Falcone's Crossroads

Where This Meets That

Capitalism vs. “Capitalism”

Capitalism gets a bad wrap.  It is all-too-frequently demonized as a carte blanche system for an elitist class built upon the backs of the poor.  What it truly is, however, is the only economic system compatible with liberty.

“Fairness” is a Tricky Thing
There is nothing wrong with true capitalism.  Is it a “fair” system?  If “fairness” is defined as everyone having equal capital with which to compete, then certainly not.  But in the sense that everyone has equal opportunity to generate opportunity, capitalism is the only “fair” system.

Corporate ideology – i.e., “the greed factor” – rests at the forefront of concerns regarding capitalism.  The “bottom line” mentality, which places profits above all else, morality, environment, and patriotism included, is widely viewed as almost criminal in times of economic hardship.  Of course, the reality is that achieving sustainable profits is the primary objective of business.

One of my previous employers cut production costs of cell phones from nearly $80 down to $17 (per phone) by transferring manufacturing from the U.S. to Mexico.  How can any pragmatic American seeking “fairness” legitimately argue against that move?  From a business perspective, it comes down to a decision to either compete or not, to survive or not.  Any “business” that doesn’t prioritize profits is not a business but a charity and, as such, depends on profits from some business elsewhere.

Profit is what enables elective spending, and elective spending is what funds charities, what funds people who are unable to fund themselves. This creates a couple diverging perspectives.  For example, one person might see a glacier as an affront to a parched region of the world, while another might see the same glacier as a great reserve of fresh water just waiting for the right conduit to supply its demand.  The concentration of wealth associated with capitalism draws similarly divergent views.   Just like glaciers and dust bowls, the wealthy and needy are merely faces of nature.  Even Jesus, who himself freely chose poverty, acknowledged as much.

What is important in grading capitalism is not whether it achieves economic equality for all.  That is a nice ideal but impossible and, in fact, is fundamentally opposed to liberty.  History has always hosted classes of wealthy elite; we usually refer to them as “rulers”.  The New World, however, promised a new axis.

New World Man
The California Gold Rush provides a rich (pun intended) example of the New World paradigm. The Gold Rush was perhaps the first time in history that the Earth offered untold riches for any man who so empowered himself to claim them. Not for some king or lord but for himself.  The feverish rush for high reward also carried high risk, of course, forcing wiser would-be rushers to assess whether the hope of success was worth the dangers of failure.  The Gold Rush inspired fantastic innovation from the people who made the journey and generated tremendous wealth for those who succeeded on the gamble. It’s notable that those who struck it richest in the Gold Rush weren’t typically the rushers themselves but the merchants who sold supplies to them.

So, again, what is important is not economic equality but that the economy be democratically driven, namely that everyone has equal opportunity to generate wealth. Ingenuity and prosperity follow, and the free market of capitalism is the only avenue to ensure that.

The more profitable an entity is, the more cumulative wealth is generated across society as a whole. Of course, the benefits enjoyed by the lower economic classes are not as pronounced as those enjoyed by the rich, as they are diluted across a vastly larger population.  It, therefore, does no favors for the image of capitalism to know that CEO’s keep getting disproportionately richer, because such findings translate to a flawed perception of the poor growing disproportionately poorer at the hands of the rich!  But consider the move of my former employer, mentioned above. Relocating its cell phone manufacturing reduced local jobs, yes, but also contributed to declining consumer costs across the industry at large, greater democratization of technology, and more collective wealth in the larger economy.

The problem with “capitalism” arises when it ceases to be capitalism.  Whenever government, with the wealth of the governed, manipulates its machinations to “steer” the markets for biased interests, either by legislation, incentive, or coercion, the free market perishes.  And where freedom in the marketplace perishes, so does the individualism innate to liberty.  I’ve already written at length about the War on Drugs here at Falcone’s Crossroads, but it provides such a vivid example of free market tampering that it’s worth mentioning again here.

The Role of Government
In the first of the recent presidential debates, President Obama said, “The first role of the federal government is to keep the American people safe.”

Well, yes and no.

“Safe” from whom?  “Safe” from what?  The problem with this “parental” philosophy of government is that it empowers the government to protect a vision that only it is qualified to define. This philosophy gives government all kinds of unwarranted collectivist leeway to define threats in a way “Joe public can’t understand”. Usually, combating these threats involves all kinds of economic (including militaristic) shell games that work against the taxpayer, directly making the governed less safe.

In response to the same question (i.e., What is the role of government?), Mitt Romney contrasted, answering, “The role of government is to promote and protect the principles of [The Constitution and the Declaration of Independence]. . . . We have a responsibility to protect the lives and liberties of our people.”

These, at least, are the right words.  Unfortunately for Romney, he has repeatedly hammered China for manipulating its currency and, thus, the world economy, exposing an apparent naivete as to how our own economy is run.  Between bailouts, re-distributing wealth, and manipulating interest rates, our central bank saddles the American taxpayer with both illusory market well-being (even when we’re told it’s bad, we’re sold a favorable spin) and the hidden tax of inflation.  And yet we call our system capitalism and assert that China’s is less so?

False Capitalism
Naturally, Romney, a lifelong businessman, is not naive to the workings of business; he’s just playing the game of government and its continual undermining of capitalism and liberty.  That Romney is the “capitalist” candidate underscores the shame of American “capitalism”; it operates behind a facade that promotes itself not by performance but by deception. If we were truly a nation of free markets, our performance would speak for itself; the dollar would be steady, industry thriving, taxes and legislation diminishing, and debt gone.

Ever wondered why some people are willing to do the jobs they do?  There are people ready and willing to do any job that needs to be done because there is opportunity in providing goods or services that others are either unwilling or unable to provide. This is what drives capitalism: consensual suppliers and consumers getting together and striking a deal.

So, going back to Obama’s and Romney’s philosophies on the primary role of government, the real role of government should be to protect the lives and liberties of the governed so that we may determine our own level of security.  Risk and reward are two wings that fly the free market and enable a person to pursue happiness according to his own calculation.

In short, the proper role of our government is to protect our rights to life and liberty and beyond that to butt out.

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12 comments on “Capitalism vs. “Capitalism”

  1. pouringmyartout
    November 3, 2012

    You are like a super hero with brains.

  2. Grande Falcone
    November 3, 2012

    Awww shucks.

  3. pouringmyartout
    November 3, 2012

    Ha.

  4. Great article! This is what I’ve been trying to explain to people for years. Unfortunately, most people simply believe whatever they hear on TV, so if they’re getting a “capitalism is bad” message, they start thinking that capitalism is bad. Without even understanding that we don’t practice capitalism today. To me, it looks more like corporatism.

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  6. Anonymous
    November 29, 2012

    Capitalism could eat itself when cheap labor revolts.

  7. Grande Falcone
    December 4, 2012

    It’s not a smooth ride, but it is self-correcting.

  8. jes
    December 23, 2012

    it is certain that you don’t know why capitalism is getting bad credit. Us on the left understand competition, profit above everything, but we are not arguing about that. What the left wants is a more humane and unstanding system. A system in which the wellbeing of the human raze is above everything, including profit, including the elites and other interests groups. capitalism is not a humane system.

  9. Grande Falcone
    December 23, 2012

    Thank you for the civil and thoughtful comment Jes.

    I understand that the left generally wants a more humane system; I think that’s what we all want. I just think the “left” places too much trust in the power and fidelity of government. Government is anything but benign. In its ideal, it is a body entrusted to protect the rights of the people, but in reality, it is a subset of the people who collectively auction off that which is earned by the people in order to pursue its own collective agenda. And, sadly, I’m talking both sides here.

    If we put back all the money squandered by government into the hands that make the money to trade and invest as they see fit, then that, fundamentally realizes a truer democratic system and ultimately, I think, a higher level of societal prosperity. A higher level of humaneness with less war, fewer sick, and fewer poor.

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This entry was posted on November 3, 2012 by in Philosophers' Row and tagged , , , , , , , , , , , , , , .
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