It also beats socialism, which is soft-core communism and leads to degeneracy. Really, it does. We all know that profit motivates people to work hard. And fear of becoming destitute is the most efficient of whips. Whereas in a planned economy, which provides security, workers lose their motivation and their fear and just sit around and jerk off.
It also beats all the other isms. Mercantilism (whatever that was), fascism, and feudalism, to name a few.
In Capitalism 102, we learned that capitalism easily gives way to excesses.
It can be manipulated by monopolies and cartels. Fraud and deception can run wild. So can desperate hope and hopeless desperation. Capitalists can hire armies, police forces, goons, and thugs to increase their profits. Fraud and deceit may run wild. Capitalists will sell shoddy, poisonous, destructive, and even murderous products. It goes from booms to busts. And some of those busts—also called panics, recessions, and depressions—can be so severe that they upset the body politic and cause society to flock to one of the other isms—communism and fascism mostly—run by dictators and strongmen.
A few relatively bright people came up with the idea of keeping capitalism while trying to get rid of the excesses!
That meant regulations.
Markets were regulated. Products were checked. Monopolies were restricted. Cartels and collusion among businesses were forbidden.
It meant government insurance. For both people and businesses. People in America got unemployment insurance, workers’ compensation, welfare, and social security. Meanwhile, bank deposits were insured and so were pensions.
It meant government support of unions.
It also meant progressive taxation—the more money you make, the higher the tax rate you pay.
All this was quite successful.
In Capitalism 103 we learned that capitalism is sacred.
A lot of people who only took Capitalism 101 already thought that.
Although the failures of capitalism happened before their eyes—or in recent history—and the success of New Deal reforms and the mixed economies of Europe, Japan, and other Asian nations were present in their growing wealth and security, a fair number of people were convinced that unrestricted capitalism would have done even better; and if those restrictions and regulations and supports and government insurance were removed, things would get better still.
The reason they believed that was that Adam Smith, a great though loquacious philosopher and economist, came up with a metaphor about an invisible hand. People pursuing their own individual gain would also often create other good things—the wealth of nations (to steal his title)—without even thinking about it, as if by an invisible hand.
As we all know, there’s only one other person who guides all things to the greatest good with an invisible hand.
Nobody was around to say to those folks, “It’s just a metaphor! Note the ‘as if by.’ It’s not an actual invisible hand that belongs to an invisible being who watches over us all and sees every sparrow that falls and makes sure that it falls into someone’s cooking pot. It’s not Him.”
So while the mixed economy was cooking along, a group of economists starting preaching neo-free market economics. They were led by Milton Friedman, who won the Nobel Prize in economics and is considered to be the most influential economist in (at least) the second half of the 20th century.
Rich people and big business loved Friedman and the Chicago school of economics. Money flowed into think tanks and universities that supported Friedman’s ideas. Pro-free market economists and MBAs were far more likely to be hired by corporations than people who thought that the common good was important. When banana republics and other third world nations fell into bankruptcy, the World Bank made them adopt Chicago school policies in order to get loans. It was this economic scheme that was going to come into its fullest flower in post-Saddam Iraq.
It came to completely dominate all economic thinking in the US. It came to dominate our public and political dialogue, almost to the exclusion of all other approaches.
Free markets became a trinity with patriotism and religion. Generally, where you find fundamentalist Christianity, you will find equally fervent beliefs in country and capitalism, with the same sort of excesses.
Capitalism 104 is a new course. It begins today.
It takes off from what we have learned in our previous courses.
Capitalism is good. History demonstrates that clearly and unequivocally.
But it is not an invisible hand (attached to an invisible God) that makes it great.
It is Random Stupidity Theory.
Everyone is stupid sometimes. Some people are stupid a lot of the time, and a few, all the time. If one person is in charge of everything, then his or her stupidity affects everything. That’s the seed of the failure of planned economies.
But in a capitalist society—at its best—if someone has a stupid idea and convinces some people to invest in it, only he and his investors lose. It’s also important to remember the random part, because we are in a changing world; the ideas that won lost year may turn out to be stupid for this year’s world.
Meanwhile, some random number of ideas will be good ones. If they are well presented and well run and attract enough start-up capital, they may well succeed.
To be continued next month with the following topics:
· Why “consumer choice” should not be worshipped.
· Invisible subsidies: How we can make them work for us.
· Packaging good ideas—like alternative energy—as “good capitalism.”
· Admitting that capitalism does some things badly (with some irrefutable examples).
· Overcoming our fear of “high marginal tax rates” (and demolishing Ronald Reagan’s favorite story).
· Why trickle-up economics works and trickle-down doesn’t.
· What’s good for a business may not be “good for business.”
· How Capitalism 103 economics can make lots of money out of a bad economy.
Larry Beinhart is not an economist but he plays one in Chronogram.