Friday, August 13, 2010

KA-POW! #41 - Kelly

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Kel Kelly for “Give Capitalism a Chance” :

My main message is that most of our economic problems derive from previous government intervention in the economy. In its attempts to "help" us, the government has managed and regulated the economy, and passed laws that sounded constructive but that in fact hurt the economy and us.

Political economic reality is replete with the law of unintended consequences. Our economic problems are the natural result of political forces, not the natural result of (supposedly evil) market forces. We have voted our current problems into existence by electing politicians who promised to help us by means of economic intervention and regulation.

As Austrians know, most people believe we have free markets, but we have no such thing. This is true regardless of the fact that politicians of all stripes — and most of the media — claim that we do. The government has its hand in every company and every industry in the nation, controlling what things are produced and by which means. Indeed, it even manipulates market prices and production directly.

Left-wing pundits ridicule those who label such government manipulation and control "socialism," but it is in fact just that. Socialism involves government control of the means of production, and its real purpose is redistributing property for the benefits of "society" (society being receivers, not givers). Controlling production and redistributing wealth are precisely the goals and justifications of our government's constant intervention in the economy.

But this constant "helping" through attempting to "manage" has resulted in a constant decline in our ability to produce real wealth and thereby to improve our standards of living. As it is now, we are seeing a consistent increase in the wealth of the rich, a moderate improvement in the wealth of the middle class, and stagnation in the living standards of the poor. As has happened to other countries at various points in history, we are now on the verge of retrogressing economically.

Consider this remarkable irony: most citizens put their faith in government — the entity that steals from us, causes wars, imprisons and starves innocent citizens, and is an absolute monopoly — to provide for us and keep us safe.

At the same time, they see businesses — which have eradicated diseases and starvation, engaged in peaceful exchanges instead of war, produced virtually everything we currently own and enjoy, paid us our wages and provided capital for us to improve our productivity, all the while being fully restrained by hungry competitors (in free markets) — as our enemies from whom we need protection. These commonly held but irrational prejudices for government and against businesses form the very foundation of the political arguments espoused by professional anticapitalist "thinkers."

And yet, when capitalism has been allowed to flourish to even a moderate degree, it has succeeded in improving the lives of all involved — rich, poor, black, white, man, or woman. Only capitalism, with its true free markets and true freedom for individuals can solve our economic problems and bring prosperity.

"Capitalism" is neither the Right-wing, crony-capitalism corporate-welfare economy, nor the anti-rich, wealth-redistribution social-welfare economy that we have today. In a truly capitalist society businesses never receive money or special privileges from government: they succeed if they please consumers in offering them what they want, and they fail if they do not. By the same token, in a truly capitalist society, individuals never receive special privileges or transfer payments. Instead, they have an abundance of jobs and of wages commensurate with the value of their work (more than a "living wage").

Real economics (i.e., free-market economics) proves that under capitalism, it is virtually impossible for things like inflation, shortages, booms and busts, recessions, unemployment, starvation, and unaffordable healthcare to exist. Competition and the threat of competition serve as iron-clad shackles on companies. On the one hand, it prevents them from underpaying, overcharging, or under-supplying. On the other hand, it assures that they guarantee the safest, lowest-priced, highest-quality products that can possibly be produced at any particular state of technology and development.

Honorable mention goes to Ludwig von Mises for “The Popular Interpretation of the "Industrial Revolution"” :

The truth is that economic conditions were highly unsatisfactory on the eve of the Industrial Revolution. The traditional social system was not elastic enough to provide for the needs of a rapidly increasing population. Neither farming nor the guilds had any use for the additional hands. Business was imbued with the inherited spirit of privilege and exclusive monopoly; its institutional foundations were licenses and the grant of a patent of monopoly; its philosophy was restriction and the prohibition of competition both domestic and foreign. The number of people for whom there was no room left in the rigid system of paternalism and government tutelage of business grew rapidly. They were virtually outcasts. The apathetic majority of these wretched people lived from the crumbs that fell from the tables of the established castes. In the harvest season they earned a trifle by occasional help on farms; for the rest they depended upon private charity and communal poor relief. Thousands of the most vigorous youths of these strata were pressed into the service of the Royal Army and Navy; many of them were killed or maimed in action; many more perished ingloriously from the hardships of the barbarous discipline, from tropical diseases, or from syphilis. Other thousands, the boldest and most ruthless of their class, infested the country as vagabonds, beggars, tramps, robbers, and prostitutes. The authorities did not know of any means to cope with these individuals other than the poorhouse and the workhouse. The support the government gave to the popular resentment against the introduction of new inventions and labor-saving devices made things quite hopeless.

...

The factory owners did not have the power to compel anybody to take a factory job. They could only hire people who were ready to work for the wages offered to them. Low as these wage rates were, they were nonetheless much more than these paupers could earn in any other field open to them. It is a distortion of facts to say that the factories carried off the housewives from the nurseries and the kitchens and the children from their play. These women had nothing to cook with and to feed their children. These children were destitute and starving. Their only refuge was the factory. It saved them, in the strict sense of the term, from death by starvation.

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The laissez-faire ideology and its offshoot, the "Industrial Revolution," blasted the ideological and institutional barriers to progress and welfare. They demolished the social order in which a constantly increasing number of people were doomed to abject need and destitution. The processing trades of earlier ages had almost exclusively catered to the wants of the well-to-do. Their expansion was limited by the amount of luxuries the wealthier strata of the population could afford. Those not engaged in the production of primary commodities could earn a living only as far as the upper classes were disposed to utilize their skill and services. But now a different principle came into operation. The factory system inaugurated a new mode of marketing as well as of production. Its characteristic feature was that the manufactures were not designed for the consumption of a few well-to-do only, but for the consumption of those who had hitherto played but a negligible role as consumers. Cheap things for the many was the objective of the factory system.

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The outstanding fact about the Industrial Revolution is that it opened an age of mass production for the needs of the masses. The wage earners are no longer people toiling merely for other people's well-being. They themselves are the main consumers of the products the factories turn out. Big business depends upon mass consumption. There is, in present-day America, not a single branch of big business that would not cater to the needs of the masses. The very principle of capitalist entrepreneurship is to provide for the common man. In his capacity as consumer the common man is the sovereign whose buying or abstention from buying decides the fate of entrepreneurial activities. There is in the market economy no other means of acquiring and preserving wealth than by supplying the masses in the best and cheapest way with all the goods they ask for.

Blinded by their prejudices, many historians and writers have entirely failed to recognize this fundamental fact. As they see it, wage earners toil for the benefit of other people. They never raise the question who these "other" people are.

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