Capitalism is fine; lets revisit Big Government instead

Let’s revisit Capitalism, Arun Maira says in the Times Of India. Consider what he has to say on it –

“Is it fair?” This is a question asked not just by people in the developing countries, but even in the US, the bastion of free markets and capitalism. In his book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, Robert Reich, a member of former President Bill Clinton’s cabinet, observes that the wealth of the two richest Americans – Bill Gates and Warren Buffet – is equal to the combined wealth of 100 million poorer Americans.

He argues that this is a result of the capitalist process. He does not grudge the two their wealth. But he says a system that can result in such huge disparities cannot be completely right.

Bill Emmott, former editor-in-chief of The Economist, in his book 20:21 Vision: 20th Century Lessons for the 21st Century says, “Capitalism in its present form is unpopular, unstable, unequal, and unclean”.

And then some more –

These critics of capitalism are not communists. They are capitalists. Yet, they are calling for a better way. Therefore, let us not be stuck in ideologies. Let us face realities. Why is it ‘socialist’ and wrong to forgive the loans of struggling farmers in India, while it is ‘capitalist’ and right to help Bear Stearns’ rich investment bankers on Wall Street pay off their loans?

It is a real tragedy that people (including me, when I have to offer some example of a country that even remotely practices capitalism) consider the US to be the bastion of free markets and capitalism. It is neither. At most, it is a pseudo-capitalist economy practicing a kind of crony capitalism. The reason is – there is too much of government interference in the economy. But as far as the general perception goes, the US is a capitalist country, and if anything goes wrong in the economy, capitalism becomes the whipping boy because most capitalists are ashamed of being found holding a bag of their hard earned money. That the government manages its finances in a manner which, if the same had been done by a private company, it would have seen its board being jailed, doesn’t seem to concern most people.

Coming to Bill Gates and Warren Buffet and comparing their wealth to that of the 100 million poorer Americans (Why don’t you compare the number of shirts each group has? The 100 million poorer Americans would surely win), and the assertion – a system that can result in such huge disparities cannot be completely right, the argument has no legs to stand on. Did Bill Gates and Warren Buffet go and rob people? Bill Gates made money from something that did not exist 25 years ago. He and the software industry together have created millions of high paying jobs and made the lives of hundreds of millions of working folk easier (and people were ready to pay for this increase in the quality of their life). And Warren Buffet made his money by investing and staying invested in companies that ran a good business. He understands the meaning of investment. Is that his fault? Whether Robert Reich grudges these two their wealth or not is irrelevant (though when a person starts comparing bank balances, what other motive exists is beyond me). The very fact that he can make such asinine comparisons and then extrapolate the results and come to a nonsensical conclusion convinces me that he either has no idea of capitalism or has mistaken the money game being played in today’s United States for the real deal.

The biggest danger comes when people believe Bill Emmott when he says – Capitalism in its present form is unpopular, unstable, unequal, and unclean. At the risk of repeating myself, what we have at present is not capitalism, but pseudo-capitalism.

As for Maira’s statement on Bear Stearns, I will say this – NO TRUE CAPITALIST would ever support the Bear Stearns bailout. I am a capitalist and I was strongly against it. The only people who would support it are those people who would lose the most if government allowed the market to function absolutely freely – and they are definitely not capitalists.

The rest of Maira’s article is mostly a rehash of existing ideas floating around on how corporates should play a more inclusive role in society. He wants them to look at the way they are making their profits and care not only about their customers, but also about the citizens. Basically, he wants them to stop doing just business and also start look at how they affect society and the environment.

A business should do one thing and one thing only – do business. A government should do one thing and one thing only – govern. When neither do what they are supposed to do but try to encroach on each other’s territory, is it surprising that we find ourselves in a supreme mess?

Reduce the size and power of government and let the market work freely if you want to see things change for the better. The only people who won’t survive in a capitalist system are those who refuse to work. And they probably shouldn’t survive anyway, definitely not by riding on the backs of those who do work.

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  • Burgess Laughlin  On April 20, 2008 at 5:44 pm

    The Ayn Rand Lexicon contains an entry, “Mixed Economy,” that addresses this issue.

    A capitalist system is a political system that has a representative government operating under a written constitution that guarantees individual rights, especially the basic rights of life, liberty, and property. The economy follows from the political system.

    The U. S., as you say, is not capitalistic, but mixed. “Crony capitalism” is a contradiction in terms.

  • aristotlethegeek  On April 21, 2008 at 3:27 am

    Yes. Mixed Economy (Ayn Rand Lexicon).

    When we were taught economics in school, the text books preached that India had chosen the best parts from two different systems – capitalism and socialism – to create a mixed economy. It was much later that I saw for myself what this mixed economy really was – a mix of non-equals and an absolute perversion of capitalism.

    You explicitly talk of capitalism in the context of a political system whereas most people refer to it in an economic sense. How a country can call itself capitalistic but not respect individual rights, or say it guarantees individual freedom but restricts economic freedom is beyond me.

    As for crony capitalism being a contradiction, it depends on each country. When countries proclaim they are capitalistic but indulge in favoritism and have active government involvement in the economy, then they probably deserve that epithet. But it does seem that every good word is soon targeted so that it becomes pejorative.

    Maybe we should redefine all such terms and invent new terms to describe political and economic systems that a single word cannot describe. We could for example call the US political system an oligarchic ochlocracy, and the Indian one an ochlocratic oligarchy. Probably that will bring things into perspective for those people who seem to think they are living in a functional democracy.

  • Burgess Laughlin  On April 22, 2008 at 6:02 pm

    >”As for crony capitalism being a contradiction, it depends on each country. When countries proclaim they are capitalistic but indulge in favoritism and have active government involvement in the economy, then they probably deserve that epithet.”

    There systems should be called “crony statism.”

    The issue is the actual, factual nature of a country’s political system (which is the cause of its economy), not what a country proclaims itself to be. To define a country by its economy is to define it by effects not causes, that is, by nonessentials rather than essentials.

    The Ayn Rand Lexicon has an excellent entry on “Definitions.” It deserves slow, careful study.

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