Gender scholars like bell hooks argue that American is an imperialist, white-supremacist, capitalist patriarchy. Is she right? The Factual Feminist responds. Read the rest of this entry »
The free enterprise system is not inherently corrupt.
Oliver Stone’s Wall Street leads the movie-goer to believe that the securities industry is a rigged game, and that capitalism is inherently corrupt. Hard work as a means to success in the financial community is debunked, only to be supplanted by corruption and law breaking, as securities trading is seen as a game with little or no productive value. Stone presents a harsh judgment on an economic system he fundamentally misunderstands.
Wall Street has come to be the historical revisionists’ cinematic representation of the 1980s—the so-called “decade of greed.” It, unfortunately, offers a view prevailing not only in the film industry, but in academia and the media as well. In many ways, Wall Street perpetuates a class warfare myth, with contrasts being drawn between so-called haves and have nots, or the bourgeoisie and the proletariat.
The movie’s antagonist is Gordon Gekko, a corporate raider. Gekko’s speech at the stockholders meeting of Telder Paper, his takeover target, is meant by Stone to reflect the corrupt nature of capitalism. In fact, Stone managed—knowingly or not—to provide a glimpse of why corporate raiders provide a positive service in a free market economy. Gekko states:
Telder Paper has 33 different vice presidents, each making over $200,000 a year . . . . Our paper company lost $110,000,000 last year, and I’ll bet half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest. . . . I am not a destroyer of companies; I am a liberator of them. The point is, ladies and gentlemen, that greed for a lack of a better word—is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge, has marked the upward surge of mankind. And greed—you mark my words—will not only save Teldar Paper, but that other malfunctioning corporation called the United States of America.
Greed or Self-Interest?
The word “greed” in such a speech is Stone’s carrier of corruption. It is his word of choice designed to elicit a specific response from the movie-going audience. After all, how could one view greed favorably? In fact, “self-interest” would have been a more apt term, which was understood over two centuries ago by Adam Smith, the father of capitalism. Smith wrote in An Inquiry into the Nature and Causes of the Wealth of Nations: “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.” Self-interest removes the judgmental nature of Stone’s presentation, while encompassing not only greed, but also industry, charity, self-improvement, and altruism, i.e., any human motivation.
Gekko’s later statements lend greater clarity to Stone’s view of the world. In reference to a Gekko plan to liquidate the holdings of an airline company, Budd Fox (the movie’s symbol of redemption as he in the end rejects the greed Gekko represents) asks, “Why do you need to wreck this company?” Gekko’s answer: “Because it’s wreckable!” Stone views the breakup of a firm as pure destruction. He is unable to understand what Joseph Schumpeter termed “creative destruction.” That is the notion that resources might be more efficiently used if freed from less profitable ventures and reinvested elsewhere. This is the dynamic aspect of capitalism that allows for renewal and growth.
But the essence of Stone’s limited vision is captured in Gekko’s definition of capitalism: “It’s a zero sum game. Somebody wins, somebody loses. Money itself isn’t lost or made, it’s simply transferred from one person to another—like magic. This painting here, I bought it ten years ago for $60,000. I could sell it today for $600,000. The illusion has become real, and the more real it becomes, the more desperate they want it. Capitalism at its finest . . . . I create nothing. I own . . . . You’re not naive enough to think that we live in a democracy, are you, Buddy? It’s the free market.” Stone does not understand that wealth can be created, not merely shifted around, and that the free market provides the incentives for individuals to create, innovate, and take risks. He sees a rise in the price of a painting as the pinnacle of capitalism. In fact, it is in those nations that have rejected free enterprise where the only source of value is to be found in a painting, for little else is created.
Wall Street presents a view of capitalism as being controlled by the few at the expense of the many—democracy versus the free market in Gekko’s words. Stone does not understand the nature of an exchange economy, missing a fundamental point that in a free enterprise system, one must first supply a service or good in order to demand; i.e., even the most greedy individuals must supply something that fulfills the needs or wants of another individual in order to participate in an exchange economy. Individuals vote with their dollars, if you will. The phrase “democratic capitalism” seems quite natural, for example, while “democratic socialism” seems oxymoronic. Read the rest of this entry »
Former U.S. Treasury Secretary Lawrence Summers, Nigeria‘s former finance chief Ngozi Okonjo-Iweala and the president of the Institute for Liberty and Democracy Hernando de Soto join us at Fortune-Time Global Forum.
The local district mayor wants to call one of several new streets around the vast Halle Freyssinet high-tech startup hub the ‘Rue Steve Jobs’ in honor of America’s best-known Capitalist.
PARIS (Reuters) – Geert De Clercq reports: A proposal to name a street after the late Apple Inc chief executive and co-founder Steve Jobs has divided the leftist city council of a Paris district.
“Steve Jobs was chosen because of his impact on the development of personal computing and because he was a real entrepreneur.”
— Spokeswoman for mayor Jerome Coumet
The local district mayor wants to call one of several new streets around the vast Halle Freyssinet high-tech startup hub the “Rue Steve Jobs” in honor of the U.S. inventor of the iPhone who died in 2011.
“The choice of Steve Jobs is misplaced in light of the heritage he has left behind.”
— Communist local councillors
But Green and Communist local councillors in Paris’s 13th district don’t like the idea because of Apple’s social and fiscal practices.
“Steve Jobs was chosen because of his impact on the development of personal computing and because he was a real entrepreneur,” said a spokeswoman for mayor Jerome Coumet, defending the proposal.
She said other streets would be named after British computer scientist and code-breaker Alan Turing, UK mathematician and computer pioneer Ada Lovelace, US naval officer and computer programming pioneer Grace Murray Hopper and French civil engineer Eugene Freyssinet, who invented pre-stressed concrete.
Leftist councillors are not impressed however by Jobs’ reputation and heritage. Read the rest of this entry »
Mark J. Perry writes: Two of my all-time most favorite economists — Thomas Sowell and Frederic Bastiat – share the same birthday — they were both born on June 30. To recognize Bastiat’s birthday today I posted some of his quotes on CD yesterday, and I’ll now do the same for Thomas Sowell, who turned 86 today. Here is Thomas Sowell’s webpageand here is his Wikipedia entry. Milton Friedman once said, “The word ‘genius’ is thrown around so much that it’s becoming meaningless, but nevertheless I think Tom Sowell is close to being one.”
In my opinion, there is no economist alive today who has done more to eloquently, articulately, and persuasively advance the principles of economic freedom, limited government, individual liberty, and a free society than Thomas Sowell. In terms of both his quantity of work (at least 40 books and several thousand newspaper columns) and the consistently excellent and crystal-clear quality of his writing, I don’t think any living free-market economist even comes close to matching Sowell’s prolific record of writing about economics. Even at 86 years old, Thomas Sowell is still active and writes two syndicated newspaper columns almost every week (one column in some weeks) and recently released his 40th book last fall Wealth, Poverty and Politics: An International Perspective — which amazingly was his 13th book in the last decade! To honor Thomas Sowell’s 86 birthday today, I present here 15 of my favorite quotations from Dr. Thomas Sowell and a bonus video:
1. Knowledge. The cavemen had the same natural resources at their disposal as we have today, and the difference between their standard of living and ours is a difference between the knowledge they could bring to bear on those resources and the knowledge used today.
2. Obamacare. If we cannot afford to pay for doctors, hospitals and pharmaceutical drugs now, how can we afford to pay for doctors, hospitals and pharmaceutical drugs, in addition to a new federal bureaucracy to administer a government-run medical system?
3. Economics vs. Politics I. Economics and politics confront the same fundamental problem: What everyone wants adds up to more than there is. Market economies deal with this problem by confronting individuals with the costs of producing what they want, and letting those individuals make their own trade-offs when presented with prices that convey those costs. That leads to self-rationing, in the light of each individual’s own circumstances and preferences.
4. Economics vs. Politics II. The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Read the rest of this entry »
What are the biggest misunderstandings about capitalism? Deirdre McCloskey, professor at the University of Illinois at Chicago, argues that contrary to common belief, it’s not the amount of capital that has been amassed which sets the last two centuries apart, but rather the explosion of innovation—which in turn has made the capital investment worth it.
Contrary to popular myth, the environment over the past 200 years has become less polluted and toxic for humans.
In July 1924, Calvin Coolidge Jr., the Presdient’s 16-year-old son, died of an infection from a toe blister he got playing tennis on the White House lawn. The bacteria that took young Calvin’s life is staphylococcus aureus, known as “staph.” …
Were health-care products such as antibiotics, antibacterial ointments, and inexpensive clean and disposable bandages available 92 years ago, Calvin Coolidge Jr., would have escaped the bacterial pollution that killed him. Factories and vehicles used to produce and distribute these items use energy, and dispense waste. But capitalist production and consumption are not destroying a pristine Eden. Instead, capitalist production and consumption are replacing more immediate and more lethal forms of environmental pollution for less immediate and less lethal forms.
We denizens of modern market economies are today largely free not only of the filth of lethal staph infections, but also of other up-close and dangerous pollutants that our ancestors routinely endured, or died of. We sleep, in sturdy buildings, on beds that rest on hard floors beneath hard roofs. Our pre-industrial ancestors did not. Save for the tiny fraction of people in the nobility and clergy, nearly everyone slept in flimsy huts on dirt floors beneath thatched roofs. (Sometimes these dirt floors would be strewn with hay, thresh, to make them less unpleasant.)
Not only were thresh-strewn dirt floors obvious sources of regular up-close pollution of a sort that is unknown to a typical first-world person today, thatched roof themselves were ferments of filth. They kept out rain and cold less effectively than our modern dwellings. Worse, they were home to rats, mice, birds, spiders, hornets, and other animals, which would drop their own wastes onto the huts’ inhabitants. They were also highly flammable.
Of course these pre-industrial huts contained no running water or indoor plumbing. Daily bathing and other routines of personal hygiene that we moderns take for granted were largely unknown to most before the industrial revolution.
For heat in the winter families would bring farm animals into the huts, especially at night. To shield themselves from the droppings of these farm animals, each of these families would cut a trench in the floor across the width their hut. They’d sleep on the side of the trench opposite where the animals slept. Unfortunately, the trench did little to protect the family from whatever insects the animals brought into the huts with them. Read the rest of this entry »
The free market: best anti-monopoly weapon ever developed.
“In New York, we are seeing a collapse as inexorable as the fall of the Soviet Union itself.”
Jeffery A. Tucker writes: An age-old rap against free markets is that they give rise to monopolies that use their power to exploit consumers, crush upstarts, and stifle innovation. It was this perception that led to “trust busting” a century ago, and continues to drive the monopoly-hunting policy at the Federal Trade Commission and the Justice Department.
“No more standing in lines on corners or being forced to split fares. You can stay in the coffee shop until you are notified that your car is there.”
But if you look around at the real world, you find something different. The actually existing monopolies that do these bad things are created not by markets but by government policy. Think of sectors like education, mail, courts, money, or municipal taxis, and you find a reality that is the opposite of the caricature: public policy creates monopolies while markets bust them.
For generations, economists and some political figures have been trying to bring competition to these sectors, but with limited success. The case of taxis makes the point.
“Think of sectors like education, mail, courts, money, or municipal taxis, and you find a reality that is the opposite of the caricature: public policy creates monopolies while markets bust them.”
There is no way to justify the policies that keep these cartels protected. And yet they persist — or, at least, they have persisted until very recently.
“In less than one year, we’ve seen the astonishing effects. Not only has the price of taxi medallions fallen dramatically from a peak of $1 million, it’s not even clear that there is a market remaining at all for these permits.”
In New York, we are seeing a collapse as inexorable as the fall of the Soviet Union itself. The app economy introduced competition in a surreptitious way. It invited people to sign up to drive people here and there and get paid for it. No more standing in lines on corners or being forced to split fares. You can stay in the coffee shop until you are notified that your car is there.
In less than one year, we’ve seen the astonishing effects. Not only has the price of taxi medallions fallen dramatically from a peak of $1 million, it’s not even clear that there is a market remaining at all for these permits. Read the rest of this entry »
They’re jealous, he says, they side with rulers, and they don’t understand how markets work.
Nick Gillespie & Todd Krainin “Intellectuals have always disdained commerce” says Whole Foods Market co-founder John Mackey. They “have always sided…with the aristocrats to maintain a society where the businesspeople were kind of kept down.”
More than any other outlet, Whole Foods has reconfigured what and how America eats and the chain’s commitment to high-quality meats, produce, cheeses, and wines is legendary. Since opening his first store in Austin, Texas in 1980, Mackey now oversees operations around the globe and continues to set the pace for what’s expected in organic and sustainably raised and harvested food.
Check out the book “Conscious Capitalism: Liberating the Heroic Spirit of Business” at Amazon.com]
Because of Whole Foods’ trendy customer base and because Mackey is himself a vegan and champions collaboration between management and workers, it’s easy to mistake Mackey for a progressive left-winger. Indeed, an early version of Jonah Goldberg‘s best-selling 2008 book Liberal Fascism even bore the subtitle “The Totalitarian Temptation from Mussolini to Hillary Clinton and The Totalitarian Temptation from Hegel to Whole Foods.”
[See more at Reason.com]
Yet nothing could be further from the truth—and more distorting of the radical vision of capitalism at the heart of Mackey’s thought. A high-profile critic of the minimum wage, Obamacare, and the regulatory state, Mackey believes that free markets are the best way not only to raise living standards but also to explore new ways of building community and creating meaning for individuals and society.
At the same time, he challenges all sorts of libertarian dogma, including the notion that publicly traded companies should always seek to exclusively maximize shareholder value. Conscious Capitalism, the book he co-authored with Rajendra Sisodia, lays out a detailed case for Mackey’s vision of a post-industrial capitalism that addresses spiritual desire as much as physial need. Read the rest of this entry »
The Paradise of the Real
“We treat the physical results of capitalism as though they were an inevitability. In 1955, no captain of industry, prince, or potentate could buy a car as good as a Toyota Camry, to say nothing of a 2014 Mustang, the quintessential American Everyman’s car. But who notices the marvel that is a Toyota Camry? In the 1980s, no chairman of the board, president, or prime minister could buy a computer as good as the cheapest one for sale today at Best Buy. In the 1950s, American millionaires did not have access to the quality and variety of food consumed by Americans of relatively modest means today, and the average middle-class household spent a much larger share of its income buying far inferior groceries. Between 1973 and 2008, the average size of an American house increased by more than 50 percent, even as the average number of people living in it declined. Things like swimming pools and air conditioning went from being extravagances for tycoons and movie stars to being common or near-universal. In his heyday, Howard Hughes didn’t have as good a television as you do, and the children of millionaires for generations died from diseases that for your children are at most an inconvenience. As the first 199,746 or so years of human history show, there is no force of nature ensuring that radical material progress happens as it has for the past 250 years. Technological progress does not drive capitalism; capitalism drives technological progress — and most other kinds of progress, too…”
— Dana Perino (@DanaPerino) June 4, 2015
Dana has good taste. (And a great laugh) In a comment to Dana, Kevin D. Williamson notes: “It’s actually an old piece that’s been making the rounds…” Fooled me, too. I also thought it was new column. Good to see it circulation again.
Join Professor Tabarrok in exploring the mystery and marvel of prices. We take a look at how oil prices signal the scarcity of oil and the value of its alternative uses. Following up on our previous video, “I, Rose,” we show how the price system allows for people with dispersed knowledge and information about rose production to coordinate global economic activity. This global production of roses reveals how the price system is emergent, and not the product of human design. Read the rest of this entry »
Today, capitalism is blamed for our current disastrous economic and financial situation and a history of incessant booms and busts. Support for capitalism is eroding worldwide. In a recent global poll, 25 percent (up 2 percent from 2009) of respondents viewed free enterprise as “fatally flawed and needs to be replaced.” The number of Spaniards who hold this view increased from 29 percent in 2009 to 42 percent, the highest amongst those polled. In Indonesia, the percentage went from 17 percent to 32 percent.
Most, if not all, booms and busts originate with excess credit creation from the financial sector. These respondents, incorrectly, assume that this financial system structured on fractural reserve banking is an integral part of capitalism. It isn’t. It is fraud and a violation of property rights, and should be treated as such.
This legalization of fraud is essentially one of the main reasons no one went to jail after the debacle of 2008.
In the past, we had deposit banks and loan banks. If you put your money in a deposit bank, the money was there to pay your rent and food expenses. It was safe. Loan banking was risky. You provided money to a loan bank knowing funds would be tied up for a period of time and that you were taking a risk of never seeing this money again. For this, you received interest to compensate for the risk taken and the value of time preference. Back then, bankers who took a deposit and turned it into a loan took the risk of shortly hanging from the town’s large oak tree.
During the early part of the nineteenth century, the deposit function and loan function were merged into a new entity called a commercial bank. Of course, very quickly these new commercial banks realized they could dip into deposits, essentially committing fraud, as a source of funding for loans. Governments soon realized that such fraudulent activity was a great way to finance government expenditures, and passed laws making this fraud legal. A key interpretation of law in the United Kingdom, Foley v. Hill, set precedence in the financial world for banking laws to follow:
Foley v. Hill and Others, 1848:
Money, when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker, who is bound to an equivalent by paying a similar sum to that deposited with him when he is asked for it. … The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.
In other words, when you put your money in a bank it is no longer your money. The bank can do anything it wants with it. It can go to the casino and play roulette. It is not fraud legally, and the only requirement for the bank is to run a Ponzi scheme, giving you the money deposited by someone else if they lost your money and you happen to come back asking for your money. This legalization of fraud is essentially one of the main reasons no one went to jail after the debacle of 2008. Read the rest of this entry »
A great find. For Reason.com, Emily Ekins writes:A 1940s capitalism cartoon is making a comeback with over 7 million views on YouTube. The cartoon “Make Mine Freedom” was produced by Harding University, a private university in Arkansas in 1948 extolling the virtues of free-market capitalism and inveighing against “isms” particularly communism and statism more generally.
The cartoon mixes humor with serious philsophy as it defines what freedom means: “America is the freedom to work at the job you like, freedom of speech and to peacefully assemble, freedom to own property, security from unlawful search and seizure, the right to a speedy and public trial, protection against cruel punishments and excessive fines, the right to vote, and worhip God in your own way.” Read the rest of this entry »