Archive for the ‘capitalism’ Tag

Relying on “Experts”   Leave a comment

I have emerged from the writer’s cave once more. I hope you’ve enjoyed the various reblogged articles. Thank you for your patience and I should probably even be back on Twitter when this runs. Lela

 

For April Fools Day of 1957, the British Broadcasting Corporation broadcasted a short segment about a bumper spaghetti harvest in southern Switzerland. The “documentary” explained that the bumper crop was due to “an unusually mild winter and to the virtual disappearance of the spaghetti weevil.” The television audience “watched video footage of a Swiss family pulling pasta off spaghetti trees and placing it into baskets. The segment concluded with an enthusiastic “for those who love this dish, there’s nothing like real, home-grown spaghetti.”

Related imageThe BBC reports that “hundreds of people phoned the network wanting to know how they could grow their own spaghetti tree.”

Okay, did you know that the word “gullible” is not in the dictionary?

Apparently, 7% of the American public believe chocolate milk comes from brown cows. Yeah, some of us are really that ignorant.

But, wait ….

I know a little bit about a lot of things. Writers research and we’re curious. But I really wouldn’t know how to build a car or manufacture a toaster. So while ignorance can be alarming, is it really so surprising? Few Americans live on farms anymore and most urbanites have never gardened. Many of us use appliances and gadgets with no idea how they are constructed and work. Without the skills, knowledge, and efforts of others, most of us would quickly perish. None of us would enjoy our current standard of living.

Conversely, one of the advantages of living in a modern society is that we don’t need to know how to construct the things we take for granted. We don’t even need to understand how they work. This frees us up to be “experts” in other fields while enjoying the benefits of what others know.

In 2008, British artist Thomas Thwaites set out to make a toaster from scratch. After nine months of mining, smelting, and assembling raw materials, he succeeded in making a rudimentary but extremely expensive and single-use toaster. When he used it for the first time, it melted.

Matt Ridley (The Rational Optimist) summarized the lesson of Thwaites’s toaster:  

To Thwaites this illustrated his helplessness as a consumer so divorced from self-sufficiency. It also illustrates the magic of specialization and exchange: thousands of people, none of them motivated by the desire to do Thwaites a favor, have come together to make it possible for him to acquire a toaster for a trivial sum of money.

Our state of boundless ignorance leads directly to “the case for individual freedom,” Hayek argues in The Constitution of Liberty. Achieving “our ends” depends upon us recognizing that we are ignorant of much of what we need to flourish. Hayek writes:

It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.

We live comfortably in a state of ignorance because, in a modern economy, others are free to cooperate and provide for our needs without necessarily even knowing we exist.

The possibility of men living together in peace and to their mutual advantage, without having to agree on common concrete aims and bound only by abstract rules of conduct, was perhaps the greatest discovery mankind ever made. (Hayek in Law, Legislation and Liberty, Volume 2)

 

Of course, nowadays, our ignorance is used as an argument insisting we need to be directed by the self-proclaimed wisest among us. Listen to the “experts” because they aren’t ignorant. Really? I’m willing to bet that any expert you look at is personally ignorant in some field in which you are expert. Expertise is usually in a narrow field and outside of that field, the “expert” is just an ordinary ignorant person. So why do we act as if their expertise in some narrow field makes them expert in all fields? Einstein was a great mathematician, but he once lost his ticket on a train and had no idea where he was going.

A part of the push toward technocracy has to do with our desire to control others through government force.

“Humiliating to human pride as it may be, freedom means the renun­ciation of direct control of in­dividual efforts,” Hayek explained. When we renounce controls, “a free society can make use of so much more knowledge than the mind of the wisest ruler could comprehend.”

I may be ignorant in many areas, but when I encounter a field where my ignorance will be a problem, I take it upon myself to become educated on the subject. That’s one reason that I feel free to offer my opinion on so many topics. I may not be “an expert” in that I lack a license and haven’t spent four years studying it in an accredited college, but I know enough on some subjects to know what works and what doesn’t. I can see, for example, that old-fashioned supply-and-demand economics makes more sense in reality than Keynesian voodoo. By and large, I am comfortable with making my own decisions, secure in the knowledge that I can educate myself, weigh the value of the advice derived from “experts” and take the hits if my analysis fails.

There is evidence that a declining percentage of Americans believes that uncoerced cooperation is the best way to satisfy our needs. “According to an April 2016 Harvard University pollsupport for capitalism is at a historic low.” The Harvard poll echoes a 2011 Pew Research Center survey, in which 46% of 18- to 29-year-olds had a positive view of capitalism, and 47% held a negative one. Many of these young people would prefer if the government controlled the economy at the level of individual interactions because they believe people other than themselves are just too ignorant to make their own decisions.

Being ignorant that spaghetti is produced by processing wheat is not inherently a problem, but ignorance of how markets work can become one. The cornucopia of food that predictably appears on supermarket shelves today is the product of a market process in which farmers, manufacturers, trucking companies and supermarkets spontaneously cooperate on our behalf. It’s been feeding us very well for many years. Government would only complicate the functional system. If Americans are ignorant of these invisible market processes, they may support socialism and policies that interfere with the freedom of others to cooperate and create. Just look at how the thriving Venezuela of yesterday became the impoverished, chaotic, socialist Venezuela of today.

Were we directed from Washington when to sow and when to reap, we should all want for bread. (Thomas Jefferson, Autobiography, reprinted in Basic Writings of Thomas Jefferson, 1944)

Not knowing how spaghetti or chocolate milk gets made won’t cause starvation, but socialistic inference in the market is causing it in some countries today and could cause it in the US if we don’t curtail our human arrogance and desire to control what others do.

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Mises on Economic Calculation   Leave a comment

I’m concluding my series on Ludwig von Mises’ 1920 essay “Economic Calculation in the Socialist Commonwealth”, appropriately enough, with his conclusion of the essay. I highly recommend you read it for yourself to get a fuller understanding of why socialism was a bad idea in 1920 and a bad idea nearly a century later.. Lela

 

He called for socialists to consider their position on a rational basis and realize that socialism does not  match reality. Their system has no way of determining the natural value of anything. Prices must be arbitrarily derived by bureaucrats in a socialist system, while in a capitalist system, supply and demand operate automatically to provide a “market value” price derived through exchange relations. The purchasers of a product determine the price depending on their personal choices.

Ninety-seven years after Mises wrote this essay, he’s still right and the Soviet Union and China have both proven his critiques. The Soviet Union is no more and Russia and the former Soviet bloc countries are largely market-based economies. Many of them are much more capitalistic than the United Kingdom or the United States. Meanwhile, China has taken a halfway position in state capitalism. Lenin thought of state capitalism as an intermediary step toward the paradise of socialism, but having tried social for several decades, China decided to introduce some capitalism.

Image result for image of american socialismName a socialist society that is doing well. There are a few capitalist societies that have a great admix of socialism — the United States, for example. Alaska too. The United States has suffered under a slowing economy for more than a decade now and is currently $21 trillion in debt. Alaska almost didn’t pass a budget this year. Socialism sounds good from the perspective where it hasn’t been tried yet, but inevitably it can’t operate without some market-economy features and so …. The United States has spent many decades slowly becoming more socialistic and our economy is teetering on the brink of collapse. Some observe that we appear to have been coasting on the dynamism of our past capitalism and that is now running out. Just look at the pace of inventions in the US between the end of the Civil War and now. You can see that we had a huge burst of activity and then we slowly fell away in an inverse ratio to the amount of government interference in the economy. So, what does that mean for us now? Is the solution perhaps reintroducing capitalism to the system?

Nature of Economic Calculation   Leave a comment

This is part of an ongoing series evaluating an essay by Ludwig von Mises. Click here to follow the rest of the series.

Every economic choice we make is really based on value. When we judge a item as more or less satisfactory, we are making a statement about its quality and its desirability to us. Most of us are quite capable of making these valuations. We all have opinions about what we like. In simple conditions, this valuation is easy, but as affairs become more complex and their interconnections are not so easily discerned, subtler means of valuation must be employed to determine value

Valuation is complicated by the  subjective nature of valuation. In an exchange economy the objective exchange value of commodities is the unit of economic calculation.

It is possible to base the calculation upon the valuations of all participants in trade. The subjective use value of each is not immediately comparable as a purely individual phenomenon with the subjective use value of other men. The exchange value arises out of the interplay of the subjective valuations of all who take part in exchange, but calculation by exchange value furnishes a control over the appropriate employment of goods. Anyone who wishes to make calculations concerning a complicated process of production will immediately notice whether he has worked more economically than others or not; if he finds, from reference to the exchange relations obtaining in the market, that he will not be able to produce profitably, this shows that others understand how to make better use of the goods in question. Calculation by exchange value makes it possible to refer values back to a unit. For this purpose, since goods can be mutually substituted in accordance with the exchange relations obtaining in the market, any possible good can be chosen. In a monetary economy it is money that is so chosen.

Monetary calculation has its limits. Money is not a yardstick of value or price. Value and price are not measured in money because as an economic good, money is not of stable value as has been naïvely, but wrongly, assumed in using it as a “standard of deferred payments.” The exchange-relationship which obtains between money and goods is subjected to constant, though often minor, fluctuations originating not only from the influence of other economic goods, but also from the side of money, but these fluctuations hardly disturb value calculations.

The inadequacy of the monetary calculation of value does not have its mainspring in the fact that value is then calculated in terms of a universal medium of exchange, namely money, but rather in the fact that in this system it is exchange value and not subjective use value on which the calculation is based.

Value calculations that stand outside of exchange transactions are impossible to calculate. If a man were to calculate the profitability of erecting a building or factor, he couldn’t include the loss of beauty in a view as part of his calculation because that is subjective criteria and yet many buildings have not been built because it would ruin a view.

It is customary to term such elements “extra-economic,” but you really can’t call the considerations irrational.

In any place where men regard as significant the beauty of a neighborhood or of a building, the health, happiness and contentment of mankind, the honor of individuals or nations, they are just as much motive forces of rational conduct as are economic factors in the proper sense of the word, even where they are not substitutable against each other on the market and therefore do not enter into exchange relationships.

Monetary calculation cannot embrace these factors, but this doesn’t negate the significance of monetary calculation in our everyday economic life. Humankind values esoteric things like beauty, health, honor and pride, so we should pay regard to them. Sensitive spirits may object to having to balance spiritual goods against material ones, but that is not the fault of monetary calculation. Even where judgments of value can be established directly without computation in value or in money, the necessity of choosing between material and spiritual satisfaction cannot be evaded.

Robinson Crusoe and the socialist state have an equal obligation to make the choice.

Anyone with a genuine sense of moral values experiences no hardship in deciding between honor and livelihood. We all have to eat and you can’t eat honor, but some people do choose to forego bread for honor’s sake, while others value material comfort over spiritual values.

Monetary calculation fulfills all the requirements of economic calculation. It affords us a guide through a complicated economic system. It enables us to extend to all goods of a higher order the judgment of value, as it touches on consumer goods. It renders their value capable of computation and thereby gives us the primary basis for all economic operations. It takes the guesswork out of capitalism.

We use money to keep track of the exchange of production goods, to reduce all exchange-relationships to a common denominator. There are limited circumstances where we can dispense with monetary calculations. Households often use a false economy. There’s relatively limited use of capital, division of labor is rudimentary, consumption goods are handled from beginning to end. So within the narrow confines of a closed household economy, it is possible to judge production without monetary placeholders, but it is increasingly difficult to do so the larger and more complex the economic system becomes.

This is why socialist societies end up perplexed when they try to take money out of the equation. “The human mind cannot orientate itself properly among the bewildering mass of intermediate products and potentialities of production without such aid. It would simply stand perplexed before the problems of management and location.”

It is an illusion to imagine that in a socialist state calculation in natura can take the place of monetary calculation. Calculation in natura, in an economy without exchange, can embrace consumption goods only; it completely fails when it comes to dealing with goods of a higher order. And as soon as one gives up the conception of a freely established monetary price for goods of a higher order, rational production becomes completely impossible. Every step that takes us away from private ownership of the means of production and from the use of money also takes us away from rational economics.

It is easy to overlook this fact when we deal with socialistic processes within a larger free market system. The State undertakes technical improvements in industry because their effect in similar private enterprises is evident and because those private industries which produce the materials for these improvements request it, but it’s easy to miss that these activities operate within a society based on private ownership of the means of production and upon the system of monetary exchange, which provides a means of accounting. This wouldn’t be possible in a purely socialistic environment, because economic calculation would be impossible.

There can be–in our sense of the term–no economy whatsoever. In trivial and secondary matters rational conduct might still be possible, but in general it would be impossible to speak of rational production any more. There would be no means of determining what was rational, and hence it is obvious that production could never be directed by economic considerations. What this means is clear enough, apart from its effects on the supply of commodities. Rational conduct would be divorced from the very ground which is its proper domain. Would there, in fact, be any such thing as rational conduct at all, or, indeed, such a thing as rationality and logic in thought itself? Historically, human rationality is a development of economic life. Could it then obtain when divorced therefrom?

Mises wrote this a long time before the Soviet Union toppled because of irrational policies based on a lack of economic calculation. He could evaluation the difference between a competitive economy and a socialist one and foresee the future.

The supply of goods will no longer proceed anarchically of its own accord; that is true. All transactions which serve the purpose of meeting requirements will be subject to the control of a supreme authority. Yet in place of the economy of the “anarchic” method of production, recourse will be had to the senseless output of an absurd apparatus. The wheels will turn, but will run to no effect.

Mises foresaw a society where many thousands of factories would be producing wares that were not ready for use, because the administration is incapable of testing their bearings. Has that good been on the shelf too long. Was work or material wasted in creating it? Was the method of production profitable? Maybe the administration could evaluation the quality of an item, but they would have no way of calculating the cost of production.

Contrast that with the economic system of private ownership of the means of production. Here the system of computation by value is necessarily employed by each independent member of society. Everybody participates in its emergence in two  ways

  • as a consumer
  • as a producer

As a consumer he chooses what he wants to buy based on quality and price. As a producer, he sets out to create high quality goods by whatever method produces the greatest return. Through the interplay of these two processes of valuation, individuals determine the price they want to pay for consumer goods, thus “harmonized their own requirements with their estimation of economic facts.”

Mises offered a contrasting example. Consider two societies are building railroads. The principle question is, should it be built at all and which route should it follow.  In a competitive and monetary economy, this question would be answered by monetary calculation. The new road will render less expensive the transport of some goods, and it may be possible to calculate whether this reduction of expense transcends that involved in the building and upkeep of the next line.

The socialist society would know how to look after itself. It would issue an edict and decide for or against the projected building and determine the route depending on personal preference. The decision would depend at best upon vague estimates by a central planning authority rather than on an exact calculation of value. The rail would not need to reduce the cost of transport of goods. It needn’t even be used. But it would be built and proclaimed a victory because it no economic appraisal or evaluation is possible. It’s just throwing darts at a board.

“Socialism is the abolition of rational economy.”

Liberty and Its Shadow – Capitalism   1 comment

I came to Christ as an individual. Mom and Dad weren’t rooting for me. My best friend couldn’t drag me. I stood before Christ alone, having no antecedents and am now acutely aware that God has no grandchildren. I can share my faith with my children, but I can’t make them believe; even though both say they do, they have to decide for themselves what THEIR faith is going to look like.

Image result for image liberty with capitalism as a shadowLiberty and its shadow, capitalism, did not emerge in a vacuum. They developed from the religious revolution of the 16th century which led eventually to the separation of church and state, and freedom of worship. That singular concept that salvation is individual and that individuals can decide their religious affiliation for themselves led to the recognition of other liberties. Free speech and freedom of the press were examples of this liberat­ing movement. Seeing these successes, men like Adam Smith and Edmund Burke began to suggest that economic activity could also be free, guided by the individuals who engaged in it rather than strangled by political regulations and controls as mercantilism had done.

Consumers make a million of daily decisions in the market place, choosing to buy this or not buy something else and this projects a pattern that signals to entrepreneurs how they should direct production within their businesses. In the free economy the consumers is sovereign. An inventor can really be proud of his product, but if consumers aren’t interested, he won’t be able to sell it to us. Businesses have no power over consumer except the ability to persuade and the quality of their products. That’s how the free market economy works and, like it or not, it is an integral part of a free society.

Most Americans believe they embrace freedom. We’ll tell you we want the State and churches to be separate. The press should not be censored. We object when we’re told what we can and cannot say, on the street, in our homes, or on social media. We’re in favor of freedom … except …

Except, business people are evil, so we want the government to control and regulate business, to protect the consumer from the wolves in trade and industry. Sometimes that ire is directed at big corporations and sometimes it is more generally spread to include anyone who thinks making a profit is a good idea.

To quote President Barack Obama, “Sometimes you’ve made enough profit.”

 

There’s a truth hidden here. Human beings are flawed. The sins we accuse business people of are the same sins you find in every walk of life. There are wicked businesspeople, but there are also wicked ministers, professors, publishers, and entertainers. Sometimes that television commentator is lying to you for his or her own benefit, to promote her preferred agenda. Yet, we still object to the censoring of the press, government interference in the churches, things like the Hayes Commission to control the movie industry. Why do we single out business people for special sanction to “protect the consumer”? You might ask – Why not? Because as we saddle them with ever more bureaucratic regulations and controls, this creates adverse economic consequences, adding to the cost of doing business, which makes all of us poorer. Worse, when economic activity is not free, every other freedom is jeopardized.

 

Human liberty is more fragile than we suppose. Economics won’t win or even sustain liberty, but when you control the economic life of a people, you control every other aspect of their lives as well.

Thirty years ago, we knew this because we could peek behind the Iron Curtain and see the condition of people who had no economic freedom, but we’ve lost that cautionary example and so it’s easy for groups like Occupy Wallstreet or both major-party candidates for President to demand income redistribution. The economy isn’t the only sector under stress in our society. Really, all of western civilization has been under attack for several generations. Just because the Iron Curtain fell doesn’t mean the attack against business is over. There’s a reason the American middle-class, the epitome of the bourgeoisie, has been shrinking for 30 years and we can look no further than the economic regulations that strangle our economy.

 

For those who failed to take European history … brief lesson here. The bourgeoisie were and are the middle class—townspeople engaged in indus­try and trade. They arose from the peasant class, but were not the nobility, whose values were quite different. While we don’t often live next door to the “nobility” these days, especially in American, it’s important to understand their values because they still exist today. Those nobody hereabouts holds title these days, the values of the nobility have been glowingly enshrined in romance and myth.

The nobleman has cour­age, spends without counting, de­spises petty detail. There is a great air of freedom and unselfishness about the nobleman. He will throw his life away for a cause, not calcu­late the returns. That is the noble idea. In reality, he lives by the serf­dom of others, and he broadens his acres by killing, and taking other people’s land-’the good old rule, the simple plan. That they should take who have the power, and they should keep who can.    … The bourgeoisie opposed such noble free-handedness and supported a king who would replace ‘the good old rule’ by one less damaging to trade and manufacture—and to the peas­ants’ crops. But the regrettable truth is that there is no glamour about trade. Trade requires regular­ity, security, efficiency, an exact quid pro quo, and an exasperating attention to detail … There is nothing spontaneous, generous or large-minded about it. Man’s native love of drama rebels against a scheme of life so plodding and re­sents the rewards of qualities so niggling. …

What a convenient word is bourgeois! How expressive and well-shaped for the mouth to utter scorn. And how flexi­ble in its application—it is another wonderful French invention!        Jacques Barzun

 

The free enterprise system (capitalism) works for the middle class (bourgeois). The nobility has no use for industry and trade. It’s too much hard work and it tends to dirty the hands without providing any glamour. Most of the world’s work today is done by those who have risen from the ranks, largely by their own efforts, in societies which have no rigid caste barriers to prevent upward mobility.

 

We’re told that freedom is something we should all care about, but when we see any particular freedom threatened, everyone does not take an interest. Christians defend freedom of worship. Journalists band together when the freedom of the press is threatened. Watch what teachers do when academic freedom is challenged. When government controls threaten freedom of economic enterprise, busi­ness people and business organizations mobilize to resist the attack.

Uh, not really.

Perhaps the most striking feature of the picture is the extent to which the bourgeoisie, besides educating its own enemies, allows itself in turn to be educated by them. It absorbs the slogans of current radicalism and seems quite willing to undergo a process of conversion to a creed hos­tile to its very existence … This is verified by the very characteristic manner in which particular capital­ist interests and the bourgeoisie as a whole behave when facing direct at­tack. They talk and plead—or hire people to do it for them; they snatch at every chance of compromise; they are ever ready to give in; they never put up a fight under the flag of their own ideals and interests—in this country there was no real resistance anywhere against the imposition of crushing financial burdens during the last decade or against labor legislation incompatible with the ef­fective management of industry.  Joseph Schumpeter

In a perfect world, we’d all defend liberty even when our own isn’t treatened, but in real life, that’s not how things are done.  It’s partly the fault of myriad business people of the past that freedom of the economy is gravely threatened today. When threatened with government regulation, many larger companies compromised with the regulators to create regulations that would favor them rather than their smaller, more efficient competitors. You can’t really blame them. They worried about the short-term consequences of falling sales and how to meet the next payroll and failed to see the long-term consequences of what they were entangling not just themselves, but everyone else in.

The American econ­omy has never been wholly free, instead operating under various political restraints pretty much since Alexander Hamilton got his greedy, manipulative hands on it. Compared to the politically planned economies of other nations ours was relatively free economy until the 1930s and has maintained quite a lot of freedom until relatively recently.

The prosperity US citizens have gained through producing and exchanging in a largely free country has been the envy of the world. Remember, we started out poor. There was little per capita wealth 240 years ago; but our forebears had an abundant faith in the nation’s future under God, a strong belief in themselves, and they practiced the Puritan work ethic. The United States became the land of opportu­nity. Millions of the poor and oppressed of other nations migrated here to make their own way in this “land of the free.” Mostly, they succeeded. Never have so many ad­vanced so far out of poverty in so short a time, as in the last 240 years in the United States.

The relatively free economy we have enjoyed in America has given us unparalleled prosperity, but an affluent society is not neces­sarily a just society, which brings us to the second test of evaluating a free enterprise system: Does it allocate the rewards fairly and equitably?

In a free society every one of us is rewarded according to the value willing buyers attach to the goods and services he offers in exchange. This market place assessment is made by consumers … uh, people, and people are self-centered, biased and ignorant. So, allowing consumers to set the value of people’s contribution to society might not seem like a good idea.

What’s your alternative? Well, before there was capitalism and the free market economy, there was the nobility who acted as the wise and good, judging and awarding on their estimation of personal merit. They assured us that the wealthy deserved their wealth and that the paupers deserved their starvation. They insisted we should all be contented and happy and pay our taxes to them so they could go on judging and rewarding by their own value system. We rejected that system for a better one.

Is it fair that some people make 25,000, while others make only 15,000 and then you have folks who make millions? Don’t we have a lopsided society in which a handful of people have accumulated the bulk of wealth? Shouldn’t be people be able to vote on politicians, who can appoint bureaucrats, who can redistribute the wealth equitably? What makes you think that someone who used to be your neighbor just became Solomon when elected to public office? You would prefer to elect imperfect people to decide how much you earn rather than let imperfect people earn that position by being successful in business?

We do live in an affluent society, and the fact is that the prosperity generated by our relatively free in­stitutions has been widely shared by the American people. Yes, there are rich people and there are middle class people and there are some who remain poor … although even the poor in our country live far more affluent lives than anything my great-grandfather Elmer (a rich man in 1900) could have imagined. The allocation of rewards represents the choices people make … the education they sought, jobs they took, the money they spent, and the investments they made. It’s said that 1% of the population owns 80% of the wealthy, that 10% owns 90%, etc. We could argue about that statistics. But take a look at reality.

Sixty percent of Americans own their own home and 95 percent own a car. I know a few dozen people who don’t have running water, but I live in Alaska and that’s actually a lifestyle CHOICE. Even people out in the Alaska village have electric refrigerators. Eighty-four percent of American homes have a washer and dryer. Eight-four percent of American homes have a computer, and 73 percent have broadband connection.

Capitalism (the free economy) has produced material abundance, and the benefits of our prosperity are enjoyed by almost every American and we’ve exported a great deal of it to millions of people around the globe.

There is no concentration of ownership of everyday things like houses, automobiles and food. It’s when we look at all the money the “rich” have that we allow ourselves to believe that the industry of this country is owned by a handful of stockholders.

Pick any one of the giant corpora­tions and examine its annual report. You’ll find thousands or even millions of people own stock shares, usually exponentially more than the employees of that corporation. Note the large number of stock­holders who are not individuals but institutions. Those fund churches, banks, pension funds. Nearly every American owns a chunk of the corporate wealth of America!

Yes, there are some phenomenally wealth people in this country. Some of them are foolish with their money, but so are a lot of poor people. Others invest their wealth, which helps to produce the incredible variety of goods America enjoys. Others, and sometimes the same individuals, give generously to charity. Americans lead the world in their charitable giving. No other soci­ety has ever allocated its rewards as generously or as equitably.

Our present economic system of free enterprise has made us an affluent society produc­ing over and above our own needs, which we have gener­ously shared with the world. Every person who has participated in the production of goods and ser­vices shares equitably in the fruits of his production. Even those who do not participate live pretty decent lives … far better than what people a century ago lived.

Ultimately, liberty is based on an aspiration deeply rooted in human nature. We all want the freedom to choose. We want to be free to worship in the church of our choice, to choose our own schools, to read freely and speak our minds. We want to be free to be ourselves, even if others don’t agree, so long as we are not harming others. We want to be free to choose our profession or place of employment. We want solitude when we choose to be alone, and we want the freedom to choose our associates—which includes the right to dissociate. These are some of the demands of human nature itself. God made us this way or it’s in our DNA.

“The God who gave us life gave us liberty at the same time.” Thomas Jefferson

 

The free society is our natural habitat. It aligns with human nature. Freedom also works in our economic sector, which is why the market economy (capitalism) works so well. The economy is free when the productive activities of people re­spond to the needs of consumers, discovered through people’s buying habits. Yes, when people are free to spend their money as they please, they may spend it foolishly. They’ll make mistakes. Most of us learn from those errors and succeed in not repeating them.

The biggest mistake of all is to persuade ourselves that we can avoid the little mistakes people make in a free society by adopting a planned economy. A centrally planned nation is necessarily a command society. Individual per­sons are no longer free to make their own decisions. Our private plans must be cancelled whenever they conflict with the overall political plan.We become nothing more than serfs, doing as the landlord dictates.

Economic freedom does not assure you’ll get the income you think you deserve, or the job you believe you’re entitled to. Economic freedom does not dispense with the necessity for work. It only promises that you may choose from among many employment oppor­tunities, or go into business for yourself. And that it outperforms all other economic systems is a bonus point in its favor.

 

 

Watch Who You Call Greedy   Leave a comment

The free-market society is often criticized or condemned from the root to the fruit for its alleged dependence on the unsavory human trait of greed. Socialists have always claimed that their system would replace one dependent on greed with one based on compassion and caring for the unfortunate.

Sounds good. We’re still waiting. Yeah, I didn’t think so.

Both theory and history have shown that socialism cannot produce the wealth that makes compassion and caring possible. Christianity aside, generosity flows from surplus.

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The idea that the free-market system rests on greed has always been mistaken, perhaps a lie made up by a socialist propagandist who was pissed off that his own family wouldn’t keep him in comfort despite his refusal to work at remunerative employment, then was pissed off that his wife’s family stopped supporting his profligate lifestyle, and finally ended up living off the redistribution of Engels’s capitalistic salary. Yes, I’m talking about Marx. Well, at least Engels was a willing party to the theft of his income. You can’t say the same for tax-payers, who essentially hand over their income at the point of a gun to their heads.

Capitalism rests on allowing people to pursue their self-interest. I know … scandalous. How selfish sounding!

Self-interest is quite different from greed and often consists of the very opposite. People in general are interested in earning more income. One major reason for this desire is that they wish to have the ability to give to or take care of others more effectively. Generally, this desire is aimed first at their own families, but most generous people don’t give to their own families exclusively.

The amounts of money, time, and effort that people devote to making others happier or better off belie the slander of a free market’s dependence on greed. We see it especially at the Christmas season, but such transfers also occur throughout the year, amounting to an enormous proportion of how people in free-market societies use their wealth.

We have a lot of Chinese at our church and I enjoy interacting and learning about their society. They tell me that the alleged compassion and caring for the unfortunate that many have supposed support socialism is almost unheard of in China. Those who refuse to work there are thrown into prison where they are put to back-breaking labor. If they survive that, they usually are much harder workers when let back out into society.

According to my friend, Mila Andrepova, the Soviet Union showed a similar pattern of stern discipline to those who wouldn’t (or couldn’t) work.

The incentives inherent in socialism require that the socialist society become or remain lodged in poverty, thereby crippling its capacity for effective compassion and caring in the material realm. Socialism does not so much eliminate the greed that exists in a population as it alters the forms in which the greed can be directed and expressed.

Leaders of socialist societies have a habit of living lavishly amid the squalor of the system they control and despoil—Mao, Castro, and Chavez provide ready examples. Ordinary people in socialist societies, deprived of free-market outlets for the pursuit of their self-interest, must strive to better themselves and those for whom they care by struggling for political power, often diverting resources intended for the general public to their own enjoyment. Socialism does not build the generous character that socialist dreamers have touted.

Chinese communists were/are much more greedy for power and the lifestyle that comes with it than American capitalists because their only alternative was/is abject poverty. Li’li Wang Babcock, raised in Communist China during the Cultural Revolution, immigrated to US two years after Tianamen Square

Capitalism may teach that greed is good, but by creating more wealth and allowing members of society to direct that wealth themselves, it leads to more compassion and generosity than does socialism. Forbes noted this correlation back in 2008 when the US was being beat up over government contributions to Haiti.

Posted December 30, 2016 by aurorawatcherak in economics

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Freedom   Leave a comment

I recently was told by a very progressive friend that libertarian/anarchy philosophy is inconsistent with Christianity and furthermore, even calling oneself a capitalist is an affront to God. She then proceeded to google flurry me with out-of-context Bible verses that were, I think, meant to prove her point.

Yes, she is still a friend. I don’t dump people just because they’re wrong and rude about being wrong. I also love when people who call themselves atheists purport to understand my belief system better than I do. Last I studied this subject, atheism meant you don’t believe in God. How does that make you an expert on what He wants from His followers?

But this isn’t a Bible study. This is me thinking aloud.

Image result for image of free willHuman beings, just because they are human, possess the capacity to exercise freedom and the right to do so. God created us this way. He created Man (Adam and Eve) to have fellowship with Him, but He wanted that fellowship to be real. He wanted them to hang out with Him because they chose to hang out with Him. So He created them with what the theologians call “free will.” He placed them in a place where their every need could be met with just a tiny bit of effort and, to give them a choice whether to obey Him or not, He placed only one restriction on them. Don’t eat of the Tree of the Knowledge of Good and Evil. What was so special about this tree? As I get older, I am coming to believe there wasn’t much special about the tree. It only became special because of Adam and Eve’s actions in disobeying God. Otherwise, it was merely a tree.

Anyway, free will means we can exercise freedom and possess the right to do so. Each of us is free to own property, choose a job and career, worship, speak, move freely within society, promote and protect our self-interest, create and innovate from our own imagination and resources, and contract, compete, trade and associate with others in voluntary exchange. That is the true and historic meaning of capitalism, which is inseparable from freedom.

Libertarians elevate personal freedom to an end to be achieved. Freedom is a prerequisite to, and integral with, the achievement of any of human goals. Libertarians defend each person’s right to be protected against all forms of external aggression initiated by the state OR by private individuals. A basic principle of libertarianism is that individuals have the right to live life as they choose, as long as their actions do not constitute an aggression against others.

This nonaggression principle (NAP for short) might better be described as non-initiation-of-force principle (because it does allow those aggressed against to defend themselves) and stems from the libertarian idea of self-ownership. Self-ownership means you get to make your own decisions about what to do with your life, property, body, energies, and speech. Individuals are equal, so a person owns himself and none other. Every other person owns himself as well.

The self-ownership principle creates a zone of privacy and freedom of action for each individual. Of course, when dealing with others we should respect them as equals in moral status and human dignity. Other people have the right and responsibility to make their own decisions regarding their own life, property, body, energies, and speech.

Libertarians reject the notion that people require a guardian to protect them from themselves. They believe they can define for themselves what is good and bad. The state (if it exists at all) should confine itself to the minimum necessary to protect individuals in the way they choose to pursue happiness. The proper state is therefore neutral with respect to its commitment to one or another conception of happiness or the good life. The state’s only legitimate purpose is to ensure the freedom that allows individuals to pursue happiness or the good that each person defines for herself.

Now we come to where my friend freaked out and google flurried me.

According to the Christian worldview, God is the ultimate moral authority Who created Man. Each person is free, self-responsible, but also accountable before the Creator. Between a human and God, the appropriate relationship may be viewed as one of agent, steward, or trustee to owner. Each person has a God-given responsibility to answer to Him for his choices including the uses he makes of his individual human potential and his property held temporarily as a steward of God.

This goes back to God created Man with free will. Only when a man has choice and its inherent responsibility can he be moral. Choice (free will) is the foundation of virtue. Morality involves choice and the use of reason in making that choice. Freedom is a gift from God, but the freedom God provides does not mean freedom from God’s law or license to do whatever we want. Real freedom is not the power to do whatever we like but, rather, to choose to do what we ought to do.

The purpose of freedom in Christ is not freedom for its own sake but for the purpose of serving God through our own lives and the voluntary common good. In Christianity, freedom is simply the means toward a higher end and is not be viewed as an end in itself. When one has freedom, the important choices become how to order one’s life, what values to pursue, and which virtues to practice.

Each person should be politically free to choose and pursue his own values and should allow others to choose and pursue their own values. Man is endowed by God with inalienable rights. The exercise of our rights is strictly a matter between the individual and the Savior, until that exercise trespasses on the rights of another person. I have a right to make value judgments, but forcing another to adhere to my morality is to deny him his right and responsibility to answer to God directly for the choices he makes.

This Christian philosophy is stated most clearly by my spiritual antecedents, the alpine anabaptists. They believed that each individual should be able to encounter God without the mediation of any other person, group, or nation. Self-responsibility before God is viewed as existing prior to political philosophies and systems. If government exists at all, it should be limited to protecting this relationship between man and the Creator. The state is simply a man-made means of securing liberty and justice for all men alike. The legitimate aim of government is to provide the social and political conditions that protect each citizen’s right to individual action.

From the Judeo-Christian perspective, governmental authorities are the civil distributors of God’s higher law. There is a realm of natural law, over and above positive man-made law, involving unwritten and unalterable laws issuing from God. Natural law, the ultimate source of right and wrong, is timeless and well beyond the political realm. The idea of governmental restraints rests on the premise that a natural law higher than that of the state limits and qualifies the power of the state.

Capitalism properly emerges from such a political system, is consistent with Judeo-Christian values, and involves the voluntary exchange of goods and services between free and self-responsible persons. It is hard for me to conceive of an economic system like communism being voluntary as it opposes human nature.

Capitalism may be defined as a system of voluntary relationships within a legal framework that protects individuals’ rights against force, fraud, theft, and contract violations. Advocates of capitalism differ in their arguments for a social system that maximizes individual freedom and in their views with respect to the nature of man and the universe. Underlying these separate views, however, is the need for freedom of the individual to choose how he wants to integrate himself into society.

Since my friend was very pointed about the actions of the early church as a “communist” society, I thought I would point out that when Barnabas sold his land and gave the whole amount to the church, it was completely voluntary. Nobody required him to sell his land and he was free to give any or all or none of the proceeds to the church. His activity did not require anyone else to follow his lead. Ananias and Sapphira were condemned not because they didn’t give their whole profit to the storehouse, but because they lied. See Acts 4:32-5:11, particularly 5:4 “The field belonged to you before it was sold and the money was yours after it was sold. How have you thought up this deed in your heart? You have no lied to people, but to God.” It was completely voluntary. There was no reason to lie. They just wanted to look as good as Barnabas without actually doing what he did.

 

 

Real Capitalism versus Socialism   Leave a comment

Have you ever thought about what happened with the fall of communist socialism in Eastern Europe? I mean, it sure seemed like capitalism had won a decisive victory. But now capitalism appears to be one the ropes and less than a genreation later we have people calling for increased socialism despite the overwhelming evidence that it didn’t work.

I’m basing this on an essay by Hans Hermann Hoppe. I like Hoppe’s thinking, but he’s German and kind of long-winded. I’m not sure if its English-as-a-second language thing or just his personal style, but I figure if it takes me two days to read one of his essays, I can’t really use it on the blog. I can, however, write my own essay based upon his.

When the Berlin Wall fell in 1989, socialism supposedly took a beating. For more than 40 years, there had been a socio-economic experiment underway whereby the post-war Europe was divided into the US-dominated “West” and the USSR-dominated “East”. Immigration from East to West was virtually impossible. The population of Eastern Europe was effectively imprisoned and the Berlin Wall was the most dramatic and visible symbol that state of affairs.

This really was an experiment on a grand scale. Theorists like Marx and Lenin had insisted that socialism was the natural state of industrialized nations, but the only country that had successfully implemented it was the Soviet Union, which had been a agrarian state before the Communist Revolution. Now, the Soviet Union expanded the “socialist experiment” across all of Eastern Europe, which had been industrialized before World War 2. Just as scientists would use a test group and a control group, central planners essentially outlawed private ownership of the means of production, confiscating it from the former “capitalist” owners. All ownership control was transferred to the State government. The Western intelligentsia saw this experiment as great and noble. Keynesian and Nobel-prize economist Paul Samuelson, whose book Economics was the most successful and widely used economics textbook in Western academia at the time, predicted that the “centrally planned” socialist economies of the East would experience a period of economic lag, but would soon surpass Western living standards. When the Berlin Wall came down in 1989, it became clear to all but the most delusional observer that the “Socialist Experiment” had been an unmitigated failure. Russian-style socialism had left behind economic wastelands, ravaged countries, and impoverished and demoralized populations.

As Westerners had suspected all along, the sole purpose of the “iron curtain” had been to prevent Eastern Europe’s most productive and entrepreneurial individuals from leaving the East for the West and thus, hopefully delay the oncoming socialist bankruptcy.

Of course, the Western intelligentsia, not wanting to admit they’d been wrong, asked the question – If socialism lost, who won? Most people answered that the West won – the United States and its Western European allies had, in world public opinion, won the “war” and since the world public opinion saw the US as a prime example of capitalism, it proclaimed that capitalism had won.

 

Image result for image of free market capitalism

If only capitalism had actually existed in the West. The US has not represented capitalism for a long time. For at least a century, The US has operated under something the neoconservative elites call “democratic capitalism”

Under democratic capitalism, private property remained nominally untouched and intact. The government claims it cannot confiscate private property or the means of production. However, a democratically elected state government could interfere with private property rights if they decided such interference was in the public interest and for the common good. In the service of these interests, the government could confiscate, tax and redistribute private property, and it could legislate or regulate the uses that private owners were allowed to make of their property. That is, all property, and in particular all property used in the means of production (capital), is in reality only provisional private property. The property remained in private hands and under private control as a state government grant, to be kept as long as the government deemed this in the “public interest.” Violate the public interest de jure and you will discover you don’t actually own anything.

Image result for image of free market capitalismUsing the general welfare clause of the Constitution, the US government has become the country’s largest land- and real estate owner and owner of all “public” streets and schools. Ostensibly for the common good, it has grown to consume almost half of the US national product (GDP) annually. In 1989, the public debt had steadily increased to reach 60% of GDP by 1989. Today it stands at more than 100% today. The government monopolizes the production of money, has established a government-controlled central bank, abolished the gold standard and replaced gold with a paper money that it can, with the help of its central bank, create at will at practically zero cost. Through a steadily growing flood of legislation and regulation, the property rights of private owners are constantly redistributed and reshuffled. Some people and businesses are made worse off and others better by the stroke of a pen. “Friends” of government, the promoters of the “common good,” are rewarded and its “enemies” punished. With the next election, that deck might be resuffled, creating new “winners” and “losers”.By 1989, the common good had been intepreted to mean the whole world and, to make the world safe for democracy and quasi-capitalism, the US government maintained the world’s largest, most costly and heavily armed military forces, occupying hundreds of military bases around the globe. Today, it remains engaged in a seemingly endless series of wars to enlarge its empire and sphere of influence.

Image result for image of free market capitalismIf that is capitalism, capitalism was not a good thing in 1989. Tragically, the European Union (EU) has adopted and followed the US model closely. Everywhere a large and steadily growing underclass of state-dependent “public welfare” clients has emerged side by side with a small oligarchy of the super-rich, government and central bank-connected bankers and financiers. Meanwhile, working and middle-class incomes are stagnant or in decline.

Could capitalism be blamed for this scenario? Only if it actually existed. Capitalism is associated with private property and with free choice and exchange based on and within the constraints of private property (laissez-faire).  That’s can’t be reconciled with the state government extracting and expanding about half of a country’s GDP and monopolized the production of the country’s entire infrastructure of roads, schools, public buildings and lands, and also production of money and credit.

We do not have free market capitalism in America; we have crony capitalism. There is a huge difference between free market capitalism that democratizes a country and makes us more efficient and prosperous and corporate crony capitalism. - Robert F. Kennedy, Jr.

Some argued that democracy (majority rule) is incompatible with private property and laissez-faire. Wasn’t democracy just another form of socialism? They argued that democracy was not to blame for the increasingly blatant shortcomings, failings, and blunders of the US and the Western world/

Of course, in the West, democracy is seen as an indisputable and unquestionable ‘good.’ You have got to have democracy to have self-rule, right? Take a hard look at the current Presidential election and intelligent people begin to wonder if that is actually true.

Image result for image of free market capitalism

Yes, in school we read that the leftist Western intelligentsia laid all all blame for all wrongs at the feet of capitalism and assured that no one was free to think otherwise in our government licenced and financed public schools and universities. Does that mean it’s true or just that we have been disallowed from thinking otherwise?

In the West, private property was not abolished entirely in one stroke and given over to government control as in Russian style socialism, but under the influence of democratic socialism, the encroachment on private property rights by the state proceeded gradually and relentlessly, until today there is virtually no aspect of human life that is left free and unregulated. Go on. Take an inventory. I have. Our every choice and activity is regulated from cradle to grave, whether as a consumer, producer or trader, at home, at work or in “public”. Private property and private property rights have become a farce. Trust me — I own a remote cabin site in Alaska where I would like to build a cabin – I know for certain that private property rights are a joke that is exceedingly not funny.

Image result for image of free market capitalism

The economic decline of the West was less dramatic than that experienced in the East because it occurred more slowly. Democratic socialism has outlasted one-party socialism by some decades, maybe because we drunkenly sway toward capitalism on rare occasion, so slow the disaster train down a bit, but the oncoming economic bankruptcy and social upheavals of Western democratic socialism should be clear to anyone. We’re at $20 trillion dollars in debt. Neither major party candidate is promising to do anything about that elephant in our collective livingroom. Democratic socialism – the Western economic system – has entered its end game and is breaking down. It took it 20 years longer than it took Soviet socialism, but it’s happening just as surely.

The Left will try to label the coming economic breakdown and social disaster as an ultimate crisis of capitalism. The cure they will propose will be another version of socialism. The difficulty is that no variety of socialism can ever produce lasting peace and prosperity. It hasn’t so far, in all of its many attempts. Only capitalism has achieved prosperity and some semblance of peace, but it didn’t last very long because the central planners took aim at it.

Capitalism is entirely different from what its socialist detractors say it is. Capitalism means

  • justly acquired private property
  • free, voluntary association, contract
  • exchange of and between the owners of private property.

Capitalism so conceived cannot be found anywhere in the contemporary world. It’s an unrealized ideal. At certain times and places, societies have made significant advances toward this ideal and accordingly prospered and flourished, but the steadily growing influence and seemingly unstoppable popularity of socialist ideas from the mid-19th century onward put a tragic end to any such attempt and has derailed and reversed any trend in that direction.

Image result for image of free market capitalism

We’ve become so glutted with the false teachings of our public schools and government-financed universities that we don’t even realize that we’ve misidentified our vocabulary, so it is extremely difficult to even have a conversation about how best to avoid economic disaster. It seems almost as though we must destroy ourselves in order to, maybe, learn a better way of doing things.

Posted October 21, 2016 by aurorawatcherak in economics

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