Honorable mention goes to Bill Bonner for “US Government Spending: Capitalists Repeating Communist Mistakes” :I'm on a Sunday walk and a nice boy tries to sell me lemonade. A budding entrepreneur! Still, I decline. So he strengthens his pitch: "I'm donating the profits to stop child abuse."
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This proves that the traditional rap on capitalism is false. It is not only about private gain for the few. Business can be as enlightened as the individuals running them. Note that all this praiseworthy other-directedness is being accomplished within the matrix of exchange, which has wrongly been maligned as selfish. As we can see, there is no contradiction between doing good and doing well. All these innovations that merge the third sector of charity with the first sector of profiteering illustrate that capitalism can adapt itself to an age of broad-minded social concern.
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... It is an admirable thing to set up a lemonade stand. ... Will he make a profit? Nothing is for sure in this world. ... But what if he does make a profit? Wouldn't that be wonderful? There would be nothing at all wrong with the world in which this kid, who gave up his Sunday to sell refreshment, could put $5 in a piggy bank as a result.
But no, we can't have that! Instead, he has learned from the social ethos that he must never, ever admit to making private gain. ...
Let's review the oldest contribution of liberal thought: The market society uses private gain to achieve social good, via the mechanism of mutually beneficial exchange. I buy a jug of milk and the shopkeeper takes my money. We both say "thank you" to each other because we have both given each other a gift and we are both better off. The profits in the form of money, if there are any after expenses, are used to expand production so that there are ever more opportunities for trade. Multiply these little exchanges and investments by the world's population and you have an ever-more beautiful and fruitful garden of peace and prosperity.
In this scheme, what is the role of giving to charitable causes? This is provided for by the growth of capital and wealth. When there is enough left over after providing for basic survival needs, people turn their attention to widows, orphans, the sick, the symphonies, art galleries, saving salamanders, promoting religion, establishing quilt-weaving societies, and billions of other causes — all of which are evidence of rising prosperity.
The direction of causation here is important. First: markets. Second: investment and exchange. Third: prosperity. Fourth: a zillion social causes that fall into the category of charity, social justice, and the like. Why is it that we are so fearful of telling the truth about this step-by-step plan for building civilization? Why are we so anxious to blur the distinctions between the stages?
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How to account for all this giving mania? Maybe it is all just a racket. Call it the "cause racket." There are more bucks to be made by spreading guilt and pity than by offering goods and services. Therefore, everyone gets in on the act.
That's one theory, but it only goes so far. My own theory is that the anticapitalistic mentality has taken a serious toll. It hasn't yet destroyed commercial society, but it has caused commercial society to no longer be proud of the magic and glory embedded within its structures and logic. Why is this? Because we no longer understand how it is that markets convert private interest to public good. The simplest lesson of economics, proven again and again and again for 500 years, is lost on people today.
By the way, when that kid told me that he was raising money to stop child abuse, I replied as follows: "I hope you keep some for yourself. You have to make a living somehow."
His mouth fell open in shock. I hope he remembers what I told him, and I hope his parents don't hunt me down to accuse me of child abuse.
What has been the major trend of the entire past 50 or so years? Government has played a larger and larger role in the US and most western democracies. Only in the formerly (and for many, still) communist countries has government been rolled back.
The communists learned their lessons. They proved that government spending does not make people rich. But now…what’s this…? The US and other countries are greatly increasing the percentage of GDP spent by the government.
The communists proved that central planning didn’t work. But again, the US and others are now planning their economies more than ever – managing interest rates, directing capital to one industry while denying it to others, raising taxes on this…subsidizing that…regulating everything that moves…
The communists also proved that state ownership of industry was a bad idea. But the US and others now own banks, insurance companies, almost the entire mortgage business, and one of the world’s largest automakers.
Perhaps most importantly, almost all the ‘old’ democracies – notably the US – are taking on much more debt. Bankers do stupid things – the feds take over the debt. Homeowners do stupid things – the feds give them more low-cost credit. Politicians do stupid things – and the feds run up even more debt.
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In a few days, America’s first time house buyers’ tax credit program expires. It’s been a great success, say supporters.
Let’s see, how did it work? According to the news reports, the government gave away $12.6 billion in tax credits. Of course, some people would have bought a house anyway…and could have afforded one without the tax credit.
Wait…that means that the only additional sales came from people who 1) didn’t really want to buy a house or 2) couldn’t really afford one. According to economists’ estimates, each one of these people cost the feds $30,000 worth of tax credits.
And according to the results of an audit, $139 million was paid out to people who hadn’t bought a house at all. And one of the people who got the credit was only 4 years old.
A perfect federal program – it accomplished nothing at great expense…
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