The Anti-Capitalists Are (Still) Wrong about History—And Much More (Demo)

The notion of late capitalism has been around since Karl Marx began his assault on free enterprise in the 19th century, although the term was officially coined by German economist Werner Sombart in his 1902 book “Der Moderne Kapitalismus.”

On February 27, 2020, Doug McCullough and Brooke Medina write on FEE.org:

The [American] Dream is not dead, and we shouldn’t let a populist scream convince us otherwise. Americans living today have every reason to be optimistic—and grateful.

– Michael Strain, American economist

Capitalism has become the preferred whipping boy of those calling for more government involvement in markets. The statists love to begrudge it and the wealthy wokes love to downplay it. Whether it’s income inequality or the growing power of big tech, “late capitalism” is a term employed by those who would like to eliminate or greatly reduce private ownership and usher in an era of redistribution.

But is capitalism really in its final gasps? And if so, where are we headed?

The notion of late capitalism has been around since Karl Marx began his assault on free enterprise in the 19th century, although the term was officially coined by German economist Werner Sombart in his 1902 book Der Moderne Kapitalismus. Marx believed that the proletariat would eventually revolt against the bourgeoisie due to the angst created by inequality and exploitation. For him, one of the most egregious injustices was wealth inequality. He believed private property was a major driver of inequality, effectively insulating the wealthy from giving workers their fair share.

Sound familiar? Senator Sanders has an entire policy trove of bad ideas built on the premise that wealthy Americans have exploited workers by weaponizing their possessions (property) for their own malignant greed.

Those suggesting capitalism is in its final throes assume two things:

1. Economic inequality equals injustice
2. The existence of  economic inequality means that capitalism must be replaced

A Tale of Two Inequalities

Unemployment in the United States is currently at the lowest level it has been since the 1960s. Not only is the economy creating more jobs, but wages are growing. And consider this: “wages for the bottom third of workers have risen at a 4.1 percent annual pace over the past two years versus 3.3 percent for the middle third and 3.6 percent for those at the top.”

Workers are in such demand, especially in industries like healthcare and education, that an increasing number of companies are offering incentive packages to defray the cost of moving to a new job. When we consider the income mobility of Americans, with 95 percent of those at the bottom 20 percent not being there in 15 years, it becomes clear that wealth is transient in a market economy, providing a pathway for many to pursue the American Dream.

It’s important to note that regulatory and tax reform play a role in reducing wealth inequality. To be sure, nothing will create absolute wealth parity in a free market (nor should it), but the effects of deregulation and tax reform are instructive. Economist Michael Strain notes that from the start of the Great Recession until 2016, “inequality decreased by 7 percent” after accounting for taxes and transfers.

As the government’s demands on business and personal wealth are reduced, employers feel more comfortable investing in expansion, leading to more jobs that in turn create a demand for additional labor. This makes workers more attractive to prospective employers, bolstering job seekers with a competitive environment that enables them to be choosier employees.

Despite the free-market’s ability to create a more level playing field, however, some types of inequality will continue to exist. Economist Thomas Sowell notes that there are many contributors to inequality, saying, “there was never a reason to expect equality. [There are so] many different complicating factors, cultures matter, demographics matter, regions matter.”

For example, the average life expectancy of a man that lives in the mountains is a decade less than one that lives in the Virginia suburbs. Inequality is even evidenced in seemingly superficial matters, such as physical attractiveness, athletic aptitude, and musical ability. Not everyone can play like Patrick Mahomes or sing like Adele.

The Justice of Capitalism

There are few things more professionally distressing than seeing your hard work and earnest efforts thwarted by a system designed to quash competition. Unfortunately, this is the type of approach many protectionists on both the left and right take when it comes to economic policy. Through onerous regulation, occupational licensing restrictions, minimum wage laws, price controls, tariffs, and more, it can feel like the deck is stacked against you.

By contrast, free enterprise is liberating and creates opportunity. The spread of capitalism and the promotion of free markets has led to a substantial decline in extreme poverty. In the 1980s, approximately 40 percent of the world’s population lived in extreme poverty. Today, that figure is 8.6 percent.

Even authoritarian regimes, like China, recognize the importance of limiting government intrusion in markets if they hope to be competitive in an increasingly globalized economy.

Capitalism has proven to be the best vehicle for economic justice for the marginalized and impoverished. Why would anyone want to deprive the poor of the mobility free enterprise affords?

Capitalism Today, Capitalism Tomorrow, Capitalism Forever?

If we look to public trust as an indication of capitalism’s viability, look no further than business, which holds “a massive 54-point edge over government as an institution that is good at what it does,” according to the Edelman Trust Barometer. It’s also worth noting that US economic confidence is the highest it has been in nearly 20 years.

No, capitalism doesn’t appear to be going anywhere anytime soon. Instead of statists thumbing their noses at capitalism–oftentimes suggesting governments intervene–they’d be wise to exhibit a little intellectual humility and take a lesson from the efficiency and dynamism of the private sector.

The data is indisputable. Capitalism has been the primary driver of economic flourishing and innovation for nearly three hundred years, catapulting individuals, societies, and nations into levels of prosperity that were previously unfathomable. Capitalism respects the agency of people and communities, recognizing that they should be able to freely associate and trade as they see fit. Free market capitalism honors the natural right to private property.

But, even beyond these principles and big ideas, the practical matter is that so long as humans value prosperity, opportunity and innovation, capitalism won’t fade away. Free enterprise offers technological innovation that make products smarter, lighter, cheaper, and use less material.

Capitalism creates, socialism destroys.

Moving from free market capitalism toward a command economy is neither moral nor responsible. So long as free people choose action over apathy and liberty over serfdom, capitalism will continue to offer individuals the opportunity to pursue the American Dream.

https://fee.org/articles/the-anti-capitalists-are-still-wrong-about-history-and-much-more/

Gary Reber Comments:

Unfortunately, for an article defending free market “capitalism,” the authors never actually address the issue of ownership of “capital,” as in productive capital assets, being concentrated among individuals who comprise the wealthy capital asset ownership class––the so-called “1 percent.”

No one in leadership positions or seeking leadership positions attacks the natural right to own. What is being challenged is how much of the non-human means of production should one own or seek to own and cannot or won’t use such productive power for consumption. At some point they begin to beggar their neighbor — the equivalency of mass murder — the impact of concentrated capital ownership. 

The authors argue their defense of “capitalism” with the idea that the benefits for ordinary Americans are to be found in job creation. Yet for the vast majority of employed people, they remain propertyless, as it relates to productive capital assets, and essentially are wage and debt slaves (or worse welfare and charity slaves), dependent on the wealthy capital asset ownership class.

The problem with “capitalism” is he manner in which a few are able to dominant the many and concentrate ownership and control of the non-human means of production.

The capitalism practiced today is what, for a long time, I have termed “Hoggism,” propelled by greed and the sheer love of power over others. “Hoggism” institutionalizes greed (creating concentrated capital ownership, monopolies, and special privileges). “Hoggism” is about the ability of greedy rich people to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. The rich and politically powerful sell every capital project on the basis that it will create jobs, when the real wealth-building benefits are vested in the already wealthy capital ownership class who seek to own more capital wealth.

Some would argue that the rich are not greedy and yet there is plenty of evidence that the wealthiest refuse to share their secrets to acquire productive capital with the self-financing earnings of capital, and without the requirement of past savings (or past reductions in consumption). While the rich, innately, are not any greedier as a group than other people, however much they have better and more opportunities to indulge that vice, they have failed to focus any discussion on what policies and system reforms are necessary to create inclusive prosperity by universally broadening the ability to generate income through personal ownership of productive capital and the inclusive opportunity to become a capital owner.

Sadly, academia, the wealthy capital ownership class, and politicians have failed to educate the American people through our schools, even at university levels, and the national media dialogue to teach effective financial means to acquire productive capital with the earnings of capital, simultaneously with economic growth. As a result, the vast majority of readers of this paper will not initially understand and comprehend the free-market, private property rights concepts and financial mechanisms proposed as related to an understanding of money, credit, banking and finance.  

Unfortunately, the vast American majority only understand earning an income via employment and are unable to make reductions in consumption to accumulate savings and speculate via purchasing existing stocks (legalized gambling), hoping for a financial gain when they sell the stock. They are excluded from purchasing new stock issues, representing new capital asset formation, with the earnings generated by the investment, without the requirement of past savings.

While the national focus is always on job creation instead of ownership creation, our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success –– always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent is not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the goods, products, and services produced as a result of substituting “machines” for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” 

If the advocates for “capitalism” really want a system that empowers EVERY child, woman and man to acquire personal and private ownership stakes in the corporations growing the economy, both established and viable start-ups, they should reform the system and provide equal access and the means to acquire new formations of productive capital assets simultaneously with the responsible growth of the economy. They should support legislation to provide equal annual allocations of insured, “pure” interest-free capital credit to EVERY child, woman, and man exclusively for investment in the responsible growth of our economy. Such capital credit would be repaid solely with the pre-tax earnings of the investments and without the requirement of past savings.

They should support Monetary Justice at http://capitalhomestead.org/page/monetary-justice and the enactment of the proposed Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/. And The Capital Homestead Act brochure, pdf print version at http://www.cesj.org/wp-content/uploads/2014/11/C-CHAflyer_1018101.pdf and Capital Homestead Accounts (CHAs) at http://www.cesj.org/learn/capital-homesteading/ch-vehicles/capital-homestead-accounts-chas/