen) produces it, and it’s a struggling business. The only other producers are China and the UAE. But it’s not all grim, for example many of the most polluting industries such as aluminium smelting are offshored, so the US has cleaner air. Imports have also kept US inflation very low, which is a benefit to all, but those with wealth benefit most.

        If the WTO had been founded on the Ricardian principle of comparative advantage, markets in both developed and developing nations would’ve liberalised simultaneously. Brazilian steel and Chinese aluminium would be exported to the US and American-made cars would return. Displaced US steelworkers would shift to higher value-added manufacturers such as automakers. However, the WTO doesn’t embrace genuine-free trade principles; developing states are allowed to maintain tariff and non-tariff barriers in order to “catch up” in industries where they don’t have an advantage (presently).

        Understand this. Not only are they allowed to maximise their comparative advantages, developing states are allowed to deny developed states their comparative advantages. They are allowed decades to acquire new technologies and know how thereby attaining new advantages to be used against the (formerly) developed world. To bypass developing markets’ tariff and non-tariff barriers, developed nations’ manufactures must relocate production to developing states (doing nothing to abate unemployment and the need for labour to accept lower-skilled and lower-waged jobs at home), and often they also must partner with local competitors, who by hook or crook use this to their advantage.

        I mentioned cars and steel, but this has occurred in all industries from silicone chips to pharmaceuticals, telecommunications to robotics. It is undeniable that this has helped reduce inequality between nations whilst increasing it within developed states. A lot of this inequality is due to how services, in particular software and entertainment, are more scalable.

        Though US consumers have benefitted from lower prices (and a cleaner environment), one group has benefitted more than anyone else. It is those who are largely protected from the consequences of the global trading system: lawyers, doctors, financiers, bureaucrats, academics, and others of the chattering class. Those who also control their own professional credentials, such as the licences to practice law and medicine, are especially insulated from globalisation’s turbulence. Yet it is this class who negotiate the trade deals and champion increased immigration, presumably to have more people pick their fruit, change their children’s nappies, attend their schools, and increase the demand for state-provided social services and benefits.

        “Oh look, income inequality is increasing!” they exclaim in disbelief to each other at the charity gala. Well, when you: establish a trade framework that rewards export-oriented hyper development and mercantilism thereby throwing millions into unemployment and lower-wage work and decimate one-industry cities and regions; indoctrinate people that the only way to get ahead is by going into enormous debt to earn a uni degree in nonsense subjects; create a welfare state that financially supports millions of poorly educated and barely employable women to have many children and who reliably vote for your candidates; and import millions more semi- and unskilled workers, many of whom work off the books, to join an ever tougher work environment… what did you expect to happen?

        “But we’re the intelligent and compassionate ones.” Good grief.

        These trade agreements are negotiated by those most insulated from the consequences yet who derive the greatest benefit of ever lower prices and wider selection. What matter is to them that China opens today or 30 years from now? But for labour at the textile mill displaced another comparable job up the value-added industrial chain is needed, yet deferred liberalisation by the developing state denies them this opportunity. Add in transnational migrant labour and you have about 18,500 J-1 visas issued to au pairs. Who is hiring au pairs? Many of the same families who have members who negotiated the trade deals.

        This is not to say free trade is easy to accomplish, especially when we consider things like labeling, phytosanitary standards, country of origin rules with regard to components used to make the final good, etc. Do we mutually recognise or harmonise?

        Still, fundamentally a free-trade system has both parities open fully concurrently and provide national treatment to imported goods and foreign investment.

        We are nowhere near that, though the EU approaches it closest intra community though maintaining numerous barriers internationally.

        • Amin says

          @ ga gamba

          “If the WTO had been founded on the Ricardian principle of comparative advantage, markets in both developed and developing nations would’ve liberalised simultaneously. ”

          Ah, the old naivety! There is no one perfect solution to economics that is there just waiting to be applied. “Comparative advantage” and all such theories “perfect conditions” to work – they are based on completely unrealisitic assumptions.

          “indoctrinate people that the only way to get ahead is by going into enormous debt to earn a uni degree in nonsense subjects”

          Pah! So how many “millions” are stuck in this? Answer with evidence.

          “create a welfare state that financially supports millions of poorly educated and barely employable women to have many children and who reliably vote for your candidates”

          More nonsense. It not about being poorl educated. It is about not having the talent in the first place. There are always going to be some people that are going to be losers of many circumstances, including nature. There will always be need for welfare.

          • david of Kirkland says

            No, you can use charity instead of coerced welfare that generally humiliates and impoverishes the recipient in a system where there’s no love, no interest, no concern, no good solutions.

          • ga gamba says

            “Comparative advantage” and all such theories “perfect conditions” to work

            It recogises that not all places produce all things as efficiently or as cost effectively as possible. Why doesn’t Alaska produce bananas? It could. Build greenhouses and heat them with the oil Alaska produces. The cost to grow Alaskan bananas will be much higher than it is in the tropics, for example the Philippines. Years ago Korea used to do this. Because imports were tightly restricted some farmers built those greenhouses and they were heated by petroleum products, which Korea also doesn’t have. The cost of one banana was about 1500 won each (about $2 each at FX rate then). Not each bunch. Two dollars for one. Bananas were a luxurious fruit. That $2 in 1991 is worth $3.74 today (I had to use the US CPI calculator because Korea’s CPI wasn’t available.) If you’re in the US, are you paying $3.74 for a banana?

            Because of this distortion there were knock-on effects. Bananas sold in US military commissaries entered the black market. But only those who had access to these commissaries could do so, and the military sought to fight black marketing by placing purchase limits on goods, so old women would hop ferries in Pusan, travel to Japan, buy many items to include Sony Walkman cassette and CD players, Levis jeans, whiskey, and bananas, then return to Korea with them to be sold in black market shops. Money passed hands from the smugglers to customs officials at the dock and from black market shop owners to other government officials. And it was still cheaper than the cost of one Korean-grown banana.

            Think of all the effort and money spent to evade the distortion of Korean-grown bananas. Distortion begets distortions.

            Eventually Korea opened its banana market to those grown in the Philippines, and its pineapple market too, and today a bunch of 8 -14 bananas can be bought for the local equivalent of $3.75.

            The Ricardian principle it doesn’t argue for perfect conditions. It realises that comparative advantage is in flux. Who knows? Maybe someday an Alaskan will figure out a way to produce bananas cheaper in Alaska than the Philippines does. But, and this is the important thing, it is isn’t for the government to stack the deck to make this happen. What the Ricardian principle does instead is have each state remove barriers to competition, such as tariff and non-tariff ones. Then the producers figure out ways to provide goods to consumers using what advantages they have as well as innovating new ones. The Ricardian principle asks officials to cease interfering – aside from basic things such as require accurate labels stating measures, contents, and the like.

            If you think about it, it asks for the conditions that exist in most countries’ domestic markets, for example where oranges grown in Florida are exchanged for maize grown in Iowa and oil extracted in the Dakotas, and done with much less government interference than done internationally, to also exists in international trade.

            Thus, if it can happen domestically, and it does, then it ought to happen internationally.

            So how many “millions” are stuck in this? Answer with evidence.

            Over 44 million Americans collectively hold nearly $1.5 trillion in student debt. This is an average of $34,000 per student borrower. Of course, debt isn’t uniformly distributed. Those who graduated years ago have less debt because uni fees were lower and, of course , they’ve been paying off their debt over the years. More than 2 million student loan borrowers have student loan debt greater than $100,000.

            And that concludes the welfare I’m giving you today, Demandy Demandface.

            If you want more mooching you’ll have to return to the back of the queue.

          • Amin says

            @ ga gamba

            “Comparative advantage” and all such theories “perfect conditions” to work

            You gave a longish reply. It didn’t really answer the question. Ricardo himself realized that for his theory to work capital and labour has to be immobile. Else comparative advantage doesn’t really work.

            Then Ricardo and you both chuirn out the same mistake. International trade isn’t really bartering. Money isn’t just used to buy and sell. Therefore “owning” money itself ha values and it goes against this principle.

            In your banana scenario – there are many producers of bananas. And daft as it might sound, CA does not take this into account!

            Switching specializations takes time and money. Not accounted for under CA.

            What if trade cannot be balanced and there is no adjustment?

            For CA to truly work – there should be no unemployment and no wasted capital. Great in theory, practically near impossible.

            One disadvatage you yourself mentioned. Protectionism and politics. Great in theory to have “protection free” trade, in practice never going to happen.

            +++

            “Over 44 million Americans collectively hold nearly $1.5 trillion in student debt.”

            Once again, you didn’t answer the question!

            Original point of contention:

            [[“indoctrinate people that the only way to get ahead is by going into enormous debt to earn a uni degree in nonsense subjects”]]

            So how many students are stuck with these deadbeat degrees and cannot earn enought to pay back their debt and are struggling? I would have thought the question was pretty straight forward…

            Not all students haivng a nonsensical degree like gender studies are struggling and I would have thought those with solid degrees [presumably those exist like Dentisty and Engineering, etc] are struggling far less in comparison.

            As a sidenote:

            This student debt is balanced out by the fact that US universities have collectively far more in money than the student debt. So even if things come to head, then system will not collapse. It is an odd system in a capitalistic world where there are no competitors and prices are fixed. And yet the whole shebang is mainly controlled by those who believe in Socialism!

  12. Bab says

    Strictly speaking, the US is not a pure capitalist economy – nor is any other country in the OECD. Instead, they are mixed-state economies, with most of them, including the US, generating about 30% or more of their GNP each year through public spending. This isn’t a coincidence – it was discovered fairly early on in capitalism’s history that an unregulated and untempered free market tends to collapse early and often – its worth remembering that the top marginal tax rate in the US is actually higher than that in Venezuela.

    If anything, I would say that the tendency over the past 100 years has been for the Americans to eventually recognise the wisdom of European middle-roadism. The finally realised the necessity of a central bank after the crisis of 1907, FDR brought in anti-trust regulation and a progressive taxation system. It seems as though they’ll probably also adopt a European-style health care system in the fullness of time, although they seem intent on trying everything else first.

    I appreciate that many tech workers, including the author, are appreciative of capitalism – it certainly wins hands down in the technological innovation stakes. However over time those technical innovations result in labour being replaced by capital in many industries, first in agriculture and then in manufacturing. The services industry has absorbed most of those unemployed thus far, but even many of those jobs will probably disappear over the next couple of decades. Its just not going to be possible for all those people to find work making smartphone apps. At the present time, a lot of the consumer class are only able to stay in the game as a result of continuing access to credit – once that dries up, expect consumer spending to tank with it.

    Socialism never looks good when capitalism is doing well, but it doesn’t look half bad when its doing poorly, such as when the US was on its knees for twenty years during the great depression at a time when the Soviet Union was motoring along relatively unaffected. If you like capitalism, and want to keep it, I suggest you do your best to fix it.

    • E. Olson says

      Bab – “…during the great depression at a time when the Soviet Union was motoring along relatively unaffected.”

      By “motoring along” do you mean the Holodomor of 1932-33 that killed 7-12 million Ukrainians, or the Great Purge/Terror of 1936-38 that resulted in the execution/death of about 1 million – including many of the leading academics and military staff, or the 1939 non-aggression pact with Hitler that led to WWII and 27 million Soviet deaths?

      Or perhaps you mean all the fictionalized stories of Soviet success by Pulitzer winning “journalist” Walter Duranty that were published in the NY Times, and which somehow overlooked all the above?

      • Max says

        I believe he is referring to the quickest transition from agrarianism to industrialisation the world has ever seen. The Chinese also built the Great Wall, but at what cost?

        We also have to contrast Soviet, Chinese, etc. shortcomings with American shortcomings.

        • E. Olson says

          Most economic historians suggest that Russian industrialization would have been faster under continuation of the Tsarist era reforms, had they not been stopped by the Russian revolution. Unfortunately, the Tsar made the fatal mistake of picking a fight with Germany and starting WWI, which they were not in a state to win.

          As for the costs of Soviet “transformations”, I’m very sure the death count from Socialism in the USSR was substantially higher than the death count from Capitalism in the USA during the Great Depression. Certainly the standard of living was far higher in the Depression era US than in Stalinist USSR, which is most graphically represented by the Soviet citizen reaction to the portrayal of US poverty in the Grapes of Wrath (see link).

          https://www.thevintagenews.com/2018/10/12/grapes-of-wrath/

          • Max says

            I’ve read a fair share of critiques of post-revolution Russia and have never read a historian that has argued that. I would actually call those historians out for being full of it. That Tsarist Russia would have industrialized more quickly than post-revolution Russia is speculation, at best.

            The problem with contrasting the casualties inflicted by the Soviet Union and China on their people with the casualties inflicted by the US on it’s people is that the former has been worked to death and numbers inflated while the latter has had little research done.

          • Amin says

            @ E. Olson

            “Most economic historians suggest that Russian industrialization would have been faster under continuation of the Tsarist era reforms”

            Name them and their works. And don’t weasel out of it either.

          • @Max

            The most widely accepted figures for Governmental mass murder in the 20th Century are about 75,000,000 in China. 20,000,000 in the USSR, and ZERO in the USA. I’ve never heard of even an attempt to really contest those numbers, apart from recent suggestions that the USSR figure should be higher.

            Obviously, no ‘research’ is needed in the USA, since, if the US government massacred anyone or caused a famine, we’d have all heard all about it as soon as it hapenned and continually thereafter.

          • Max says

            @ JohnTShea

            Those numbers are propaganda, plain an simple.

            1932-33 famine- roughly 4 million. This number is not without consideration given to natural disasters.

            The Soviet Gulags- Roughly 1 million during the Stalinist period.

            Soviet executions, 1921-1953- Roughly 1 million.

            That’s a far cry from the figures you sourced from the widely debunked Black Book of Communism, whose authors have since admitted was an ideological fabrication.

            Now, if we applied The Black Book of Communism’s methodology, we would find that capitalism has amassed quite a staggering number of casualties.

          • Amin says

            @ E. Olson

            This is just classic you.

            Your words:

            “Most economic historians suggest that Russian industrialization would have been faster under continuation of the Tsarist era reforms”

            Reply:

            ” I link to a site that has some nice summaries of economic activity in late Tsarist Russia vs early Soviet days”

            When you wrote the original statement… you simply made it up. And when challenged you quickly did a google search and posted a general link. You knew fully well you weren’t going to answer the question.

            Becuase it is OBVIOUS you were making it up! You bullshit a lot.

            Now why don’t you go and feel victimised that I called you a cunt!

        • Sean says

          @Max

          Yes the soviet transition was fast albeit at extreme human cost. But a very interesting thing about that Soviet industrialization is that almost none of the advancements were developed in the Soviet Union. The greatest achievement of the Soviets was they developed the world’s premier spy agencies (CHEKA/NKVD/KGB etc) that stole the industrial technologies/advancements that capitalist western countries developed.

          • Max says

            That’s my point, anything can be done quickly if you work your labour force like Hebrew slaves.

            The Soviet intelligence apparatus may have stolen technology however that was not uncommon then and isn’t uncommon now, despite being destructive to relations.

          • codadmin says

            @Sean

            Exactly. The industrial/technological revolution was, and still is, a product of open markets ( capitalism ), take that away and industrialisation can’t happen organically. It’s why all Communist countries, without exception, are technologicially backwards. ( despite having some of the ‘inherited’ technological trappings of open market societies. )

      • Bab says

        If you’re willing to reach far enough to blame the Soviets for the 20 million Russian dead in WW2, then I think the US at least bears responsibility for the 4 million dead in Indochina. Not that that has anything much to do with the original point I was trying to make.

    • david of Kirkland says

      Two world wars started in Europe in the past 100 years is an example of what?
      Of course there must be regulation and law to deal with outliers (fraud, theft, pollution), but once government gives benefits, immigrants become “leeches” to the locals, and when demographics change and it turns out government leaders failed to predict the best path to a future, unknown world of global actors, these systems fail.
      That anybody thinks life is risk free, problem free, a utopia isn’t thinking clearly.

  13. Edgar Williams says

    Oh, I don’t know. I’d find all of this more convincing if the unexamined premises upon which so much is based were a bit more, er, examined.

    Rand and Bastiat? Poseur and thinker? Absolutist and empiricist? And Greenspan … the guy who admits (brags, even) that he gave up logical positivism for absolutism after reading Rand. And still we hold the author of 2007 up as a paragon. Of what? Piety? Are we debating religion or economics here? Jeez….

    I like Quillette. I even contribute to it. But essays like this one (and the last on Progressives) could do with some critical thinking — on the part of the editors if not the authors.

    • Nakatomi Plaza says

      This article is awful. It reads like some sort of desperate undergraduate plea for credibility.

      I get that this place needs a constant stream of content, but this piece is embarrassing. It should never have been published.

      • Peter from Oz says

        Nakatomi

        Your comment is awful. It reads like some sort of desperate undergraduate plea for credibility.

      • Andrew Mcguiness says

        Nakatomi & Edgar, I agree. This piece is shallow. The author doesn’t even define what he takes Capitalism to be. The ‘arguments’ in favour of capitalism amount to cherry-picked examples; even so, they immediately raise questions which aren’t addressed.

        I’m afraid Quillette is getting worse. Everynow and then, there’s an excellent article and in between there’s a range between nonsense and mediocre.

      • Bab says

        I think that’s a bit unkind. The author is a tech worker; naturally enough he thinks that technology is capable of solving all the world’s problems and he’s offering up a succinct encapsulation of an optimistic credo that is widely shared by others in his milieu, which is interesting from a cultural mindset if nothing else.

      • Well, I guess even something that is clearly the product of the public relations department of a global software company headquartered in Cupertino, California, is grist for Quillette’s mill. I think that is good.

        Clare brings it all on, the good, the bad and the ugly.

  14. Max says

    This, combined with the oversimplified drivel about “settling things like men”, has completed Quillette’s transition to just another propaganda outlet. Jacobin, meet Quillette.

    • Peter from Oz says

      Max

      Did I miss your post in which you argued cogently as to why this article is wrong?
      Al I have seen from you on this thread is a wish to cover up the crimes of socialism.

      • Max says

        @PeterFromOz

        I don’t have to, and am not willing to, expend the energy required to refute this grade school level article.

        I would also suggest you spend a little time researching Marxism, Socialism, and Communism. While the three are utilized interchangeably in this comments section, they are not one-in-the-same. I know it is convenient to draw correlations between individuals policies and their interpretations of theories however it those correlations are spurious.

        • K. Dershem says

          @Max, I think you’re right the sloppy use of terms. Many commenters also seem to believe that any progressive policies will lead ineluctably to a totalitarian dictatorship. Accordingly, advocates of a single-payer health care system (which seems to work relatively well in Canada) are forced to account for the 100 million people killed by Communists in the twentieth century. It’s hard to have a reasonable conversation when you’re accused of being a stalking horse for a Stalinist conspiracy.

        • Stephanie says

          That’s not fair, Peter. Max has also spent a good deal of time trying to justify grave-robbing.

          • Max says

            You never disappoint me with your lizard-brained posts.

  15. Don’t forget regulations on top of regulations that always trickle down to the little guy who does business with the big guys. We suffered horrible during the Obama years. Of course, according to him, “we didn ‘t build it”.

    I sometimes think our overgrown government wants us all to either work in a cubicle for a conglomerate or as a bureaucrat. We are easier to control that way. But they make it clear they despise the small guys and regulate us to death.

  16. Stanley Ketchel says

    Left brain logic will never sell! Too much time looking at statistics and drawing inferences hurt the head. The most rabid critics of markets conflate inequality with poverty. There are differences but often those differences spur people to change their status. Pinker is right! One cannot bring up the bottom if wealth creation ceases — we slip back into the default state of humanity.

    Also, one of the biggest enemies is crony capitalism. Carried interest and long term capital gains are boondoggles for the rich. Income is income, and should be taxed at a flat rate once a reasonable deductible is established. I also think the effort to create transparency in medical bills would go a long way toward solving the flagrant cost fixing in the health care industry.

  17. anton says

    The problem is that capitalism also requires continuous growth, and a planet with physical limitations won’t allow that.

    • Max says

      The profit motive. This demand for ever increasing profits if why this country is in the position it is. A company or corporation can only turn a profit from sales alone for so long.

      • Stanley Ketchel says

        The famous Julian Simon/Paul Ehrlich bet about rising commodity prices was won by Simon.
        He bet all commodity prices would be lower in real terms in ten years. Smart people pushing technological boundaries have left Malthus in the dust. Those kind of people are the ones that are in short supply.

        https://en.wikipedia.org/wiki/Simon%E2%80%93Ehrlich_wager

      • Locketopus says

        This demand for ever increasing profits if why this country is in the position it is.

        Largest GDP in the world? Sole remaining superpower? By far the most attractive destination for immigrants? Oldest constitutional republic in the world? Cultural and scientific hub of the planet?

        Yeah, you’re not really convincing me here.

        • Max says

          GDP communicates nothing in the way of quality of life of citizens.

          Third-world immigrants do immigrate the US, however that’s never compared to other nations or how many emigrate from the US. In 2015, 1.38 million immigrated to the US, it was almost half a million to England in the same year, that’s to a nation almost 4 million square miles compared to a nation about 50k square miles, the size of NY. That’s not even mentioning the almost two million that immigrated to Germany in the same year, just under a half of which left, which would place German immigration at the same level of the US.

          San Marino is the oldest constitutional republic.

          Cultural and scientific hub of the planet, don’t make me laugh.

          • Locketopus says

            Third-world immigrants do immigrate the US, however that’s never compared to other nations or how many emigrate from the US.

            On a proportional basis, more than 10 times as many Canadians emigrate to the United States as U.S. citizens emigrate to Canada. The raw numbers are about the same (it varies somewhat from year to year), but the US has roughly 10x the population. If the countries were equally desirable, one would expect to see 10x more U.S. citizens emigrating to Canada. But we don’t see that at all.

            And that’s Canada, which is widely considered one of the better countries in which to live.

          • Locketopus says

            Cultural and scientific hub of the planet, don’t make me laugh.

            The Nobel Prize committees disagree. As do the literary, music, motion picture, video game, and fashion communities.

            Silicon Valley didn’t happen in Europe, Africa, or Asia, dude.

          • Max says

            @ Locketopus

            My figures did not discriminate based upon country. And Canadians make up roughly three quarters of a million of the total number of immigrants in the US. Americans make up roughly a quarter of a million of the total number of immigrants in Canada. The numbers aren’t that stark a contrast.

          • Max says

            @ Locketopus

            Cultural hubs shift and for the vast majority of time the US has NOT been an influential cultural hub. Having travelled, I’ve seen FAR more influences from Europe than the US, in Africa, Asia, etc. If your benchmark is contemporary technology then sure, the US is probably leading the way, however that’s an extremely specific benchmark.

            I’m interested to hear about these literary titans of literature, music, motion picture, video game, and fashion. The majority of literary titans came out of Europe. Few American musicians found success beyond the borders of the US. Motion picture is subjective, as films such as Jaws were just as successful as films such a Lawrence of Arabia. Red Dead Redemption 2 has broken numerous records and GTAV is the most profitable entertainment product of all time, both products of Rockstar Games, founded by Brits. And surely you can’t be serious about American fashion? The leading design houses, as well as the oldest, are either British, French, or Italian. The US didn’t create a splash in fashion until the mid-twentieth century.

          • Locketopus says

            And Canadians make up roughly three quarters of a million of the total number of immigrants in the US. Americans make up roughly a quarter of a million of the total number of immigrants in Canada.

            You are missing the point entirely, and quite likely, deliberately.

            I said that Canadians emigrate to the United States at a rate more than 10x that of emigration the other way. As I believe I noted, this varies from year to year. You appear to be using cumulative figures over a longer period of time. That’s fine. Let’s do the arithmetic for that.

            Using your numbers, about 2% of the current population of Canada has moved to the United States, while only about 0.08% of the current population of the United States has moved to Canada. That means that on a per capita basis, a Canadian is roughly 25 times more likely to have emigrated to the United States than the other way around. That’s much higher than the 10x I claimed.

            Now, according to you, the United States is the WORST COUNTRY IN THE WORLD? No “free health care”. “Racism” everywhere. TRUUUUUUUMP!

            But somehow Canadians still prefer to live in the United States at a much higher rate than U.S. citizens prefer live in Canada. It has not escaped notice that every time a Republican gets elected President of the United States, numerous celebrities and “activists” threaten to “move to Canada”. But somehow they never do.

            What is your explanation for that?

            And, once again, this is Canada we’re talking about, which is, over all, a pretty good country (I’ve enjoyed the time I’ve spent there).

            What do you imagine the numbers look like for, say, China? Or Venezuela? Or any other Marxist hellhole?

            What do you imagine those numbers would look like if immigration were unrestricted?

          • ga gamba says

            Yes, pick 2015, the year when immigration to Europe skyrocketed and was not typical of previous years. What was Germany’s immigration in 2014? 2008? 2002?

            Stacking the deck is seen and called. You’re quite a dishonest player here. You the same way in real life?

          • Max says

            @Locketopus

            You can wax on about 10x however if it’s 1 to Canada and 10 to America the. The figure is not large. The simple fact of the matter is that the number of Canadians in the US and vice versa is not of significant difference. The likelihood of a Canadian immigrating to the US and vice versa is not of significant difference. If there exists a particular labour demand in the US then Canadians will immigrate. If I remember correctly, the majority of Canadians immigrated to the US way back when the US possessed considerable industry, of which it now doesn’t.

            And you fall back on your Trumo sycophancy as a defense all you like, the US ranks poorly when compared to other first-world, western nations.

          • Max says

            @GaGamba

            Germany had 400k immigrate in 2012, which is roughly 138k square miles. The US had one million immigrate in 2012, a nation just under 4 million square miles. Those aren’t massive difference in numbers but are massive differences in size of nation.

        • Andrew Mcguiness says

          A trillion dollars in debt and the dollar propped up by its being the currency in which oil is sold. You’re not really convincing me.

      • ga gamba says

        There are several way to accomplish it. Companies don’t exist solely for sales, they exist for profit. Companies many have a lot sales and still fail to achieve that. You may become a more efficient producer, thereby lowering the unit cost of production. You may find, or create, substitutes for depleting or scarce materials. You may also also introduce an entirely new product that replaces less efficient or more costly ways of performing the same task.

        The profit motive often is a good thing.

    • dirk says

      But, Anton, you have heard what Keynes said about that?
      In the end, we are all dead!
      I still am thinking what he meant exactly by that. Was it cynical? Optimistic, pessimistic? Warning or soothing?

      • Max says

        I have always taken, in relation to Keynes’ overall analysis, to be an argument against the Darwinian nature of capital acquisition. A very small segment of societies are obscenely wealthy while the massive segments starve, struggler, or scrape. Why strive for a society in which that is the accepted norm? We all die in the end, should we not be striving for a society that is dedicated to making that life comfortable?

        • DrZ says

          @Max: Are you saying that the “obscenely” rich Bill Gates or Steve Jobs should have been stripped of their wealth? What about the millions (billions?) of lives they have improved?

          Would that improvement occurred had the government redistributed their wealth early in their careers?

          • Max says

            There is nothing Gates or Jobs have done that justifies the obscene amount if wealth they have amassed. That’s not even taking into account the tax dodging they’re guilty of.

            And that improvement would have occurred regardless of whether the government had limited company profits to a particular number and forced the rest to be distributed amongst the lower level labour.

          • Locketopus says

            There is nothing Gates or Jobs have done that justifies the obscene amount if wealth they have amassed.

            The people who (voluntarily!) gave them the money apparently disagree.

          • Max says

            @Locketopus

            They wouldn’t, it’s not them trading their labour for a poverty wage. I don’t expect capitalists to sympathize or empathize with anyone but themselves. The ends justify the means.

          • Locketopus says

            Max: > They wouldn’t, it’s not them trading their labour for a poverty wage.

            No one who works for Apple or Microsoft is working for a “poverty wage”. Not even the people who clean the offices.

            The only people in the chain who make “poverty wages” are the ones working in the worker’s paradise known as the People’s Republic of China.

          • Max says

            @Locketopus

            Interesting, $13/hr is the lowest wage at Apple.

            I suppose you’re referring to the literal poverty line, which is a grotesque $12-15k a year depending on the state, which is what you will pay for an efficiency studio in smaller cities. Then you have to concern yourself with food, utilities (if not included), transportation (personal or public), clothing, toiletries, etc.

          • stevengregg says

            Gates and Jobs deserve their wealth because every dollar they made created forty dollars of wealth in the market from their computers. You do realize their computers created entire industries where people worked and created products and services for others, right?

    • Locketopus says

      By far the largest component of economic growth over the last several decades has been information, not strip-mining coal or forging iron.

      Besides, there’s a whole universe of planets out there. We just need to go get them.

      • Locketopus says

        Max: Interesting, $13/hr is the lowest wage at Apple.

        That is the wage for a clerk in their retail stores.

        Most retail clerks make minimum wage, which is $7.25/hour.

        I suppose you’re referring to the literal poverty line, which is a grotesque $12-15k a year

        You don’t get to make up your own definitions for words, dude.

        • Max says

          That’s the wage of someone working in an Apple store. And the poverty line for an individual is the income level required to afford shelter alone, that’s fucking ridiculous. I suppose if they set the poverty level at whatever the average meal would cost that would be acceptable as well? If that were the case then $13/he would still be above the poverty line.

          • Locketopus says

            That’s the wage of someone working in an Apple store

            Yeah, so? I said “That is the wage for a clerk in their retail stores.” I’m not sure why you’re repeating that, while ignoring the part where Apple clerks make about twice what a typical retail clerk makes.

            And the poverty line for an individual is the income level required to afford shelter alone, that’s fucking ridiculous.

            The whole idea of a national “poverty line” is ridiculous. It costs WAY more to live in socialist utopias like California than it does in benighted capitalist hellholes like, say, Indiana.

            But if you’re going to use that ridiculous metric at all, you need to stick with it. You don’t get to make up your own based on your personal opinions.

          • Max says

            Oh well, they make twice as much, and still require public assistance to get by. Amazon’s median wage was just under $28k, if you didn’t know. That public assistance we all pay for with our taxes are a subsidization of a private corporations low wages, while that trillion dollar corporation pays zero federal taxes and its CEO makes the median salary every 12 minutes.

            Yeah, that California is terrible, it doesn’t come close to the top ten worst states to live in. Glorious Indiana ranks fifth.

    • Sean says

      @Anton

      Does capitalism need continuous growth? Capitalism at its heart is the unrestricted trade of goods and services between 2 or more parties. If village 1 grows potatoes and village 2 raises chickens, assuming no population growth in either village, why do they need to increase the amount of potatoes and chickens they trade?

      • dirk says

        John Stuart Mill taught that the less nice details of capitalism (the unfair elbowing, so often at work) is needed for economic and social development, but also that there should be an end on this growth and elbowing if people have a comfortable life enough. from then on, people should going for other things, spiritual ones, art, the environment (he mentions the French hedges and landscape aspects, vanishing even then at a quick pace for agricultural needs). This was Mills futurism, alas, he was wrong there, growth is the real squeleton of capitalism. But, every ecologist (and even Keynes, of course) knows that perpetual growth ends in the abyss.

      • Bab says

        Sean – thats not really capitalism, in the sense that there is no capital investment. Its basically subsistence agriculture, which humans have been practicing for the best part of a hundred thousand years. Marx referred to it as primitive communism, which it probably isn’t, but it certainly isn’t capitalism.

        The problem with what you are proposing – a steady state economy – is that capitalism requires profits, because this is what ultimately provides the incentive for investment. If however, the economy is not growing, then profits can only come at the expense of others, meaning that you have an economy that is effectively a zero-sum game. In such a system, the capital class would simply bilk the consumers until they had no money left, whereupon the system would collapse.

      • stevengregg says

        Because specialization of labor drives costs down which lead to new uses for products.

    • ga gamba says

      Really? That’s unique to capitalism, eh? The socialist/communist countries weren’t looking for continuous growth as well? Fascinatiing. Where did you learn that?

      You run into a problem because population is also growing. If you have population growth of 2% how much must the economy grow to keep abreast of that? Since real GDP is divided by the population, a nation’s real GDP must grow faster than the population grows in order for its standard of living to increase and must equal population’s growth to remain unchanged.

      What are we to tell the people of the developed world? You can’t have have an increase in the standard of living. You think they’ll agree? Go tell them that and let’s us know what they say.

      An easy(ish) way to increase the growth of the economy is to decrease population growth. South Korea implemented policies to accomplish this, not only by distributing birth control and encouraging abortions, but also by running frequent news stories and popular entertainment narratives that emphasised the downside of having many children. Further, the state health insurance would not pay for the birth of more than three children. It didn’t forbid a fourth and more, but it made it much more costly for a family to do so – this is a reason why of a certain age group often those families that have four children have three daughters and one son, the youngest being that son. Confucianism and ancestral rites were, and still are, important. Presently, due to population falling far below replacement, the government has reversed course and encourages families to have a more then two children by increasing subsidies in a wide range of areas.

    • Stephanie says

      The planet has a fixed mass (minus the tonnes of debris we’re pelted with every day), but we are limited only by our ingenuity. There’s no reason to think that we’ll consume all our current resources before we figure out how to utilise new resources.

      Then, of course, there’s space.

  18. Barney Doran says

    Purely anecdotal: Have you been to Paris, London or any other European city of any size as a tourist lately? They are absolutely mobbed, at almost any time of the year, with other tourists from apparently all over the world. I have lived in Europe on and off for many years and recall not all that long ago when that was not the case. What happened? In the Seventies and Eighties socialism began to crumble in Europe, replaced by a healthy dose of capitalism. Crowds started forming, uh-oh. After the fall of communism in the early Nineties, the rest of the world started getting on the capitalist train. OMG, where did all these Russians and Chinese come from? Now all my favorite places are jammed packed with a United Nations of Tourists. Sorry if this might discourage some of you who are planning a trip, but you can blame capitalism for enriching, no, empowering all these people to spend a huge amount of discretionary income on a European fling. Not convinced and just want to stay home? Then try going to your favorite restaurant this weekend and getting a table without a reservation. Dining out, the other major discretionary spending item, has gone berserk. Why? Usual suspect. Capitalism has done this and no amount of stretching or rationalizing socialism will ever enable so many people to be able to spend so much to enjoy living on this wonderful planet. Eat you your hearts out, SJWs (at least it won’t require discretionary income.)

    • Max says

      Perhaps in eastern Europe. The only thing American-style capitalism has brought England is falling prices in product, unaffordable cities, housing shortages, and Russian oligarchs, who have contributed greatly to the affordability, not unlike the Chinese in NYC.

      One side claims capitalism will solve all of our problems and the other claims more immigration will. Both contribute to the demise of the common man.

      • Kessler says

        Basically, there are glitches in capitalism, when it comes to global economy, with free movement of capital and labor.

        Some countries chose to adress them, for example by restricting, how much real estate foreigners can buy and financing construction of housing, so ordinary people can afford to live in the cities. Others sleepwalked through the changing world and let things get bad.

      • Sean says

        The main reason for housing shortages is that the country’s population continues to grow. As all western countries have a naturally declining native population, it is immigration that causes population increase.

        Reduce immigration to less than the natural population loss and the housing crisis will go away.

    • dirk says

      And Barney, this is just the annoyance of a West European, too many tourists in their nice streets and terraces (is tourism also a capitalistic feature, btw?, I wonder sometimes), but what about these poor Eastern European countries? I don’t mean the adventurous people that went to France and Germany to work and earn there, but the locals? I tell you, really horrible, your heart is crumbling if you speak to them in the train to Odessa or Kosice, all their privileges, medical care, education, all gone, and rents, bills and food extremely expensive (not for the tourists, but for them), I really felt for them, but what to say? Try also to work in capitalistic Germany? Very often not even possible. And what about Africa? Worse even there, globalism, free trade, capitalism, a curse for the billions, but, of course,not for the happy few like us.

      • E. Olson says

        Dirk – Sad as it may be, you do understand that all those lost “privileges” in Odessa were because they finally ran out of other people’s money to spend? I suspect the outcomes would have been far nicer for everyone if something approaching Capitalism had been implemented since 1917 instead of Communism.

        And where in Africa has Capitalism been tried since colonialism ended and black rule began? They pretty much all went to Communist/Socialist to create a fairer societies, and they have largely succeeded as everyone is poor and miserable except for the leadership who have billions of foreign aid and extractive industry profits in their Swiss bank accounts.

        • dirk says

          Other people’s money in the Ukrain, EO, are you serious? Yes, that’s what they hope for maybe, from Brussels, if they will also once belong to the European community. Chances on that are minimal, however, Putin won’t allow so.
          People you meet in those trains are mostly pensioned teachers, housewives, musicians, kolchoz workers, factory workers (jobless now), that once were productive, but now are missing the connection. But, many of them still have a datsja, so, they won’t starve

          • E. Olson says

            Yes Dirk – other people’s money still applies even in the Ukraine. How did these people get “free” health care? They did it by forcing doctors to work for $12 per month, which made them only slightly better paid than a bus driver. Wage equality was very high, which means musicians, school teachers, factory workers got relative high wages, which were subsidized by the relatively low pay that doctors, professors, engineers, pop stars, professional athletes received. Such cross-subsidies never work in the long-term because they distort supply and demand (i.e. lots of people want to be musicians when the pay is good, fewer people want to be engineers when the pay is bad), so eventually the system runs out of money to redistribute.

          • dirk says

            Again, E.O., I wonder, do you really think that the amount of athletes and musicians is dominated by market forces or wages? We have here TV programs like The Voice Kids, children doing their utmost best to perform, I can’t imagine that any form of marketing or capitalism is at work. In the end, yes, a very small minority of them will become millionaires, but that’s just a side dish. And why should an engineer make 5x the wage of a garbage man (doing , day after day, rather inhumane things for others)? In my time, this was more or less the situation, now no longer in our social democracies, just come and visit us and see it with your own eyes, proletarians of all countries.

  19. Kessler says

    I think capitalism is the best system and a lot of issues are due to government interference in capitalism. But there are issues with global trade and competition, that I feel are unaddressed. I agree, if all global trade was shut down, it would be very bad for everybody. But is all global trade equally good?

    1.
    I’m all for comparative advantage – growing food, where climate and soil provide richer harvests, making stuff, where logistics and access to natural resources reduces costs, etc. But, let’s say a factory can deliver cheaper product, because:

    Factory can save money, by dumping toxic waste into nearby lake, instead of proper disposal.
    Factory can save money, by making workers work in hazardous conditions, long hours, for minimal pay, so they’ll likely suffer accidents, have severe health issues and reduced life expectancy in 10 years.

    Is this a legitimate comparative advantage? Should unmitigated environmental destruction and conditions that endanger lives and liberty of people be competitive advantage in global trade? Is more wealth created by this trade, or are you simply shifting costs to the public or future?

    I think the fallacy in argument, that global trade creates wealth is to assume, it doesn’t matter, where that wealth is created. Capitalism doesn’t exist outside of nation. It needs political and societal stability to function. Once comissars, leading red guard, start shooting capitalists, economy quickly collapses. So, what are the effects of certain type of global trade.

    Chinese workers may be grateful for the opportunities, that global trade gave them, but they don’t get a vote in USA elections.
    Consumers having cheaper ipods is nice for them, but wealth is relative, if all Ipods were expensive, people would just assume, that’s how things are. Nobody is dying on barricades to get cheaper gadgets.
    Corporations getting extra cash, certainly make shareholders happy, but that is a minority of population, that is already pretty wealthy. There is potential for charity, but I feel it isn’t realized.
    Workers losing jobs and having few economic opportunities on other hand – that’s what disrupts political and societal stability, and leads to things like opioid crisis.

    So, should there be restrictions on trade, that may increase overall wealth, but would politically destabilize country and society?

    • Stephanie says

      Kessler, I think that’s a really important point about comparative advantage. If it’s more economical to have a given product made in China than the US because they don’t have to follow the same environmental regulations, is that an advantage we should exploit?

      An appropriate use of tarrifs would be levying the costs of complying with the importers’ environmental regulations. Alternatively, we could remove all such environmental regulations here, since we prove by our actions we don’t value them. Either way, we should get consistent.

  20. Ted says

    Lost me at “wealth can be created out of thin air.” The essay seems well-intentioned, but so overly simplistic as to be useful only in “preaching to the choir.”

    Wealth is “created” by extraction and “destroyed” via entropy. Every economic system is based on managing those two forces.

    Immerse yourself in transactional commerce while contemplating the Pareto distribution curve. The situation then becomes clear. Certain systems fail when the requisite friction in resource allocation and distribution become divorced from accessible utility.

    Try again. You have an engaging style of writing, and I’ll certainly enjoy perusing a more thoughtful effort.

  21. Heike says

    “When other countries produce goods at a lower cost (including their opportunity cost) than we can produce ourselves the result is lower prices. And lower prices mean consumers are wealthier.”

    This is not capitalism, this is neoliberalism. The essence of globalization is: labor is commoditized as mobile capital is free to roam the globe for the lowest cost labor. In contrast, labor is far less mobile, and unable to shift as fluidly and frictionlessly as capital to exploit scarcities and opportunities.

    Neoliberalism–the opening of markets and borders–enables capital to effortlessly crush labor. It’s been decades, wages have stagnated, jobs have not been replaced, Asia is not even pretending to meet our environmental standards and the benefits of global trade has been largely concentrated in the bank accounts of the 1% at our cost.

    It’s time to end these global free trade agreements, it’s time each nation took back it’s responsibility to trade in the best interests of its citizens and not an international elite that has been lying to us for decades. Import tariffs are necessary to protect US quality of life. Our minimum wage and other worker protections make us fundamentally noncompetitive with countries that can exploit slave labor (or something close). Without trade protections, either our workers have to work for peanuts, or our economy will eventually tank. Import tariffs (and the related topic of export subsidies) generally protect our comparatively strong social policy.

    There’s a strong case to be made that the US should have a broad tariff on all imports like we did for nearly the entire history of the US before the advent of the income tax nearly 100 years ago. The whole point of tariffs is that it gives us a way to effectively tax foreign companies for being able to safely sell their products in a large, well-regulated market.

    People are right to point out that this may raise the prices of foreign goods, and potentially raise the cost for American producers and consumers, but it also allows us to lower domestic taxes (which are offset by revenue from tariffs).

    If we had free trade, that would be great. But we don’t. Not only does China have a competitive advantage by having zero regulations, it also gets the benefit of having no tariffs placed on the products it sells here. You know that they put high tariffs on our goods? Why aren’t we doing the same?

    Mexico has been ruined by our open trade and borders. They’ve lost their smartest and hardest working people. The drug ban gave control and influence to the drug lords who murder more people per year than are killed in the same timeframe in the middle east wars we started. Without diligent, smart, or forward thinking people, they have stagnated for 30 years.

    Protectionism may well result in a mild increase in the cost of goods but it provides many with jobs that they wouldn’t otherwise have. The benefits are largely felt by the working class. We tax labor at twice the rate of capital, which hurts them the hardest.

    If you are an average working class American, then your incomes and your throats are being cut by the huge influx of new, cheap labor. Working class jobs are being destroyed by low income labor at one end and automation at the other, leaving working class voters angry and broke and with no place to go.

    That’s where the backlash is coming from, and that’s why so many upper income people can’t see any problem with it. It’s the old old problem of the landed gentry and the nobility looking down their noses at all of those stinking whining peasants, all over again.

    But don’t take my word for it, let’s listen to White House National Trade Council Director Peter Navarro:

    But we’re not in that world. And because we’re not in that world, every year the United States of America basically sends about a half a trillion dollars a year offshore in the form of a trade deficit. This is something that’s not supposed to happen in the Ricardian trade model. Let me say that again. This is not what is supposed to happen in the Ricardian trade model, which my colleagues in economics and folks in the media and everybody in between love to cite as the free trade model: “gains from trade, everybody wins.” In the Ricardian trade model, you can never have these persistent deficits because of things like currency adjustments, right? But we have them. We’re shipping off a half a trillion dollars a year. We are, as President Trump has said, the piggy bank of the world. And the reason why this happens is because countries around the world do not engage in free, fair, reciprocal and balanced trade. We have, for example, a trade deficit with China, which accounts for about half of the problem. But, at the same time, the European Union is about $151 billion in 2017 in trade deficit in goods: that’s about 20 percent of the problem. And then you have Japan and Mexico, with about another 18 percent of the problem.

    If you look at these different countries, they all managed to gain advantage over this kind. I don’t call it competitive advantage. I just simply say advantage over this country in different ways. Germany, for example, which sells us three cars for every one we sell to them, has a tariff on autos, which is four times higher than ours. Japan, which has very low tariffs, sells us over 100 cars for every one we sell them. Extraordinary! And the problem there is non-tariff barriers. So all the president is trying to do with his trade policy is to level the playing field. And we would love to live in a world where the rest of the world caught up to us: I don’t know if you know this, but the United States of America has among the lowest tariff and non-tariff barriers in the world.

    https://www.hudson.org/research/14437-full-transcript-white-house-national-trade-council-director-peter-navarro-on-chinese-economic-aggression

    • Sean says

      @Heike
      Excellent comments.
      “Not only does China have a competitive advantage by having zero regulations, it also gets the benefit of having no tariffs placed on the products it sells here. You know that they put high tariffs on our goods? Why aren’t we doing the same?”

      China actually goes one better and prohibits the west from selling certain products to China. With tariffs we could sell them at an inflated price but by banning them there is absolutely no concern for competition by Chinese companies.

      Former Canadian PM Stephen Harper discusses this in a Ben Shapiro interview:
      https://www.youtube.com/watch?v=nVNw03gyLmk

  22. dirk says

    Another question: is China a capitalist or a communist country? China has left 800 million out of abject poverty within one generation, so very successful, but can one attribute it to capitalism, or to communism and totalitarianism? I wouldn’t know. A correspondent recently back from China told us on TV: the Chinese are very happy with their communism/capitalism salad, and are not at all busy with free enterprise, speech, democracy or human rights.

    • Max says

      That is a fact that many students had difficulty grappling with in relation to the other lessons of political science, socioeconomic, etc. As long as people aren’t struggling to acquire the basics, they don’t tend to be picky about the form of government.

      • Stephanie says

        Max, the Chinese I’ve talked to say that people in China do have a problem with their government’s abuse of their rights, but they feel they can’t do anything about it. The surveillance state is too sophisticated now, and even in the past dissidents disappeared before they could get too far.

        One friend of mine in his 40s told me his parents told him that when he was young that there was nothing they could do about the government, but that maybe his generation would be able to. Now he says it will have to be the next generation.

        I wouldn’t mistake their helplessness with complacency.

        • Max says

          Steph, I would contrast that to Malaysia, if I remember correctly. Laws are quite strict there, however people’s lives are relatively stable, especially so in Kuala Lampur. Subsequently, they accept the strict laws.

    • Harland says

      The Chinese call it “taking the capitalist road to achieve socialism”.

      Capitalist-roaders were a heresy of socialism. They were put in labor camps and reeducated. After Mao died, Deng Xiaoping hijacked the people’s revolution onto the capitalist road and it all went to hell afterwards.

      • Max says

        Marx theorized that Socialism/Communism would be birthed from the inequalities of capitalism. China has simply found a purgatory between the two. I would actually argue that China’s success hasn’t been a result of Chinese actions but a result of US actions, i.e. US companies and corporations moving their production to China. What I’m interested to see is where those companies will move next, now that the Chinese are demanding high wages and imposing stricter regulations. I’m thinking they will move to India or the like, as that’s where the textile industry moved.

        • Locketopus says

          Marx theorized that Socialism/Communism would be birthed from the inequalities of capitalism.

          Yeah, well, Marx theorized a lot of nonsensical bullshit. None of which has ever come to pass, and all of which has resulted in one or more of slavery, starvation, or mass murder every single time someone has attempted to implement it.

          Perhaps if he’d ever held a real job he might not have gone so far around the bend.

        • Max says

          @Locketopus

          I’m interested to hear where Marx endorsed slavery, starvation, and mass murder. I’ll answer my own question, he didn’t. Like most of your other posts regarding Marx, you’ve pulled that one out of your ass as well.

          Crack a book, it would do you well.

  23. TheSnark says

    At its core, “capitalism” merely describes the way people interact with each other when outside their immediate circle of friends and family. They barter/negotiate for the best deal, as do the people on the other side of the transaction. If they reach an agreement, they make the deal.

    That is why capitalism works; it is in accord with human nature. Capitalism is not a prescription (of how to structure an economic system) it is a description (of how people naturally interact with strangers).

    And that is why socialism does not work; it is not in accord with human nature. It assume that strangers will treat each other as well as they treat friends and family. Sometimes they do, but most don’t. When those strangers are in position of power, far too many of them will act like humans and take care of themselves and their families first.

    And the height of irony is the way the anti-capitalists in the West rely on all the things created by capitalism. Their social media, smart phones, the entire phone/internet system, etc etc were all created by capitalists (and, horror of horrors, by white men). They simply take these things for granted, without a clue where they came from or what was involved in creating them.

    • E. Olson says

      Great comment Snark. Lefties everywhere hate Capitalism, but almost always a safe distance away from actual socialism.

      • Nakatomi Plaza says

        You’re surrounded by “actual socialism” everyday that works perfectly well, and you clearly take it for granted. You’re also surrounded by capitalistic enterprises that exploit and destroy human beings, robbing them of the capacity to stand up for their own best interests. You’re surrounded by these things and a thousand variations and combinations of each.

        Grow up. Your conception of the world is sad and pathetically simple-minded.

        (And you really don’t know where the internet came from? Jesus, really? Hint: the goddam government that you hate so much invented it.)

        • E. Olson says

          NP – Your knowledge is so deep!!! I didn’t know the government invented Netscape, which is what made the Internet something that anyone besides a few academics could use. Next I suppose you will tell us the government invented the lightbulb, car, airplane, and so much more – I look forward to hearing your stories.

        • Peter from Oz says

          Mistaking altruism and co-operation in society for socialism is the sort of schoolboy error we have come to expect from you, Nakatomi

  24. Tim says

    “This means that every single person on earth can be wealthy.”

    Can every single person be so wealthy they don’t have to work for a living? What happens to capitalism when no one is desperate for a job? Or when machines are doing virtually all of the jobs? Capitalism is on borrowed time. Its end is inevitable. Gene Roddenberry was not wrong about the future. Money will seem ridiculous.

    • Locketopus says

      Can every single person be so wealthy they don’t have to work for a living?

      Sure. It won’t even require that much more wealth. 160 hour work weeks were routine at the beginning of the 19th Century. Now we’re down to less than 40. We’ve already eliminated 3/4 of the required hours of labor to earn a living. The remaining 1/4 won’t be all that hard.

      What happens to capitalism when no one is desperate for a job?

      The capitalists will have to pay a higher wage or, if it’s a job so horrible that no one wants to do it at any reasonable wage, develop a machine to do it.

      • Locketopus says

        I wrote: > Sure. It won’t even require that much more wealth. 160 hour work weeks were routine at the beginning of the 19th Century.

        This is, of course, pure nonsense. What I meant was 16 hour days, not 160 hour weeks. So, 96 hour weeks (6 day work week).

        I blame sleep-deprivation from the time change. Yeah, that’s the ticket.

        That may also explain why I slept all afternoon, and why I’m now awake in the middle of the night. How long are we going to continue stomping on our Circadian rhythm twice a year like this?

        The larger point, that we have already drastically reduced the number of working hours, remains.

        • stevengregg says

          From what I read of ancient history, people worked from dawn to dusk, though more slowly than we do. That’s an 84 hour week. Children began working when they could first walk, fetching things, gradually learning how to work from their parents. It was the steam engine that changed all that, making people productive enough to earn a living in half the time. It’s likely that automation will cut that in half again.

          • dirk says

            The steam engine was an invention by somebody in the Roman empire, and was used in a device to open and close theater doors. However, because of the army of cheap slaves, there was no enterpriser taking the idea up to go further with it and develop labour saving machines and practices. That still had to wait for centuries. Now, we are freed from all that slavery and earn good incomes, though, burn a lot of fossil fuel. The Romans were a slave society, but in CO2 emission, we really didn’t make much progress, at the contrary.

  25. Sean says

    I am a firm believer in Capitalism but it does bring problems. From the article:

    “Pick one of the following:

    Buy a new iPhone (built where costs are lowest) for $650.
    Buy a new iPhone (manufactured in the US) for, say, $3,000.”

    iPhones sell for over $1,000 now at huge profit margins to Apple. If Apple were forced to make the phones in the US, the company would innovate to bring down the costs. Japan is a great example of a country that is rich and still makes high quality goods that are relatively cheap such as Toyota and Honda cars, and Yamaha, Suzuki and Kawasaki motorcycles. Yes they have plants abroad but many vehicles are manufactured in Japan and both Honda and Toyota have opened plants in the UK which is also expensive. Germany also manages the same.

    The problem with moving production to cheaper countries is that the good paying jobs also go, so you end up paying less for goods but your income is less. I really don’t know what the answer is. Are we to become a post manufacturing country such as financial and computer services? If this is the case we need to invest a lot more in education to prepare kids for the brave new world.

    • Max says

      You have to instill, somehow, the concept of enough-is-enough. That’s the problem with capitalism, it’s not enough to be profitable or even obscenely profitable, you must turn an ever-increasing profit. Companies and corporations can only turn an ever-increasing profit from sales for so long, then they have to find profit in cutting productivity costs, wages, benefits, they impose increasingly larger quotas or longer hours, they blur or erase the line between work time and private time.

      • codadmin says

        @Max

        That instinct for more profit/productivity is what leads to innovation, and innovation is what leads to standard of living.

        Every slight increase in productivity adds up over time. The amount of people employed in industry is dramatically less than it was a 100 years ago, but the amount of productivity is dramatically higher.

        In other words, the open market constantly finds new ways to create more and better stuff. And it hasn’t stopped yet. The process is ongoing. Who knows what the process would have created in 500 years.

        • Max says

          Yet they don’t innovate until they’ve exhausted the cost cutting angle, which at this point they have. If it were as simple as innovation then they would be manufacturing product stateside and innovating, they’re not.

          Problem is that as productivity has increased, as profitability has increased, the wages and salaries of those who trade their labour hasn’t. Instead we’ve seen CEO salaries balloon, shareholder returns balloon, stock buy-backs become more frequent. Oddly enough it’s the Republicans/conservatives that come to the defense of this despite it being in contradiction to their trickle-down theory.

          • codadmin says

            @Max

            Absolutely correct. But, so what.

            The richest societies in the world have the greatest inequality. The poorest societies in the world have the greatest equality.

            The people living in the most equal societies in the world are multiple time poorer than those living in the most unequal societies in the world.

            Even as inequality increases, standard of living continues to improve.

          • Max says

            @ Codamim

            The Scandinavian nations are far from poor and are the most equal.

            Quality of life is not confined to a vacuum. No, people are not eating lard and dying of cholera however we don’t live in the 18th or 19th century.

          • codadmin says

            @Max

            The Scandinavian inequality/equality ratio might be slightly better than other rich nations, but in contrast to the worlds poorest nations, they are grossly unequal.

          • Max says

            @Codamim

            The poorest are far from equal, the wealth is simply more tightly concentrated in the pockets of politicians and corporations. There are countless dirt-poor African nations whose leaders and their children live obscenely luxurious lives in stark contrast to the almost entirely dirt-poor populace.

    • Max says

      I would suggest that when a company wishes to relocate in search of increasing profits, the structure, machinery, etc. remains and it is turned into a worker co-op.

    • ga gamba says

      Excellent comment. Germany is an engineering power and export juggernaut in things we normally think of such as Porsches and BMWs, but it is also a power in pencils and crayons, neither of which are exactly high tech.

      Mr Hogge fell the argument that it’s only labour costs that matter. This is untrue. It’s the unit cost of production, of which labour is one of many costs, that matters. Couple that with innovation that keeps your products more desirable than lower-priced competitors and you can keep manufacturing jobs around.

      It’s not easy, but it is done.

  26. Good on yer Hogge!

    However about concentration of wealth (not wealth, money): For every single super yacht built by the “outrageously” wealthy (Which probably leaves the harbor once or twice a year.), thousands of paychecks went in to the pockets of iron workers, lumbermen, boat builders, etc., and hundrends of thousands of meals were put on their families tables.

    Sound like a fair trade.

  27. Leonard E. Read’s “i, Pencil” should be required reading pre secondary school. Nothing explains the cooperative nature of capitalism so clearly. Especially for the uninitiated.

  28. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” – Adam Smith

    “”In other words, capitalism understands incentives, or the idea that people are naturally selfish. A person doesn’t create a business out of the kindness of their heart. They do it to feed themselves and their families. This selfishness is immeasurably powerful.”

    The author makes a strong case that our current “capitalist” system does indeed generate tremendous wealth and that overtime it does seem that this wealth does seem to get “spread around”. The author however does not point out that there is no such thing as “free markets” – totally unregulated capitalism is and always will be an ideological fantasy.

    This common omission of the nature of the regulating forces on capitalism is evident in the author’s selective quotation of Adam Smith. The author emphasizes the “selfishness” of the butcher et al. has having a beneficial social effect but fails to mention other “moral sentiments” which Smith feels are necessary for a healthy, free society. Specifically, Adam Smith emphasizes the virtue of “sympathy” which is an individual’s capacity to understand the needs of a fellow citizen. Sympathy with his fellow citizens is a virtue by which the butcher is aware of the consequences of unadulterated selfishness. Smith, in effect, affirms certain values and institutions which “invisibly” regulate free markets.

    The misappropriation of Adam Smith as an apologist for unregulated free markets has contributed to the great ideological divide of the modern world. Those of the Right champion the wealth generating forces, while those on the Left champion the regulating power in the form of the State. What is completely forgotten is the power and humaneness of self-regulating individuals and self-regulating communities which are of primary concern to Adam Smith.

    Not surprisingly, it turns out the champions of free markets and the champions of the State share an identity of interests over time which are not those of smaller communities or anybody who does not directly benefit from their ascendancy. What people the world over are beginning to realize is that the interests of the Globalized Corporate State are not necessarily their interests.

    The great irony is that the kinds of values perpetuated and emphasized by this globalized capitalism ultimately generate atomized, dependent and shallow human beings who become obsessed with the State to relieve their suffering. As Octavio Paz once observed, “within the womb of industrializtion are carried the seeds of totalitarian bureaucratization”. Right and Left are two sides of one coin.

    Again, the author does a convincing job of describing certain benefits of what we think of today as capitalism. But so long as we think of capitalism is either an economic principle or an ideology we miss many essential aspects of what has been going on for the last couple of centuries.

    To simplly debate the virtues of “capitalism” vs the virtues of “socialism” while interesting and apparently highly contentious, is not to debate the larger issues at all.

    • ga gamba says

      Those of the Right champion the wealth generating forces, while those on the Left champion the regulating power in the form of the State.

      The left does more than though, doesn’t it? I have no opposition to well-founded regulation. Keep the mercury out of the drinking water, the rats out of the sausage, the drunks off the roads, and aeroplanes landing safely.

      The left then decides it wants to seize more than needed to regulate; it decides to redistribute. The money is representation of my labour, my time, my thoughts, and my willingness to take on risk. When you redistribute you have seized a portion of my life and given it to another.

      It is an irony that the far left goes on about how a person who freely enters into a contractual relationship to sell labour is exploited yet the same left is happy to seize a portion of my labour to give to random strangers who are not even thankful of such generosity but believe they’re owed it.

      • ga gamba

        True enough that the Left tends to gravitate from mere regulation to control and even seizure – there is no end to the insanity once human beings have lost contact with experiential reality. Who are the most dangerous human beings of the last 200 years: Idealists So, as you yourself seem to suggest above, capitalism is complicated. Your analysis of externalities is quite convincing.

        I believe what we think of as economic capitalism is actually a manifestation of whole understanding of reality which emerges in the 19th century. Economic capitalism or socialism or communism cannot be understood apart from this greater shift in how we understand reality This is related to what Heidegger refers as “aletheia”, what Nietzsche means by “the movement of nihilism” or even “the death of God”, or what Roberto Calasso suggests by “the religion of society” etc.

        All I’m suggesting is that reality operates as a whole – the emergence of all past and present totalitarian thinking is related to the same kind of thinking which produces tremendous technologies and vast wealth.

        When I mentioned Octavio Paz noting a relationship between industrialization and bureaucratic totalitarianism I think he was in effect responding to this question: What happens when human beings begin to believe reality can be understood by breaking it into pieces?

  29. Amin says

    Standard dumb article. Probably paid for by the Koch money.

    • Locketopus says

      Or quite possibly witches, Russian bots, or evil spirits. Or something.

  30. Mark says

    you forgot to mention property rights, without which capitalism would be impossible. Then again, Silicon Valley often leaves property rights out of their policy sphere because it’s in their interest to limit them.

    • Nakatomi Plaza says

      Who enforces property rights? Yea, a taxpayer-funder legal system. It all depends on a socialistic network of institutions such as infrastructure and law-enforcement mechanisms, not private institutions.

      And yea, the last thing Silicon Valley wants is to pay producers fair value for their work.

      • Locketopus says

        Still on the “anything done by a government is ‘socialism'” kick, I see.

        Which, of course, would make everyone from Sargon of Akkad (the real one, not the YouTuber) to Genghis Khan to Rand Paul a “socialist”.

      • stevengregg says

        Socialism is the public ownership of the means of production. The legal system is not a means of production.

  31. Interesting. But the Iphone is poor example. Even Apple have aparently admitted it would not cost much more to make it in the USA these days. And there are many other quite obvious political and strategic reasons to beware of trading with China.

  32. codadmin says

    Communists want humans to live lives free from unnecessary labour.

    Thats’ a great goal.

    But without technological progress it’s never going to happen. And without open capitalistic markets, technological progress is never going to happen either.

    Communists have to accept the process cannot be rushed. Revolutions only hinder the process.

  33. Andy says

    The problem with this article is that international trade is not free trade, it is managed trade. Our trade representatives that negotiate bi- or multilateral deals inevitably pick winners and losers. It’s not an accident that industry lobbies the State Department heavily during these negotiations.

    The op-ed also ignores the fact that many of our trading partners are quite obviously engaged in mercantilism.

    So no, it is not win-win at all.

  34. DNY says

    Do you actually know anything about the Koch brothers, or is that just a name you learned somewhere?

    The much vilified “Koch money” supports things like the push for criminal justice reform that saw one of the few bipartisan successes since Trump was elected, although the cause, and the Koch’s desiderata for it are much broader, a diversity initiative (?!) at Kansas State University, arts programs, and lobbying against corporate welfare (yes, seriously, see here: https://www.charleskochfoundation.org/apply-for-grants/requests-for-proposals/corporate-welfare-reform/).

  35. DNY says

    Fine article, but among those who need to be convinced it will fall on deaf ears.

    To the millennials who are increasingly embracing “socialism”, “capitalism” is coextensive with its current instantiation in which state power is used to prevent the market from harming established corporate interests (bailouts, “too big to fail”); is not deployed against manifest malfeasance and fraud (no one went to jail for selling bundles of sub-prime mortgages); creates regulatory environments in which incumbents in the market are protected from actual and potential competition, if only by the compliance costs, if not directly; patent and copyright law have been corrupted (first by being reified as “intellectual property”) so that they no longer serve the interests of inventors and authors (or artists) but of publishers and and other corporate “rightsholders”, and of lawyers;…

    The argument that must be made is that the corrective to these problems is returning to the market, not further empowerment of the state. I’ve made headway with this with my younger son, who has a dim view of the police by pointing out that the police are the business-end of the government, and that the other parts of the business-end of the government (tax collectors, case workers, and the like) are not much better, and wondering why anyone would want to turn the provision of their necessities (and luxuries) over to what basically would be the cops?

  36. Nakatomi Plaza says

    This is childishly simplistic. Of course capitalism is the future, but not in it’s current form. That should be obvious to everybody by now. The writer mentioned Uber, so let’s use that as an example:

    Uber has never made a nickel. Not a penny of profit, ever. They only exist because every ride they provide is subsidized by their VC backers, and customers naturally want the cheapest product regardless of why it’s so cheap. Their business model is completely unsustainable and will almost inevitably collapse unless somebody magically hands them a fleet of autonomous vehicles. They’re going to go public based on a gigantic pile of bullshit based on massive bank fees and misinformation campaigns in hopes that nobody calls them on it. Is this functional capitalism? Of course not. It’s a scam in desperate need of regulation and common sense before it ends up undermining our system, but nobody is interested in providing that oversight.

    You’d better inform yourselves because your ignorance will not protect you from the pitchforks. Stop defending a shit system and begin advocating for solutions. The Uber/Lyft public offering scams are now well understood, so you have absolutely no excuse to be as stupid as the writer of this article.

  37. Chuck Berger says

    The author should have titled this “the clear case for markets”, because the piece he wrote is an argument for markets, not capitalism. They’re not the same thing, and in fact are often in contradiction.

    Capitalism is a form of economic organisation in which financial investors (“shareholders”) call the shots. Capitalists generally don’t like markets, precisely because of market efficiency. Capitalists generally prefer oligopolistic or monopolistic structures, because they allow the maximum profit for investors.

    There are plenty of “capitalistic” enterprises that have nothing to do with competitive markets. This is common in western democracies in situations where natural monopolies have been privatised. Toll Roads, private prisons, private electricity distribution networks, and private water/sewage/waste companies are often not involved in competitive markets at all, but they are certainly capitalist.

    Conversely, there are many forms of market organisation that don’t have anything to do with capitalism. I do my banking with a credit union, effectively a consumer co-op. But it exists in a market context, in which it is competing with other co-ops — and with shareholder corporations — for customers. (Incidentally, my co-op is called Bank Australia, and it is just so much better in every way than Australia’s “Big Four” banks!)

    The point is that “capitalism” describes a particular ownership/control structure. Capitalism is a system in which capitalist enterprises dominate. Capitalist enterprises are ones in which the “owners” of capital – shareholders, being a kind of financial investor – dominate.

    “Markets” in contrast are an allocative mechanism, which may or may not involve capitalist enterprises. Markets can exist without capitalism, and oddly enough capitalism can exist without markets.

    As for the substance of the article – it’s all very well-worn territory, I don’t know why he wrote it.

  38. Chip says

    Economic systems don’t “cause” any outcomes like justice or injustice, healthy societies or dysfunctional ones.

    Markets are perfectly compatible with a righteous society in which all are free and equal, or one based on slavery and horrific oppression.

    Markets aren’t even in opposition to state control and regulation; In fact, markets depend on government control of socialized legal and physical infrastructure.

    The only difference between a Trump and Alexandria Ocasio Cortez is the list of what should be regulated or taxed, where and to what degree.

  39. dirk says

    I wonder, I once roamed the Amazon, in the boat of a regaton (businessman on the water), that sold simple goods (salt, matches, petrol, sugar, oil, cooking pots) to the local, and bought their forest products such as nuts, hides, parrots, cassava and the like. I could not sense any regulation or laws at work in such transactions. Could this be called capitalism? And, if yes, capitalism is as old as humanity, or not much younger. But, maybe, so is socialism (next chapter).

    • Chuck Berger says

      Did they use money? If so, there’s a mountain of state action and involvement.

      But no, I’d say that’s not capitalism. Capitalism isn’t just trade or markets or money. It is a form of economic organisation in which financial investors (“owners” or “shareholders”) control economic enterprises. Capitalism as such didn’t really come into being across entire economies until the 18th century, though there are example of proto-capitalist enterprises in Feudal Europe, India and China.

      The finest account of the deep roots of markets and money is David Graeber’s “Debt: The First 5,000 Years”. Fascinating book. The kind of strictly transactional exchange you describe above is actually very modern; such exchanges were extremely rare in traditional societies, where social relationships were deeply intertwined with material exchange in ways we find almost impossible to imagine. The history of trade is far far stranger than told in our economic textbooks – which are ahistorical in the extreme!

      • dirk says

        That’s indeed a good one, Chuck, for money you need a bank or monetary system. Most of those transactions were done with money, but not all, barter is just as good. But inflation in the Amazon was the normal thing, so, money was often immediately spent in cattle (and this is the real, original capital of course, caput= head, a lot of heads of cattle means a lot of capital). Some of these regatones were just small guys with a small boat, others had invested in 3 or 4 large boats and made use of captains and labourers working for them. So, I would think capitalism at work, clearly.

        Google poses capitalism started late middle ages, just here around the corner, Antwerp, Bruges, Hanse cities, Amsterdam.
        But also elsewhere, China, India. America not mentioned (Aztecs? Mayas?, Mexico city had such huge markets that the Spanish were flabbergasted, there was also a strict inspection on cheating and measures used).

  40. thatsmysecretcap says

    Every conversation about which ism we should be following is a waste of time and reveals only the ideological leanings of the speaker. What is important is that the players follow through on the tenants and principles of the ism and faithfully comply with the rules and responsibilities that the ism is based on. Socialism and communism are perfectly capable of creating utopian societies. All that is needed is for people to faithfully and consistently act against their instincts and personal best interests. Capitalism always wins not because it is somehow inherently better, but because it is dramatically easier to get human beings to consistently comply with its tenants.

    Trying to fix the real problems we are facing by changing the ism that we conform to is like getting frustrated with your laptop running slow, throwing it out the window and picking up an abacus. Even worse, once we adopt some other philosophy of social organization, we will be faced with the same ineffectual decision making, cronyism, political infighting, religion-based myopia, etc. etc. etc.

    What we need to be focusing on is cleaning up our act and making sure we are doing what we are doing as well as possible. There is a huge lack of deference to competence in our current social order. Ever run into a person who is supposedly at the same level as you in an organization and they can’t even find their shoe laces? Do they help or hurt the overall productivity and effectiveness of the organization?

    I don’t believe the people’s current disdain with the rich is based solely on inequality. I think it’s based on the perception that the inequality was unearned, won through rent seeking, cronyism, corruption, market manipulation, etc. I think people are willing to tolerate incredible inequality if they have faith in the system and believe that the inequality exists for a just reason. Incidentally, if inequality only existed for just reasons, it would be far more rare and less extreme, because it is very difficult for a single person to produce that much more value than the average person. I’m less concerned about Elon Musk’s billions seeing as how he started with very little, risked everything multiple times, works relentlessly, and has created genuine innovation both personally and through his organizations. I’m more concerned about the latest ceo of General Electric (example only, I don’t know anything about Mr. Culp) who spends his time discussing executive compensation with the board and working out how to optimize his stock options over the next 5 years before he opens the golden parachute and moves on to “new opportunities”. I’m worried about the guy who has the job because he rubbed the right elbows while getting his MBA at the right school. I’m worried about the guy who only talks in buzzwords and doesn’t know what his workers are building or how they are doing it.

    As usual, the place that we should focus our efforts is the most difficult, annoying, demanding, exhausting pursuit: understanding our own systems and making sure they work as well as possible. Rent seeking in all forms needs to be ferreted out and destroyed. Why do government organizations take as long as they do to approve things that consist of rote tasks like collecting specific documents? Why are we still relying on human air traffic controllers when the technology has existed for years to dramatically improve the safety and efficiency of our flight patterns while saving time and fuel and increasing the throughput of our airports? People talk about how the march of automation will affect manufacturing. We already have enough technology to eliminate a quarter of manufacturing workers (number straight from my ass) if we just applied what is already mainstream and readily available. Why are there people who make millions of dollars based on their computer connection being a fraction of a second faster than the the other guy? What value is being created there? As far as I’m concerned, most of the financial sector should be reduced to a spreadsheet, though I realize I have a blind spot for what is really going on there. Look into the lobbying done by tax preparation companies against laws that would make submitting your tax return as simple as printing off the forms prepared by the IRS, reviewing and signing. That is straight up rent seeking where society is bleeding value for no reason other than the lobbying power of special interests.

    Our current state of decay is due to the luxuries and surpluses created by those that came before us. We are so inefficient because we haven’t experienced deprivation in so long we’ve forgotten that physical reality still exists and it wants us to be living in caves, clubbing rabbits, and scratching in the dirt for grubs. Now that the rest of the world has caught up with our post-war lead, reality is reasserting itself and ideologues are seizing the opportunity to push their own agendas.

    Sustainability and climate change are orthogonal issues to how we manage our societies. When you’ve been throwing your food waste out the window of your single family home for years, and you start experiencing rodent and insect infestations, communicable disease outbreaks, disgusting smells, etc. the answer is not that the nuclear family is a flawed institution and we must form communes. The answer is to get a garbage disposal and competently operate and maintain it.

  41. david of Kirkland says

    Trade doesn’t create wealth, at least not directly. Each person gets something they want in exchange, but wealth remains even, just in different hands. In your case, the amount of money and cars remained the same.
    The key to wealth is producing something new from lower cost items and then trading it. This is why tariffs are so bad, as we reward those who produce less efficiently and thus create less wealth per unit created. I could bake all my bread and raise all my food, but the time and effort to do so would be high compared to a bake or farmer. The cost to produce all of our own food would be much higher than if we allow others to do so and we trade for what we want.

    • stevengregg says

      Trade creates wealth because you are trading something you value less for something you value more.

  42. david of Kirkland says

    The only lasting monopolies are created by government. Capitalism would fix it.
    The only bad taxation is unequal taxation created by corrupted politicians. Democracy would fix it.
    We don’t need to abandon them, but exercise them. Like rights, those you give up to another won’t come back without a fight.

  43. augustine says

    Good food for thought. Mechanistic and amoral, though. Capitalism doesn’t have to be moral since that is a role for people to fill. Capitalism is uncaring, its opponents charge, unlike Socialism…

    • NOYB says

      @Max – I hope I’m not doing something verboten by replying here to comments you left on another article. There’s no notification of replies and I doubt you or anyone goes back to an article from several days ago to see if anyone replied. Regarding Ed Schools, you said that you hadn’t seen anything like this until ‘the election of Donald Trump brought out the authoritarian SJWs, race-baiters, and anti-white ranters.’ You seem not to have read the article. It spends considerable time discussing the ResLife situation at UDelaware that started in 2004. And I can’t imagine anyone missed the flourishing of race-baiters (hello BLM) under Obama. So that comment by you was quite bizarre…

      • Max says

        @NYOB

        I have no doubt it existed at some college somewhere at some point before the period I started however I attended what many would probably refer to as a liberal college, perhaps not, and in a matter of three years, the time it took me to complete my undergraduate and graduate degree, I saw the dynamic shift completely. I didn’t attend a small, homogeneous college either.

        The longer I’ve follow this SJW phenomenon, the less I read the names of small liberal arts colleges and the more I read the names of major institutions.

  44. Michael Lardelli says

    “wealth can be created out of thin air”

    Which shows that, like the great majority of people, the author is “energy blind” and does not see that the economy is fundamentally an energy system. Wealth is actually best defined as access to energy and money is just a system for allocating the energy available. Energy can be seen both in its “active” form where it is doing work or in its “embodied” form where a manufactured good represents all the energy that went into its production (mining the materials, transport, materials synthesis, assembly). It is because of this misunderstanding about wealth that the author can assert that all the world can become wealthy and that there are no limits to economic growth.

    Capitalism is simply a most efficient way of consuming natural resources. It does so more efficiently and rapidly that other economic “isms” and so has outcompeted them. But all economic systems survive on drawing down on natural capital. At the moment the author, living in his particular wealth bubble and temporarily insulated from the effects of the ongoing destruction of the environment, can perceive capitalism in a positive light. However, now that oil production and even coal production appear to have peaked, the author will see things very differently within his lifetime.

    To better understand the real nature of wealth and how economic systems are actually entropic, “energy-dispersal” systems, read Hall and Klitgaard’s, “Energy and the Wealth of Nations: Understanding the Biophysical Economy” (Springer)

    • Andrew says

      We don’t see it, because it isn’t an energy system in the way that you mean. I can light a forest on fire producing tremendous energy, but it likely creates no value, because the energy isn’t captured.

      You have a part of the answer, but there is a value to human attention. What makes a book, or an idea, or a movie valuable. Not its joules I am afraid. There might be something second order, where the book or idea causes humans to go take a certain kind of action.

      I pay to hear a symphony, and your theory doesn’t seem to address that.

      Like an energy system, yes. An energy system, not measurably, because there are no physical laws governing what humans will or won’t value. Free will won’t fit into equations.

      • Michael Lardelli says

        Andrew, “value” as you define it is worthless if it cannot be exchanged for something physical, like the food you need to stay alive. You only have time to think and dream and write comments below Quillette articles because, somewhere else, fossil fuel energy is being used to grow the food you need to eat. If you are lucky, then maybe a food producer will provide you with food in exchange for your interesting ideas or for the entertainment value in a film (that, itself, took extraordinary amounts of energy to make). But ideas in themselves are almost worthless if they do not find expression in some way in the physical universe. Free will, of itself, will not feed you. That will needs to control energy flows to have any effect.

        • Andrew says

          If I buy a ticket to a Symphony that transfers value to the symphony. Aread you maintaining that I receive nothing in return? I ask because a substantial portion of gdp would then be fraud.

  45. Chuck Berger says

    There’s a lot of utter nonsense in this article. I’ll just give on example… the author’s claim that the child care sector is one characterised by “very little technological innovation. … insufficient productivity growth, innovation, and disruption. You’ve got monopolies, oligopolies, cartels, government-run markets, price-fixing—all the dysfunctional behaviors that lead to rapid increase in prices.”

    To begin with, I’d challenge the author to specify exactly what kinds of technological innovation, innovation and disruption he would like to see in child care, while remaining willing to send his child to such a centre. Are we talking uber or lyft here? Gig economy for child care? Or robots looking after the wee things?

    You see, child care isn’t like making televisions, or programming computers. Maybe one accountant can do the work today that 20 did in day past, but that will never be the case in the caring sectors, where human attention and care is the very thing that is being purchased.

    I would also challenge the author to point to the monopolies, cartels and price-fixing going on in child care. Last I looked, child care was one of the least centralised sectors around – doubly true in the informal child care markets for babysitting and home child care centres. Nor is it an especially heavily regulated sector. In fact, Ibis World reports that there are NO companies with a major market share in this sector. And in many urban areas, parents have a variety of centre to choose from. And as any young parent knows, these centres proudly and fiercely compete against one other, primarily on quality rather than price.

    In fact, child care features very low market concentration / no monopolies / no price fixing.

    The real dynamic in child care has nothing to do with innovation or market concentration. It’s pure supply and demand: as more mum are wanting to return to paid work earlier, the demand has escalated, at precisely the same time that many women are finding a career in child care less attractive. Fewer workers, more kids to be taken care of = surprise surprise, higher prices.

    Then there’s pharmaceuticals. Here, monopoly is certainly the problem. But the author fails to recognise that the drug company monopolies over their patented products are a PRODUCT of capitalism. He speaks of these monopolies as if they somehow came about outside of capitalism.

    Capitalism isn’t “free markets” – most capitalists (and especially big Pharma) don’t like competitive markets, they prefer monopolies. Big pharma loves their patent protections, because it allows them to corner the market. So what’s the author’s logic here? Dismantle patent protections for pharmaceuticals? Government price regulation? Dallas buyers clubs? If not those, what? Here as in the rest of the article, he grapples with none of the complexity of real-world markets, and makes sweeping claims that simply don’t hold up to a magnifying glass.

    Pharmaceuticals, cars, child care centres and highways are all very different sorts of markets, all with their own individual ways of working well, or breaking. Instead he just says “capitalism good”, when what we need is “markets in x can work well, but only under the following conditions which address the inherent flaws in markets for x.”

    • “Capitalism isn’t “free markets” – most capitalists (and especially big Pharma) don’t like competitive markets, they prefer monopolies. ”

      no shit. did you read the article?

      • Chuck Berger says

        Did you write the article? If so, you’d know there’s a section called “capitalism is competition”, which highlights plenty of examples where capitalism is not resulting in competition. My point is that capitalism is intrinsically anti-competitive, that whenever “pure” capitalism is allowed free reign, it tends towards anti-competitive conduct. You say your solution is “more capitalism” – but what you really mean is “more competitive markets” would fix the problem. More capitalism would just be more monopolies, price fixing, regulatory capture and corruption of politics.

  46. Jackson Howard says

    The OP should have been called “The clear case for free market capitalism”. Because the author seems to ignore all other forms of capitalism. It also makes a point at ignoring the issues of rent seeking, regulatory capture, externalities and market cornering by oligopolies.

    These are all problems that are plaguing modern America. And yet, the author is silent about them, or blames the state. What I see is an idealist seeking ideological purity, and ignoring all the problematic details. I find it astounding that the author come up with his definition of capitalism :

    1.Capitalism is trade, which creates wealth.
    2.Capitalism is competition, which spurs innovation & lowers prices.
    3.Capitalism is unselfish, which brings cooperation & peace. (I know, some readers will already think this is ridiculous. We’ll get there).

    So trade did not happen before the 1800’s ? Trade creates wealth, or is it arbitraging ? Does the OP mean that in the old Ricardian model sense ? What about the destruction of wealth seen in the 30’s brought by trading papers with numbers with no relation to the reality ?
    Again, this is so vague it’s hilarious. Competition and cooperation exist since man exist. In what sense is this a capitalist exclusive ?
    Assigning values to a tool. Unselfish ? in the ideal world yes. But can you call rent seeking and market cornering unselfish with a straight face ?

    Definition that does not even include the private ownership of the means of production…

    Capitalism and markets are tools. Nothing more, nothing less. Free market capitalism is very effective at converting ressource into value during an expansion phase. The future will likely be a capitalistic system. The question is which one ?

    If wealth can be created from thin air, it is not zero-sum. To believe otherwise is to fall victim to the fixed-pie fallacy.
    2.This means that every single person on earth can be wealthy. And, as we’ll see, we’re on our way to exactly this outcome.
    3.Once something of value is created (i.e. ‘wealth’), it’s shared with others by selling it to them. In other words, wealth is shared via trade.

    An here is the big one : speaks a lot about wealth, but never defines it. This is a big problem. As far as I know wealth as money is a claim on future work. Work that requires energy in the real, physical sense with Joules as units. The amount of joules per capita was nearly stable for 100’s of years, and guess what did not happen : uber, Lyft and all that wonderful free market capitalist utopia. Energy cannot be created from thin air, unlike debt and paper money.

    The we hit the fossil fuel lottery and enter a 200 year expansion phase. Free markets capitalism emerges as the most efficient at growing. Now, the trick question is : once the lottery money is done and spent, and expansion tappers off, what happens ?

    • Stephanie says

      Jackson, what happens is we convert to nuclear and continue getting wealthier.

  47. Andrew says

    Capitalism is trade, which creates wealth.

    Two false claims, under the umbrella of the usual conflation of capitalism with free trade. Trade as such does not require capital. Trade requires parties willing to make an exchange. In societies with coinage, goods could be transferred for currency. In no case is capital involved. I could help my neighbor plant her garden today, and she help me weed tomorrow.

    Capital is the wealth, accumulated durable value, necessary in order to produce a service or object that can be traded for another service or object to produce a profit, an incremental increase in the accumulated surplus value that can be distributed to shareholders or added to operating capital.

    Trade does not necessarily create wealth. I begin the refutation by asking whether trades that occur at a loss are somehow not trade? Consider the commodity trader, grocer, or farmer who must sell produce before it spoils. Due to a surplus of the commodity or lack of demand, they sell at less than the cost to produce or procure the produce. It is the best real option. Better to recoup some of the production cost than to lose the entire investment. Are there two winners in this situation?

    And what of the condition, that Marx somehow overlooks when calculating the condition of labor, of the laborer working for a wage that will starve them slowly? And what of their employer, who may starve laborers slowly knowing that more labor is available should the laborer die or turn to crime. Are they barred by capitalism from returning a profit to their shareholders? No, on the contrary, a return to the investors is the highest ethical good of capitalism. If labor is going to starve, than it had better do it and decrease the surplus of labor so that the market remains free. Under capitalism it is more important that the wealthy should be repaid than that labor should survive.

    Capitalism is competition, which spurs innovation and lowers prices.

    First, if capitalism is trade and competition. Is trade competition? No. It is cooperation. There is competition among those offering similar goods and services. I admit that this is a cheap logical trick, but it does illuminate the sloppiness of the reasoning.

    Let’s look at a few the anecdotes.

    Epipen- even in the absence of a patent, how many people are going to die before market forces can correct the pricing? Because a group of investors purchased all of the means of producing the medicine a new production facility will have to be built or tooled, or an existing facility would have to be purchased. If the facilities are in the hands of this new monopoly, why would they sell? To enable their new competitors? Not likely. AB Miller have shuttered plants rather than sell to competing brewers in order to slow new entrants to the market. The appropriate answer to preserve human life is to seize the property of those capitalists by force.

    Uber- it seems that Uber is making good use of the principle by which capitalists slowly starve their employees while generating a return to their shareholders. Have any studies demonstrated that drivers are in fact making money?

    It is generally accepted and true that production and distribution benefit from economies of scale. This benefits the largest player in an industry disproportionately and can afford the larger company to starve out its competitors. Imagine if Barnes and Nobles decided to undercut local booksellers in one market at a time until they have no competition. Imagine if Coke decides that it wants to buy a small tea company and just close it so that there are fewer choices in the market. Then they can raise their prices so long as their competitor, Pepsi also wants to maximize their return to shareholders. Right. It doesn’t take much imagination does it?

    Capitalism is unselfish. Big Tobacco. Okay, on the other side of that paroxysm on my part, let’s recall that the highest goal of capitalism is to return economic value to shareholders. This is best accomplished by offering something with almost no economic value to consumers in exchange for economic value. A business can sell the same T-shirt with a swoopy bit on it for twice the amount. The swoop has economic value to the business but none to the consumer. It might have some other kind of value to the consumer. But, that’s one of the casual evasions that occurs when unsophisticated observations are accepted at face value. Not all trade creates value in kind and offering nothing in exchange for something while hiding behind free choice is one of the established system’s most odious black truths.

    To the editors, this article is uncritical garbage that only served to repeat the truisms the author read somewhere. I’d bet it cheered the already convinced and annoyed those who suspect that these tired dogma are deceptions. Your readers deserve better.

    To readers at large. Please do not suppose that my refutations mean that I am denouncing capitalism in favor of some other system. I am not. I do, however, believe that the ills of any system cannot be addressed if they cannot be precisely stated. And, one part of that is to reconsider the underlying beliefs masquerading as self-evident propositions.

    • Locketopus says

      I won’t bother refuting all of your shopworn Marxist cookie-cutter propaganda points, but I did want to set this one out by itself:

      If labor is going to starve, than it had better do it and decrease the surplus of labor so that the market remains free.

      And yet, oddly, all the starving people always seem to live in Marxist economies. Somehow.

      Bizarre coincidence, innit?

      • Andrew says

        Really, all those Irish starved to death by Britain were commies?

        Just admit that capitalisms precepts are flawed if you can’t make an argument.

        • Daniel says

          Andrew,
          Assuming you’re referring to the Irish potato famine, are you implying that it happened in the presence of free market forces?

          • Andrew says

            Is this the part where you are going to argue that it wasn’t real capitalism?

  48. Andrew Elsey says

    Adam Smith is near the top of my bookshelf, but I’m really weary of of the do-or-die, absolutist rhetoric that the system is going to come crashing down if we don’t allow unfettered trade with China. If I’m understanding him correctly via one of his quotes, the author actually had the gall to insinuate that we must do so, in order to avoid being invaded. Completely inane absolutism of this sort is what diverges capitalist proponents away from objective rationality and towards their completely braindead Marxist counterparts.

    Companies like Apple and Google DO NOT need to globally maximize their profits to achieve optimality in terms of wealth created for themselves and their host countries over a long time horizon. They can’t even reasonably re-invest their money. Google is actually buying up real estate right now. Let that sink in very slowly. The real truth is that the falsely derived “3000 iPhone unless you build in China” scenario has in fact done more damage to these companies’ (and our nation’s) wealth over a 25 year time horizon than both alternative scenarios of forcing these companies to produce in-house, or to have our government prod executives to slowly and politely shift their manufacturing bases. And, frankly, within a decade, IPHONE PRODUCTION FACTORIES WILL NOT NEED TO BE STAFFED BY THOUSANDS OF WORKERS DUE TO AUTOMATION. So, these “high cost 1st world” factory scenarios are really the byproduct of continually incentivizing executives to not invest in automation innovation. China has also been the perfect storm for us to hand over a half century of technological advantage. I don’t think there are any other countries in the world that had the perfect combination of both cheap labor along with high enough competence to steal everything and re-engineer it for themselves.

    So, congratulations. You are now wealthy with your $650 dollar iPhone. However, your sons and daughters may very well be paying $2000 because the world is not a black and white, greedy algorithm because of a few charts showing correlation. Seriously, I think some economists are suffering from schizophrenia – they secretly believe they are Algebraic Geometers or Algebraic Topologists studying the nether regions of abstract concepts, but the reality is that there will be a big price to pay for these universalistic approaches.

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  50. dirk says

    Could it be that everybody has its own meaning of capitalism? I,m sure that the capitalism of Adam Smith is not that of Marx, is not that of Hayek, is not that of Chuck.

    • Chuck Berger says

      Indeed! Smith & Ricardo etc. wrote about markets and trade, but not about “capitalism” as such. The term pre-dates Marx, but it really only came into widespread use following Das Kapital. Marx’s definition of capitalism was explicitly class-based; the “capitalists” were those who were able, by virtue of their ownership of the means of production, to extract surplus value from the labouring class.

      Weber takes more of a cultural view: capitalism to him was primarily characterised by an attitude which emphasises the pursuit of profit for its own sake, rather than as a mere means to other ends.

      Hayek called it “free markets” plus “private ownership of the means of production”.

      I think today the term gets bandied about with very little rigour, or even clarity about what is meant by the term. To my mind it is unsatisfying to use “capitalism” to refer to free markets – because why not just say “free markets”? “A market economy” is clearer and more precise than saying a “capitalist economy”, if all that you mean is an economy where most stuff is produced and distributed through market mechanisms.

      The relationship between ownership of economic enterprises and capitalism is to my mind essential, and so i suppose my own view is in a way closest to Marx’s understanding of the term – though I would reject many of his conclusions.

      Interesting to look rigorously at who actually “owns” the means of production today. Many large companies are owned in effect by pension funds, not wealthy individual capitalists. Those pension funds are often state-owned, or union-managed (in Australia), or so diversified as to be quasi-public in nature.

      The real dynamic today is a form of capitalism that we might call “managerial capitalism”. This has less to do with the formal “public” or “private” nature of ownership, as with who is actually calling the shots in the decision-making of enterprises. I don’t believe ownership matters as much as it used to, because in fact it is the managers that hold all the cards today. This is a mix of CEOs and investment fund managers, who together constitute a kind of “managerial class”. It is this class that really calls the shots in our economy. For better or worse.

      Finally, for the record, I’m strongly pro-market, but also strongly sceptical of managerial capitalism.

      • Andrew says

        One of your phrases clarified the distinction between Marx and any of the capitalists. By virtue of ownership capitalists are able to extract surplus value from the laboring class.

        A capitalist would say that the surplus value is extracted from the consumer.

        That seems to me to get at the moral disagreement between the two camps.

        • Jackson Howard says

          Surplus value is extracted from surplus energy available.

          Capital is itself accumulated surplus value (embodied energy) that is privately owned.

          In essence, surplus value is created from transforming raw materials into a more valuable product. This requires labour, capital (embodied energy) and energy.

          The whole moral disagreement is on how to share the surplus value. But let’s make no mistake, if there is no surplus energy available, nothing happens. If there is no capital (embodied energy), nothing happens and if there is no labour, nothing happens.

          Automation is mostly about replacing labour by capital. If you do that to a large extent, the consumer society fall appart because non elite workers cannot buy anything.

  51. dirk says

    I think, capitalism is like progressivism ,libertarianism or colonialism, it doesn’t matter very much how it is defined, the important thing here is: are you against or for it, that’s the question. Rightist people are in favour, leftist less much so, this whole definition matter can wait then.

  52. Daniel says

    In 1976, an economics professor at Chittagong University began lending small amounts of money to poor women, so they could begin small businesses. They made paper bags, bamboo furniture, or sold eggs from the hens they bought. This lending arrangement became Grameen bank, and is credited with the beginning of microcredit. The professor is Muhammad Yunus, who received the Nobel Peace prize in 2006. (One of the apolitical, and therefore deserving, recipients, I might add.)

    Yunus used capitalism to transform the practice of poverty alleviation. His goal was to help the borrower, rather than the shareholder.

    Capitalism is the only viable vehicle for economic progress, wealth creation, and alleviation of poverty. But if it is directed towards political power, it leads to corruption. If it is directed towards rent-seeking, it leads towards the oft-maligned wealth inequality.
    It can be directed towards more altruistic endeavors. Hobby Lobby, for instance, is reputed to have higher-than-market wages for its employees.

    The difference between conservatives and progressives, is conservatives recognize that there’s room under the capitalism umbrella for moral, fair, even altruistic behavior. They also realize that there isn’t room for any of these under the big government umbrella.

    • Max says

      @Daniel

      Yet they don’t advocate for a moral, fair, or altruistic capitalism, they advocate for Darwinian capitalism. When the market collapsed you’ll remember that conservatives were not adamant about letting the banks, who were failures within the system, die. Conservatives joined progressives in saving the banks with the publics resources. Those same banks now perpetrate the same offenses that lead them to ruin a decade ago.

      There are few progressives, no conservatives, that are adamant about instilling some measure of morality, fairness, and altruism into the system.

  53. Chloe says

    The quote below is oversimplified and I believe practically incorrect:

    ‘The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy.’

    It’s implied that how much a “free market’ cares about an individual is dependent on their willingness/ability to pay for different goods and services. Essentially, a ‘free market’ cares only about how much money one has. How much money one has is directly linked to the earnings opportunity of individuals, which are affected by an array of factors which can at times be shifted (e.g. education, life experience, social class,…), while many cannot (e.g. childhood experiences, mental illness, physical ability, cognitive ability, skin colour,..). As a result, an individual who is unlikely (for whatever reasons) to reach medium to high earning opportunities, will by design be always be valued (or in this context cared about) less than an individual with medium or high earning opportunities.

    I am of the opinion that capitalism solves many complex economic problems and adds an enormous amount of wealth to the world (on average). However, I find the concerns of the public, who live their lives within (somewhat) capitalist societies, are too easily dismissed and ignored by such quotes. It can make it very hard to reconcile their experience with the opinion of experts….

  54. Paul says

    Corporate cronyism is a natural consequence of capitalism existing alongside government. Succeeding in capitalism is all about maximizing return on investment, and sometimes the greatest marginal value is found in the pocket of a politician.

    The idea that this is some sort of perversion of how capitalism is “supposed to” work feels a lot like the claim that communism would totally work if people would just do it the proper way.

  55. Alastair says

    If anything, the problem with articles like this is that where they should stimulate thoughtful and careful discussion (something that Quillette itself appears to wholeheartedly support), they are more likely to engender a rehash of the same old back-and-forth, with the same old arguments about (on the one hand) how capitalism is intrinsically exploitative and unjust, and (on the other) about how many people died under socialist regimes.

    There is a lot of dubious reasoning in Mr. Hogge’s article. This isn’t to say that it renders capitalism indefensible; I just don’t think this article does a particularly good job in doing so. Bill Gates is an easy example of benevolent capitalism; however, there are two problems with using him in this way: firstly, there are hundreds more billionaires in the world, and focusing on only one tells us nothing about their general behaviour; secondly, while it’s true that Gates has spent much of the past decade both donating money to, and actively funding, charities in Africa, it is still important to consider the means by which he made his money in the first place (Microsoft is hardly a shining example of uncorrupted capitalism).

    Alongside this, there is the libertarian claim about how every exchange made in a capitalist society is automatically both fair and rationally motivated. Hogge uses the example of a person who accepts a minimum wage job, but he assumes far too much about his example and ends up presenting it as something too abstract to count in support of capitalism (we don’t know the specifics of precisely why the person accepted the job; for one thing, we can only argue that an agreement is fair if there is at least one preferable alternative choice available, and if the choice is between having no money and having the bare minimum, this doesn’t bode well for the claim that this exchange is either fair or rational).

    Lastly, Hogge plays a similar rhetorical trick that many proponents of socialism use, which is to claim that ‘bad’ instances of an economic system are not ‘true’ instances. This is a clear example of the no true Scotsman fallacy. Capitalism is good, says the article, but its critic responds “what about things like monopolies and corruption, such as when the wealthy have more access to political power?” Ah, says the article, this isn’t ‘true’ capitalism, and all we have to do is get rid of the bad bits and everything will be fine. Sound familiar? That’s because we hear the same thing when proponents of socialism try to defend it against the various injustices carried out in its name.

    I’m sure there is a good argument for capitalism. This just ain’t it.

  56. Joseph Ducreux says

    “But there are plenty of examples of companies taking advantage of their customers!” you might say. “Doesn’t that show that capitalism is bad and that greedy executives can get rich on the back of their customers?”

    ##

    Everything you buy, every transaction you are involved in, you voluntarily enter into. This means that you are willing to pay up to the point that they are “taking advantage” of you. The only entity that doesn’t apply to is the government. They take what they want, and they give you what they want.

  57. Peter says

    I stopped reading when the author stated that iPhone would cost 3000 USD if manufactured in the US. I listened to a radio show which spoke about GE succesfully transferring production of heat-pump warm-water boilers from China back to US. This eliminated many trips by engineers to China, as well as some transportation costs. It also improved the product and the production process, when GE guaranteed US workers they will not lose jobs if they suggest innovations.

    That said, I firmly believe in free markets, protection of private property, and also capitalism. Venice became rich and powerful by simple and transparent arrangements between sea captains and investors, who provided the capital for the voyage (and sometimes lost the money).

    But I also enjoyed being a member of several co-ops, which as a rule provided a very pleasant shopping experience and good quality merchandise.

    I find interesting the idea (in comments) of nudging rich people to have more children – perhaps by inheritance laws.

    IMHO there are areas in which free markets sometimes function poorly – like health care, pharmaceuticals, supplements, scientific publishing…

  58. If “wealth is stuff”, how does it follow that “wealth can be
    created out of thin air”? Hogge says it is “simple truth”. I
    suggest that only the “simple” part is accurate.

    “To believe otherwise is … fallacy”, implies that some logic
    has been demonstrated, but no logic has been offered for
    the assertion that “wealth can be created out of thin air”.

    Hogge says that “capitalism isn’t allowed to work”, but he fails to identify the authority that disallows the ability of capitalism to work. Is it government? What else could have such authority?

    Hogge claims that Mylan’s ability to “screw over its customers ” is due to “corporate cronyism—a type of fake capitalism,” but does not demonstrate how such a system is “fake”. He seems not to recognize that, in a free market, corporations would be free to form cartels and create monopolies, (as they do.) It therefore appears that he advocates government regulation of markets. That is what some call Socialism.

    • Lagrange says

      Wealth is created out of thin air when innovators innovate. For example when Page and Brin wrote the PageRank-algorithm and founded Google.

      If markets are heavily regulated in favor of existing businesses, then that is an example of government hindering capitalism. This is how cartels can form. In a free market that would not be possible because a new competitor would enter and offer a lower price.

      • Hulakan says

        Google was not created out of thin air. Code was input to machines. Google requires servers. Also, the wealth comes from advertisers who sell stuff, not thin air.

        Cartels do not require require government regulations of markets. Fixing prices, limiting supply, colluding to undercut any would-be competitor requires no government action at all.

        The imaginary impossibility of such collusion in a free market is pure magical thinking/ ideological dogma.

  59. The really relevant issue is not capitalism yes or no, but which sort of capitalism. Adam Smith was in favor of markets, but only on condition that there is real competition among sellers and buyers — i.e. there are many buyers and sellers, and no collusion among them — and that transactions are not subject to deceit or coercion. This rule is still accepted by modern economists, but there are myriad ways in which competition can be sidestepped or suppressed, beginning with monopoly, i.e. there is only one seller or very few sellers. Additional obstacles have been discovered, like unsymmetrical information between buyer and seller and several others.
    Consequently the government must constantly pass laws and regulate the markets to prevent any of these many problems taking place.
    In addition to the obstacles facing competition, there is the problem of external effects, which means that the buyer of a certain goods is not always the only beneficiary of ownership, but often the benefits “leak” out to third parties. For example it has been shown empirically that a student and his family are not the only beneficiaries of the student´s education, because other members of society also benefit when one of their fellow-citizens gets an education. the same is true of technical innovation and scientific research. Therefore people spend less on education and on scientific research than they would if they were the sole beneficiaries of the investment in education or research. Consequently it is beneficial for society as a whole for the government to subsidize such investment.
    A different sort of external effect occurs when a business generates costs for third party, like noxious fumes, noise, pollution, etc. in such cases the law-courts or the government must make sure that the business that generates these costs is forced to compensate the third parties who must bear them.
    Moreover certain sorts of economic activity cannot be properly performed by private businesses because of coordination or conflict of interest issues, and in such cases it is more efficient for the government or some publicly funded body to perform those functions. This is a generally accepted conclusion among economists who hv studied education, health care, pension systems, etc.
    The upshot of all this is that in order to be efficient, a modern capitalist system must include a large government or quasi-governmental sector.
    Consequently asserting the virtues of capitalism does not mean letting private businesses do whatever they like. A large degree of government control is necessary.

  60. Alan J Green says

    Great article, with little to disagree with. But a bit long – I doubt you’ll get the average millennial to take their eyes off Snap Chat long enough to read it. Also, this is a great summary of the virtues of capitalism, but there’s little about why socialism doesn’t work. Here are some ideas:

    Socialists invariably view the economy like a giant pizza, with some getting a lot of slices while others are left eating the box. This ignores how the pizza came into being (& how it could easily be destroyed by bad policies), & also ignores the role of individuals in its creation. A better analogy is that capitalism is a great big worldwide pot luck supper, where you bring a dish & trade it with others. Those who make something especially tasty get offered lots of servings from others (they get rich). If government tries to spread the food around evenly, don’t expect people to put much effort into their next casserole.
    Capitalism is complex & intimate. We all make our own decisions about our own friendships & romances – economics is just the extension of the satisfaction of our ever-changing wants & desires into the realm material goods. An this can’t be planned centrally any more than our relationships can be planned centrally. No matter how fast & complex computers become, the knowledge of each persons desires & skills is not available to the mind of any group of planners, & it never will be.
    Similarly, the government can’t plan the economy. It’s not that government planners are stupid, the problem is that it takes many people from all walks of life to come up w/ the next big thing. Some will be bad ides & their businesses will fail. But there’s no such thing as perfect information, entrepreneurs are just mice in a maze searching for success at the other end of the box. And government planners don’t have a birds eye view from the top of the maze. We need as many people innovating as possible.
    The defining characteristic of capitalism is that it’s free, which is why free enterprise is a better name for it. Note that Beyonce, Oprah, and Taylor Swift weren’t required to coerce anyone to become rich. Instead, people voluntarily gave them lots of money because they really liked the “dish” they brought to the pot luck supper.
    The defining characteristic of socialism is coercion. I was 9 years old when the US landed an astronaut on the moon, & for at least a decade my mother would say “if we can put a man on the moon….(insert your favorite socialist goal)”. Think through this. Say you’re a NASA engineer, a true rocket scientist. You’ve tested & examined the physical qualities of thousands of parts for an Apollo project, & successfully designed a space vehicle. So given your brilliance, some official asks you to help w/ the design of a planned economy. So suddenly, instead of thousands of switches, circuit boards, wires, & other electronic parts, you’re dealing w/ millions of people. It’s as if all those electronic parts just came alive: they think & act on their own for reasons totally unavailable to your brain. So you either give up or you say “stop it! You’re not behaving the way I planned! I must restrict your actions for my plan to work”.

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