Thomas DiLorenzo has written a masterpiece. This book should be required reading for every college freshman to immunize him against the anticapitalist drivel he will get in his history and economics classes. It should be required reading for every college graduate to destroy the myths of capitalism that he was exposed to while a student. But this is not just a book for students, for every teacher, politician, and minister needs this book as well. For those of us who are already true free-market capitalists, we have not only a great reference source, but a great weapon in our arsenal against all varieties of socialism, interventionism, and anticapitalism. FULL ARTICLE
Source link: http://archive.mises.org/3966/what-they-wont-tell-you-about-capitalism/
What they won’t tell you about capitalism
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“Capitalism” is a Marxist propaganda deliberately used by anti-market advocates to confuse the statist status quo with true free markets. The greatest triumph of Marxists was to get pro-market advocates to use the term. It implies to the world that a free market benefits the owners of capital rather than also workers, consumers, and everyone else.
I agree that this is an excellent book. Too bad not many college freshman or graduates will ever read it. Hopefully through the Mises Institute and the power of the internet, more and more people can be exposed to important works like this, and just maybe, we can undo some of the colossal damage done to civilization by government interference and socialist misinformation.
Any economic system beyond subsistence is based on capital formation, including socialism. And given the left’s success in stimatizing the term, “market economy,” strikes me as far superior to the word caitalism, especially when DiLorenzo has had to go out of his way to distinguish between the corportate capitalism that prevails today and the genuine article.
I have not read the book, only the article so I know I have limited insight and right to comment. Some things are however clear from the article.
It is great to see that the damage that state interventionalism has caused within and outside America is mentioned. Level playing field in a globalized economy is a myth and economies of 3rd world countries are being systematically destroyed by American and European foreign policies and internal mechanisms (subsidies, tariffs etc…). Most crimes done in the name of capitalism and free trade have nothing to do with either of them.
I am however not convinced that the concept of true free market economy is the answer to all the problems. The system is ultimately based on motivation of individuals to acquire more and more private property (greed). Therefore it can often lead to short term thinking and actions that are destructive towards the environment and other people. This is why it has to be limited by safeguards of minimal protection of others. Sustainable development can not be achieved in any other way in an environment with limited resources.
This is probably a lot more obvious in Europe, than the US. We have a lot less resources at our disposal and they have been used for a lot longer. The lessons of abuse of the environment and other people have been bitter. Resources had been squandered and consequently large areas of Europe were destroyed, wars fought and workers abused. Even communism was a bad but logical reaction to the fallings of European capitalism.
America has been blessed by such wealth of resources that it was spared a lot of these experiences. The system worked great as long as there were unlimited resources with no owners (at least not owners with any rights). The settlers did great because they could take the land from the natives for free. When they start taking resources from each other the problems might start. Using foreign countries as sources of cheap resources is only a temporary fix at best. In the long run some changes to the system might be needed and some “truths” reevaluated. Trusting individual entrepreneurs or even corporations to be insightful enough to take care of all the stakeholders is naïve. The bottom line is they have to exploit them. Otherwise they lose the competitive race to those who do.
There is no alternative to capitalist economic environment at this time. But we should strive to create a balanced system that ensures high quality of life for future generations. This can only be done by certain legal limitations that include limitations on the use of private property. How to get the legislators that are capable of improving anything instead of making things worse is another issue.
Listnen to Rothbard’s “Conservation and Property Rights” here on this site. Or listnen to George Reisman’s “Environmental and Resource Economics” that should make the libertarian point a view quite clear.
I am however not convinced that the concept of true free market economy is the answer to all the problems. The system is ultimately based on motivation of individuals to acquire more and more private property (greed). Therefore it can often lead to short term thinking and actions that are destructive towards the environment and other people.
If you understood the rudimentary concepts of time preferences, you would realize that you have things exactly backwards.
Longer-range thinking (i.e., the willingness to forego short term goods for long-term goods) is the very essence of wealth creation.
Government thuggery (the use of force to achieve short-term benefits) has much the same effect on wealth as acts of violence by private persons — it destroys it.
The system is ultimately based on motivation of individuals to acquire more and more private property (greed).
I’ve never understood the “greed” trope. Left-liberals have no trouble seeing how it is a bad idea to use government to punish “lust.” But for some reason, government force is portrayed as necessary to combat greed.
Here is a depressing essay on the subject.
Lust often punishes short term thinking, but consider the number of teens with STDs and offspring, the problem is not so much that the left-liberals don’t want government to punish lust, they don’t want to punish it at all and actually want to encourage it (see that planned parenthood cartoon featuring dian-isis who drowns an abstinence advocate, then blows up (literally) pro-life demonstrators).
But you also don’t differentiate between wealth creation and wealth acquisition – which can be done in the short term, i.e. as long as I collect a few of everyone else’s chips, I’ll be better off, and it might be less work than actually building something.
When the top members of a corporation are paid in stock options, their incentives are literally to pump and (exercise, then) dump. They will be paid more if they manage to get one exceptional quarter and cash out at a very high stock price even if the company is bankrupt a year later.
Government, or the culture, or society can either encourage or discourage, reward or punish longer term thinking. When you have large families and orient toward that (when divorce is unthinkable), you think in terms of decades since the idea is to maintain things until the last child leaves the nest. When you have people living materialistically (if they have to get a new car every two years to be in style), or hedonistically (the pleasure of the moment), you cannot have long-term thinking since nothing lasts that long. No one says they will want to save for one big orgy 20 years from now, or get a chick-magnet car when years from now when they hit retirement age.
There is still the problem of externalities. Just because they cause problems for theories doesn’t make them go away. If I can gain public benefit or distribute costs on a non-entity, I will have an advantage.
Is it still (government) thuggery if it is to achieve long term benefits? Probably, but I don’t think I’ve ever heard an actual argument based on this. (I think patents or copyrights might fall into this, but am not sure it has been used as an argument).
But you also don’t differentiate between wealth creation and wealth acquisition – which can be done in the short term, i.e. as long as I collect a few of everyone else’s chips, I’ll be better off, and it might be less work than actually building something.
There’s no need to differentiate. As long as the transactions in question are mutually voluntary, then, by definition, the participants in those transactions consider them to be beneficial, and therefore contributing to an improvement in their situation. That’s as good a definition of “wealth building” and “wealth acquisition” as one can find.
Value is subjective, remember.
When the top members of a corporation are paid in stock options, their incentives are literally to pump and (exercise, then) dump. They will be paid more if they manage to get one exceptional quarter and cash out at a very high stock price even if the company is bankrupt a year later.
If you see this as a systemic problem, then you are committing the basic fallacy identified by Hazlitt — looking at a situation as it effects too few people or on too short of a time scale.
When a corporation (allegedly) over-pays its executives, then that corporation has less cash with which to do its business.
That, by definition, creates a profit opportunity for another company. The other company that spends its capital more wisely will out-compete the wasteful company.
The terms by which companies agree to pay executives are entirely voluntary. They are rational, relatively sophisticated and fully capable of examining its own needs and interests. When a company pays an executive, it gets what it feels is something of equal or greater value in return. Otherwise, they wouldn’t do it.
Government, or the culture, or society can either encourage or discourage, reward or punish longer term thinking.
Time preferences, like prices, should be shosen freely, by each person, in each situation. Things change. Life changes. Time preferences lengthen and shorten. There is nothing inherently better about having them shorter or longer. There is a time to consume and a time to save.
People have every natural incentive to save. Government should not manipulate time preferences any more than it should manipulate prices.
There is still the problem of externalities.
To the extent that an externality infringes on someone else’s private property interest, it’s actionable (or should be).
Is it still (government) thuggery if it is to achieve long term benefits?
Yes. All government action is force. Government is organized force.
There are minarchists and anarchists, but the minarchists believe that there is a place for some forms of government force. Defensive force, for example. Force that prevents or remedies invasions of life, liberty and property, such as crime. Force that prevents or remedies the harm caused by such externalities as the costs of defective products or negligent behavior. Force that enforces contracts.
As Bastiat said, we should begin by asking whether it would be right for you, in your individual capacity, to act in a certain way. That’s what is proper for government.
I think patents or copyrights might fall into this, but am not sure it has been used as an argument
See Steven Kinsella. He has a blog.
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