WHAT ACTUALLY IS CAPITALISM?
Election years bring us so many labels of division and derision which cause us instinctively to take sides and choose our tribes. Of course, recent years have been controlled by identity and oppression labels, the majority of which I still can't understand, although I am trying since the NPR radio station carries no other stories! Yet, nowhere are labels and terms more misunderstood than when the politicians attempt for a few minutes to finally address business and economics.
The term "capitalism" is, again, being demonized as manipulative, controlling, elitist, and destructive. Yet, in the true implementation of free-market capitalism this ideal is rather transparent, freeing, bourgeois, and enabling. Politicians, professors, and the media reiterate these incorrect definitions because they have never received a proper economic education, or because they are intentionally misinforming others who care not to educate themselves. So, we need a refresher this week. JAM VIEWS Members counteract this manipulation by continually seeking knowledge. Knowledge is power.
Instead of causing our eyes to glaze over with technical definitions, let's simply describe what free-market capitalism means to us today.
First, Barton Swaim in the WSJ described that is is not a planned system such as a socialist-communist society. He states, "A socialist economy is, by definition, a system - it must be created, planned, vigilantly monitored and forcefully regulated in order to function. But a market economy has no plan." Adam Smith first described this as "the invisible hand."
Second, Friedrich Hayek summarized in "The Use of Knowledge in Society" that a "modern market economy is an immeasurably confusing and constantly changing combination of associations and exchanges - not a 'system' of any kind." This is why artificial government inputs, such as price controls or minimum wage laws, always create opposite the desired effect, unfortunately many times long after that misinformed congressman has been re-elected for "helping" the poor.
Third, capitalism demands the correct allocation of capital (money), and only the capital, itself, understands where it is supposed to flow. History is replete with proof that mortal man cannot determine, or predict, the correct allocation. Only in modern media do we unfortunately believe the talking heads, Monday morning quarterbacks, who claim to have called market corrections, interest rate movements, and the next Google.
Fourth, therefore, capitalism requires money to be earned and spent by individuals working in their own self-interests. The antithesis is to give this money to a non-free-market entity, the government, which by definition is a socialist entity with no profit motive, no competition, and no demands for increased productivity or efficiency. Hence, Capitalists cannot understand a citizen's desire to transfer capital to the government through taxes, even when the specific goal may be the betterment of his fellow man. Higher taxes are inherently illogical to a Capitalist.
Let's pause for a current checkup on the recent capitalism infused into our U.S. economy after nearly a decade of determined socialist intervention.
The Good: Due to the recent tax reductions (TCJA) and the war against needless government regulation, 1) over the past year, wages for the bottom 10% of American workers have jumped 7%, and for workers without a high-school diploma have grown 9%, 2) labor-participation rates (people who can work working) have reversed long declines and are now increasing in every category, 3) even though the Congressional Budget Office had projected the creation of only 2 million jobs by this point, 7 million have actually been created, 4) even though the Federal Reserve had projected 5% unemployment at this point, it is setting records at 3.5%, and 5) the U.S. is the only Group of Seven country that will post GDP growth above 2% for 2019. Wow.
The Bad: It all gets erased if we never control the spending. We are all rearranging the chairs on the deck of the Titanic and fiddling while Rome burns. Will the capitalists, so few left among us, pull the spending eject button and cut entitlement spending (Social Security, Medicare, Medicaid, and 75 other programs), or at least cut the future growth of these line items? Will Maverick eject before the flat spin takes him out to sea? It's likely too late to save Goose, but will Mav live to fight another day? Can anyone who commits to push the eject button ever be elected, or re-elected?
Even on top of this entitlements looming disaster, Congress recently passed $1.4 trillion more in discretionary spending, 2,300 pages with "little debate or objection." The bill threw in $425 million in "election security grants" (Russian Collusion?), EPA budget increases (Increases?!), tax breaks for race-horse and Nascar owners (What?) and distilleries (Well, that one makes sense!). The Export-Import Bank was reauthorized for 7 more years (scam piggy bank for Boeing), the flood insurance program was extended (Nebraska min-wager pays for millionaire coastie's beach house rebuild), and Nancy gets federal funds for a San Francisco Park (To clean up the needles?). A significant percentage of Americans want to raise your taxes and give these people more of your money! Have they completely lost their minds?
Tax receipts have grown 4% over the last year because of the tax cuts (do you understand that?), but spending grew 8%. A trillion here, a trillion there, and soon we will be talking about serious money!
Fight for the capitalists. Understand what words truly mean instead of blindly accepting media narratives. The capitalists are our final and only hope. And, as Ayn Rand exhorts, "When I say 'capitalism,' I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism with a separation of state and economics, in the same way and for the same reasons as the separation of state and church." Stay diligent!
"Unfortunately, socialism could only work in a utopian vacuum of, I don't know, golden retrievers, but not with humans on planet Earth. It never has. " - Bob Vukovich, "Just One More," Ash Press, 2020
** Many thanks to the WSJ, Forbes and Fortune for the above quotes and statistics, especially Barton Swaim, Gary Cohn, and Kevin Hassett.
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