Missing The Obvious

I recently heard a very knowledgeable, influential person talking about the future. He had many insights that were helpful and valid. His economic views, however were quite disturbing. He made a comment to the effect that capitalism is immoral. He pointed to the fact that many people have been hurt by capitalism and that it is morally bankrupt. You can’t count on people doing the right thing.

This is an intelligent man, someone who is aware, who’s job it is to look behind the façade to see what is really happening. This is also a man who is a consultant, a businessman, an entrepreneur, a profiteer and , in leftist radical terms, a capitalist pig. It is difficult to imagine that he is unaware of that fact. He is, in essence, an example of what is good and moral and right about capitalism.

He offered his service and he was paid very handsomely. The participants went away with something of value. He has clients all over the world that also pay him a lot of money, and I would expect that he is very busy because he gives something worth paying for. That is the essence of free markets, another name for capitalism, people trading freely with others who are willing to deal with them.

He is a small scale capitalist, but size doesn’t matter. Whether the market is for a gallon of milk or a billion dollar manufacturing plant, as long as the parties to the transaction are free to make their own decisions and use their own resources, economic freedom gives the best result. Consistently good judges of value and of the future are the most profitable and contribute the most to society. The only exceptions are those businesses that use government coercion for their profits, rather than market competition. They are the source of injustice in the markets.

Our consultant friend was committing the error that so many people commit these days. They assume that the markets are actually free because that’s what they have been told. They assume that economic freedom is the source of the problems. The natural inclination with that frame of reference is to look for government to save the day. He refuses to see that there isn’t a single market in this country that is truly free. Further, the markets that are experiencing the most disastrous problems are the ones that are most seriously impaired by government manipulation.

When our futurist cited his sources of economic understanding, it became clear as to why he was so far from the economic truth. Economist Joseph Stiglitz was a key reference in the economic analysis. He is one of a breed of influential economists who have been trained in the discipline of central planning. As intellectual superiors, they know how things should work. For this group, the stated aim of economics is to guide government intervention to bring economic nirvana to the people. Lowly peasants don’t know what is good for themselves, so they need the experts to cram it down their throats.

These economists lead intelligent but unwitting people to believe that banking deregulation caused the credit crisis. They say that the boom-bust cycle is an inherent evil of capitalism and that free markets lead to exploitation of the masses. What they don’t say is that the entire banking system is built on a foundation of government manipulation of banks, prices and markets. The Federal Reserve Bank directly and indirectly controls interest rates and monetary policy, the sources of economic instability. Artificially low interest rates initiate and expand credit and asset bubbles. We are living through the latest Fed induced bubble and crash as I write this. The Fed is, at this moment, laying the groundwork for the next big bubble and crash in 5 or 8 or 10 years, which may be worse than what we are experiencing now.

Our world traveling consultant seems to be a brilliant man. He has the answers to many questions and has a good grasp of technological and demographic trends. When it comes to economic understanding, however, it seems that he is missing the obvious. He imputes injustice on capitalism when it is, in fact, the only road to true justice and prosperity. “Capitalist pigs” like him are the reason that all people, rich and poor, are better off in free economies. His comments only empower the enemies of freedom. Moreover, his indictment of capitalism is an indictment of himself. Neither he nor capitalism deserve such treatment.