In a recent commentary on the MarketWatch.com website (owned by Dow Jones) entitled “Capitalism is killing our morals, our future,” Paul B. Farrell shows a misunderstanding of the American economy, of economic history, and of capitalism itself. Both despite and because of its erroneous views of economics and morality, Mr. Farrell’s piece is a useful read for those who want to understand the academic left.
Channeling Harvard professor Michael Sandel (who is not an economist), Farrell argues that since today’s economic arrangements don’t suggest the same interest by society at large in the things he thinks most important such as financial equality, publicly-funded health care and education, and public spaces free of advertising, it must be the fault of capitalism, which is to say the fault of freedom itself.
Let’s start with the United States: Farrell complains that we have “drifted from having a market economy to becoming a market society,” a barely-subtle way to say that he disapproves of the choices being freely made by his fellow citizens -- and would like to make different choices for them.
But his examples fail the test of reality. Quoting Sandel: “Markets [exist] to allocate health, education, public safety, national security, criminal justice, environmental protection, recreation, procreation, and other social goods unheard-of 30 years ago. Today, we take them largely for granted.”
A perceptive reader would notice that these are, with the exception (though not as complete an exception as it should be) of procreation, some of the least free markets in America. We have inappropriately government-dominated heath care and education, along with more appropriate government roles in police, fire protection, and national defense. Most parks are public rather than private.
It’s as if Farrell is complaining about the failings of football using the Cleveland Cavaliers and the Chicago Cubs as examples.
Another old -- and fundamentally incorrect -- liberal myth is that the 2008 financial market collapse was caused by capitalism and years of deregulation. There is probably no more-regulated sector of the American economy than banking, and the manipulated-by-politicians subsector of housing finance. Indeed, the mostly-unregulated parts of the financial system such as those demonized credit default swaps, acquitted themselves well (with the obvious exception of the outrageously-levered AIG) through some of the most persistently difficult market conditions of my lifetime.
When it comes to the lives of ordinary people, Professor Sandel offers a familiar tune: “The good things in life are degraded if turned into commodities. So to decide where the market belongs, and where it should be kept at a distance, we have to decide how to value the goods in question — health, education, family life, nature, art, civic duties, and so on. These are moral and political questions, not merely economic ones.”
This turns reality on its head. If good things in life are turned into commodities, it means that (unlike in non-capitalist societies) those who are not rich can afford them. Even the poor in America are rich by world standards, with almost every household in America having a color TV, a microwave, and a car. A minuscule percentage of Americans goes to sleep hungry -- because capitalism has turned food into a commodity that fills large supermarkets with affordable products. That is what it really means for something to become a commodity. Imagine what your local Safeway or Vons would look like if the free market were “kept at a distance.” Or just do a quick Google search for “Soviet supermarket.”
Contrary to Mr. Farrell’s claims that a “market society” is destroying the moral core of the nation, what is truly immoral is suggesting that capitalism is harming us by making so many goods and services affordable to the ordinary American. It is a statement that only a well-off liberal, such as someone who is annoyed by the price of arugula at Whole Foods, could make with a straight face.
It is a luxury of the pampered to say that life is too easy, that government should make life more difficult and expensive, that citizens’ freedom should be limited in order to force people to do and value those things which the elite do and value. It is a snobbish paternalism which everywhere and always, when it gains political traction, results in a lower quality of life for a nation’s citizens.
It would be amusing, were the consequences not so dire, that the same people who argue that some things have become too easy to acquire hypocritically suggest in the next breath that we should strive to minimize inequality of income or wealth.
Liberals too often forget that every large-scale attempt to focus on equality rather than prosperity has resulted in outcomes ranging from dreary stagnation to mass murder. Thus, Mr. Farrell reminds one of former British Prime Minister Margaret Thatcher’s rejoinder to a leftist member of Parliament who was decrying increased inequality in England: “He would rather the poor were poorer, provided the rich were less rich.” And that’s the best possible result of Farrell-like thinking; the less fortunate get Pol Pot or The Great Leap Forward.
Some think that the wealth differences between the rich and the poor is fodder for revolution. But other than in Venezuela (where one corrupt regime replaced another, and the poor stayed desperately poor) and despite the flash in the pan of “Occupy Wall Street,” there is no evidence to support such a contention.
If a poor person is much less poor than she was a few years ago, is she going to focus her attentions on whether the rich man has $10 million or $20 million…or $2 billion? Unless the rich are getting rich by theft or corruption, the answer is manifestly no. And unlike the left’s frequent suggestion that capitalism and corruption are two sides of the same coin, truly free markets and limited government minimize the ability of corruptocrats and their rent-seeking cronies to profit off the backs of customers and taxpayers.
Many on the left suggest that there is something immoral about the existence of billionaires while some people are “surviving on two bucks a day.”
However it is only the chance to become rich, or at least not poor, that has paved the way for hundreds of millions of people to be lifted out of poverty in less than a generation. As the Yale Center for the Study of Globalization notes, “We are in the midst of the fastest period of poverty reduction the world has ever seen. The global poverty rate, which stood at 25 percent in 2005, is ticking downwards at one to two percentage points a year, lifting around 70 million people -- the population of Turkey or Thailand -- out of destitution annually. Advances in human progress on such a scale are unprecedented, yet remain almost universally unacknowledged… Not only is poverty falling rapidly, it’s falling across all regions and most countries.”
One of the factors that Yale specifically credits for this modern miracle is “the spread of capitalism.”
Free enterprise has done more good for humanity than any other form of societal economic organization, changing the lives of billions for the better. Although it can have occasional bad outcomes, capitalism (which is not what truly exists in most sectors of the American economy, and none of the largest ones) is the most moral possible economic system as it is the only one rooted in freedom.
George Mason University Professor of Economics Don Boudreaux often reminds his students that the most important question in economics is “compared to what?” When it comes to the academic left’s negative views of capitalism, it is a question they never seem to ask.
Photo: Creative Commons ("The poetic triumph of capitalism over communism," Bush School of Government and Public Service, Texas A&M University)
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