Liberal Attacks on Capitalism

I would like to confront typical liberal attacks on Capitalism, and the basic theories of limited government. I have disapproved of the Health Care bill from day one, and adamantly opposed Cap&Trade legislation as well as anything attempting to expand the scope of the federal government. When debating Liberals on these issues, there is a typical criticism that I ALWAYS hear. People say, "But, think about the poor. Think about those who have many children, are working multiple jobs, and can't afford health care." Or, "You're just selfish, why don't you think about other people?" The socialist left is constantly bashing capitalism and the practices of the free market economic system on the premise that it is "selfish". I shall address these concerns in this blog post.

First off, this entire dilemma can easily be solved by reading Ayn Rand's Atlas Shrugged. I've previously mentioned this novel.. it is one of my favorites :) The novel addresses the concerns of the progressive left who gain popularity and control through use of the media, and the idea that "selfishness" is the biggest threat to society. Hence, capitalism is frowned upon as its end result is the selfish desire for profit.

Perhaps one of my favorite examples of socialism in this book is the story of the "Twentieth Century Motor Company". This company was one of the most successful companies in the United States at the time of the original owner's death. The heirs to this business decided that they would not follow their father's greedy desire for profit. Instead, they would transform the company into a "modernized politically-correct" company; One that would not exploit others for profit. After the heirs preached to the workers about the plan, the company had a vote on it.
(This next excerpt is from Atlas Shrugged, pages 661-663)

And if anybody had doubts, he felt guilty and kept his mouth shut-- because they made it sound like anyone who'd oppose the plan was a child-killer at heart and less than a human being. They told us that this plan would achieve a noble ideal. Well, how would we know otherwise? Hadn't we heard it all our lives-- from our parents and our school teachers and our ministers, and in every newspaper we ever read an every movie and every public speech? Hadn't we always been told that this was righteous and just?

Do you know how it worked, the plan, and what it did to people? Try pouring water into a tank where there's a pipe at the bottom draining it faster than you can pour it, and each bucket you bring breaks that pipe an inch wider, and the harder you work the more is demanded of you, and you stand slinging buckets forty hours a week, then forty-eight, then fifty-six-- for your neighbor's supper-- for his wife's operation-- for his child's measles-- for his mother's wheel chair-- for his uncle's shirt-- for his nephew's schooling-- and for the baby next door-- for the baby to be born-- for anyone anywhere around you-- it's theirs to receive, from diapers to dentures-- and yours to work, from sunup to sundown, month after month, year after year, with nothing to show for it but your sweat, with nothing in sight for you but their pleasure, for the whole of your life, without rest, without hope, without end... From each according to his ability, to each according to his need...

We're all one big family, they told us, we're all in this together. But you don't all stand working an acetylene torch ten hours a day-- together, and you don't all get bellyache-- together. What's whose ability and which of whose needs comes first? When it's all one pot, you can't let any man decide what his own needs are, can you? If you did, he might claim that he needs a yacht-- and if his feelings are all you have to go by, he might prove it, too. Why not? If it's not right for me to own a car until I've worked myself into a hospital ward, earning a car for every loafer and every naked savage on earth-- why can't he demand a yacht from me, too, if I still have the ability not to have collapsed? No? He can't? [...] Well, anyway, it was decided that nobody had the right to judge his own need or ability. We voted on it. [...] Do you care to think what would happen at such a meeting? It took us just one meeting to discover that we had become beggars-- rotten, whining, sniveling beggars, all of us, because no man could claim his pay as his rightful earning, he had no right and no earnings, his work didn't belong to him, it belonged to 'the family', and they owed him nothing in return, and the only claim he had on them was his 'need'-- so he had to beg in public for relief from his needs, like any lousy moocher, listing all his troubles and miseries, down to his patched drawers and his wife's head colds, hoping that 'the family' would throw him the alms. [...] so it turned into a contest among six thousand panhandlers, each claiming that his need was worse than his brother's. How else could it be done? Do you care to guess what happened, what sort of men kept quiet, feeling shame, and what sort got away with the jackpot?

But that wasn't all. There was something else that we discovered at the same meeting. The factory's production had fallen by forty percent, in that first half-year, so it was decided that somebody hadn't delivered 'according to his ability.' Who? How would you tell it? 'The family' voted on that, too. They voted which men were the best, and these men were sentenced to work overtime each night for the next six months. Overtime without pay-- because you weren't paid by time and you weren't paid by work, only by need.

Do I have to tell you what happened after that-- and into what sort of creatures we all started turning, we who had once been human? We began to hide whatever ability we had, to slow down and watch like hawks that we never worked any faster or better than the next fellow. What else could we do, when we knew that if we did our best for 'the family', it's not thanks or rewards that we'd get, but punishment? We knew that for every stinker who'd ruin a batch of motors and cost the company money-- either through his sloppiness, because he didn't have to care, or through plain incompetence-- it's we who'd have to pay with out nights and our Sundays. So we did our best to be no good.

There was one young boy who started out, full of fire for the noble ideal, a bright kid without any schooling, but with a wonderful head on his shoulders. The first year, he figured out a work process that saved us thousands of man-hours. He gave it to 'the family', didn't ask anything for it, either, couldn't ask, but that was all right with him. It was for the ideal, he said. But when he found himself voted as one of our ablest and sentenced to night work, because we hadn't gotten enough from him, he shut his mouth and his brain. You can bet he didn't come up with any ideas, the second year.

What was it they'd always told us about the vicious competition of the profit system, where men had to compete for who'd do a better job than his fellows? Vicious, wasn't it? Well, they should have seen what it was like when we all had to compete with one another for who'd do the worst job possible. There's no surer way to destroy a man than to force him into a spot where he has to aim at not doing his best, where he has to struggle to do a bad job, day after day. That will finish him quicker than drink or idleness or pulling stick-ups for a living. But there was nothing else for us to do except fake unfitness. The one accusation we feared was to be suspected for ability.

And that my friends, is why socialism fails. All people are given the same pittance whether they work or not. Intelligence and innovation is punished, and the strive to work is ultimately diminished. This is why I support limited government, and believe that free market capitalism is the pathway to prosperity. Why should government think they can do a more efficient job with the health care industry than the free markets can? Why does an entity who can't even run a profitable mail service think they can take on health care? I already know what atrocities lie ahead: Inefficiency and poor service will plague our system. I refuse to live in such a world as the man from "Atlas Shrugged", and his Twentieth Century Motor Company.

Capitalism: The drive for profit

"Let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it. Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another - their only substitute, if they abandon money, is the muzzle of a gun." --Atlas Shrugged

There is nothing evil about rational selfishness. Do you want to live? Do you want the privilege of affording food each night, a roof over your head, and wealth that ensures your financial prosperity? You would be a fool to deny any such thing. Every man desires riches.. Be it for his and his family's humble survival, or to live the rich life. Wealth is envied, and sought after. This is exactly why the free market economic system is the most efficient system ever devised. It seeks to spur innovation by rewarding those who can think; those who can use their mind to invent, those who put their intelligence and brain power to the limits-- It rewards these people with riches and profit. It is such a simple, yet elegant system. All who can successfully delegate and utilize resources efficiently are rewarded with profit. Those who fail, are aptly punished with bankruptcy. Socailism, and government intervention prevent this natural process.

As a libertarian, I am an advocate for limited government. You should be responsible for yourself-- Both your successes and you failures. I don't want a "Big Brother" constantly looking over my shoulder and pointing me in the "right" direction. I don't believe the government knows best how to spend the money that I earn.

Studies have shown that people are much more giving when the government is not breathing down their necks, and confiscating so much of their money in taxes. I believe we need to end every social program sponsored by the government, and cut the government down to what it was designed for-- defense; Protection from crime and military aggression by other States. But aside from that, you're on your own. The government should not be giving MY tax dollars to people who make bad decisions-- Those who are too lazy to attend school, too irresponsible to know the consequences of their own actions, etc.. The looters of the world seek to gain free health care on my work. I cannot, and refuse to hold the weight of the heavens on my own shoulders.

"I swear by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine." --John Galt

I oppose the health care legislation based on the simple premise that no man can hold another at the point of a gun, and demand service. I believe people need to take their own responsibility, and live with the consequences of their actions. Government should not be there to support you when you fuck up-- Because who wants to pay for it? Do you propose we force all the people who made the right choices in life pay for the failures of others?

The Solution

"The political system we will build is contained in a single moral premise: no man may obtain any values from others by resorting to physical force," --John Galt, Atlas Shrugged.

The solutions to health care, the abysmal economy, and all that plague this country is the same: Limited government. Open up state lines to insurance companies to spur competition, look into tort reform, and eliminate government involvement in the private sector permanently-- Including Medicare, Medicaid, and Social Security. These entities do much more harm than good.. Setting prices for insurance companies and doctors to follow. Nay, you must allow the free trade of goods.

Also note that from previous posts, the actual number of people who are LEGAL US residents, make less than $50k/year, and who truly cannot afford health care amount to roughly 3% of the population. Why should we change our system to support these people?

The Disadvantaged
I do understand that people are born with certain disadvantages in life. Be it physical handicaps, mental handicaps, being born into a broken home, awful environment, etc.. These disadvantages do exist, and do pose a problem for people. However, who's fault is it? It certainly isn't the fault of these people born into these circumstances. But is it my fault? Is it the fault of everyone else? Surely not. You cannot play "Robin Hood", and take other people's money to support these unlucky few. It is not anyone's fault that people are born with disadvantages. Though, if someone personally wants to donate to charities to help these people, then they are perfectly able to do so. You are free to allocate your own money however you see fit; And I believe that this can be accomplished through free enterprise. Eliminate taxes, and people will donate more to charity and religious organizations, who in turn, will be able to efficiently allocate their own funding for the disadvantaged. Government intervention always drags inefficiency and waste with it.

Hence, people who fuck up in life and end up having ten kids by the age of 15 will have something to turn to. It is their own consequences and free will which have landed people in the situations they find themselves. Sure, bad luck may play a part. But in the end, it's your problem-- And you need to deal with it yourself. You cannot rely on people to pay for your mistakes.

Now I shall end as I began, with a lil' bit of Atlas: (577)

I seized the boats that sailed under the flag of the idea which I am fighting: the idea that need is a sacred idol requiring human sacrifices-- that the need of some men is the knife of a guillotine hanging over the others-- that all of us must live with our work, our hopes, our plans, our efforts at the mercy of the moment when that knife will descend upon us-- and that the extent of our ability is the extent of our danger, so that success will bring our heads down on the block, while failure will give us the right to pull the cord. This is the horror which Robin Hood immortalized as an ideal of righteousness. Is is said that he fought against the looting rulers and returned the loot to those who had been robbed, but that is not the meaning of the legend which has survived. He is remembered, not as a champion of property, but as a champion of need, not as a defender of the robbed, but as a provider of the poor. He is held to be the first man who assumed a halo of virtue by practicing charity with wealth which he did not own, by giving away goods which he had not produced, by making others pay for the luxury of his pity. He is the man who became the symbol of the idea that need, not achievement, is the source of rights, that we don't have to produce, only to want, that the earned does not belong to us, but the unearned does. He became a justification for every mediocrity who, unable to make his own living, has demanded the power to dispose of the property of his betters, by proclaiming his willingness to devote his life to his inferiors at the price of robbing his superiors. It is this foulest of creatures-- the double-parasite who lives on the sores of the poor and the blood of the rich-- whom men have come to regard as a moral ideal. And this has brought us to a world where the more a man produces, the closer he comes to the loss of all his rights, until, if his ability is great enough, he becomes a rightless creature delivered as prey to any claimant-- while in order to be placed above rights, above principles, above morality, placed where anything is permitted to him, even plunder and murder, all a man has to do is to be in need. [...] Until men learn that of all human symbols, Robin Hood is the most immoral and the most contemptible, there will be no justice on earth and no way for mankind to survive.

The Inevitable Collapse of the United States Economy

Like many proponents of the Austrian School of Economics, I am pessimistic about the economic future of the US. I believe that we are paving the road for our own demise. I hope people begin to pay attention, because it's your future that's at stake here: that of you and your family. I'll be discussing my economic theory, and will be quoting heavily from Peter Schiff's Crash Proof (Henceforth denoted with "Schiff") along with many other sources.

The Problem

First off, what's the problem with the American economic system? Well, I'm sure most people have heard about our soaring national debt, inflationary policies of the Federal Reserve, and adherence to failed economic theories. As I write this, our current national debt is $12.5 trillion ... Which amounts to $40.6k per US citizen. Counting social security, medicare, medicaid, and other unfunded government liabilities, our debt is estimated at or above $60 trillion. This debt is unsustainable. If we are unable to quickly turn things around and cut federal spending.. We will suffer a depression the likes of which haven't been witnessed in 70 years. Why would anyone hold US treasuries or dollars? Why do you think China will continue to buy our debt?

One reason our deficit is so high, is that we have a trade deficit. Each year, we export wealth to India, China, Japan.. We simply aren't producing in this country.

The popular notion that in the postindustrial service economy money-valued services are an acceptable substitute for goods because both generate money ignores the distinction between money and wealth. Money is a medium of exchange. Wealth is what is received in that exchange. (Schiff, 10)

People seem to think China will suffer the most from selling US treasuries, which consequently devalues the dollar. This theory is far from the truth. To illustrate a parallel, I'll quote one of Peter Schiff's brilliant analogies (Schiff, 14):

Let's suppose six castaways are stranded on a desert island, five Asians and one American. Their problem is hunger. So they sit down and divide labor as follows: One Asian will do the hunting, another will fish, the third will scrounge for vegetation, the fourth will cook dinner, and the fifth will gather firewood and tend to the fire. The sixth, the American, is given the job of eating.

So five Asians work all day to feed one American, who spends his day sunning himself on the beach. The American is employed in the equivalent of the service sector, operating a tanning salon that has one customer: himself. At the end of the day, the five Asians present a painstakingly prepared feast to the American, who sits at the head of a special table built by the Asians specifically for this purpose.

Now the American is practical enough to know that if the Asians are going to continue providing banquets they must also be fed, so he allows them just enough scraps from his table to sustain them for the following day's labor.

Modern-day economists would have you look at the situation just described and believe that the American is the lone engine of growth driving the island's economy; that without the American and his ravenous appetite, the Asians on the island would all be unemployed.

The Asians, and Chinese in particular, would benefit from our demise. As a nation of purely services, we basically exchange services among ourselves (Hence, the American is a customer of himself). The few things we export are easily overtaken by our vast imports. The manufacturing and exporting of Televisions, gaming systems, computer systems, building materials, food, etc... actually involve the exchange of wealth. We are exporting wealth to other nations as we sit on our asses and enjoy their toils. This can't last for long.

My favorite of Schiff's analogies is the "Tale of Two farmers". It's long, so I'm simply going to paraphrase (Schiff, 21-23):

There are two farmers: Chang and Jones. Chang grows only oranges and Jones grows only apples. Each grows only the fruit he produces most efficiently, trading his surplus for the fruit grown by the other. Obviously, this free trade allows both farmers to benefit. They can eat both apples and oranges simply via bartering. Anyway, this process continues for many years until a flood wipes out Farmer Jones' apple crop. Jones proposes that Chang sell him oranges in exchange for IOUs and 10 percent interest in apples for the next year. Since Jones has efficiently grown apples in the past, Chang accepts (Jones has a great credit rating ;-)). Note that the IOUs are a promise to pay, similar to treasury bonds, and do not possess any intrinsic value themselves. Payment cannot actually be made until the next year when Farmer Jones redeems his notes by giving Chang all the apples his IOUs obligate him to pay. Only then can the notes be retired and the transaction completed.

Now, assume similar natural disasters plaque Jones for several more years, and he and Chang make the same agreement each year. Suddenly, Farmer Jones realizes he's eating well without actually farming. He can import oranges without working, and without exporting any apples. He therefore decides to turn his apple orchard into a golf course, and simply play golf all day while enjoying Farmer Jones' oranges. In other words, Farmer Jones now operates as a service economy. (He, representing a single country, is primarily a service economy-- and exchanges services within the country-himself.)

Farmer Chang, by contrast, is so busy growing all those oranges that he never gets a chance to play Farmer Jones' course. In fact, he has been accepting IOUs for so long, he no longer remembers his original reason for doing so. Though, knowing no other life style, he is content. Chang now counts his wealth based solely on his accumulation of Farmer Jones' IOUs. Since Farmer Jones has such a good reputation among all the other farmers (credit rating), Farmer Chang is able to exchange those IOUs for the goods and services of other farmers. However, as a result of Farmer Jones' good reputation, no one notices that his apple orchard has been turned into a golf course. His IOUs are essentially worthless since he no longer possesses the ability to redeem them with actual apples.

Some might argue that the entire community now depends on Farmer Jones and his worthless IOUs, and that Farmer Chang and the others will simply accept them indefinitely to avoid acknowledging the reality of their folly. Of course, were these revelations to occur, the unfortunate holders of Farmer Jones' IOUs would officially be forced to realize their losses. However, their true financial situations would improve, as any future accumulation of worthless IOUs would end. As for farmer Jones, without a viable apple orchard or the ability to buy oranges on credit, he would starve. It would take years to transform his golf course back into an orchard, and regain his knowledge of farming, and replace his obsolete and dilapidated farming equipment (IE transformation of a services economy back to an industrial one). In the end, Farmer Jones' only alternative might be to sell his golf course to Farmer Chang and take a job picking fruit in his orange grove.

What a wonderful analogy, no? He writes them much better than I.

Finding the Source of the Problem

Where can the beginning of the demise of our economy be traced back to? 2000? It's all George Bush's fault, right? To the contrary, FDR and his socialist policies wrecked havoc on the Free Market system. The eventualities of social security, medicare, and medicaid plague our current financial system with enormous cost.

But, that's another issue. I'm mainly looking at the creation of the Federal Reserve in 1913 and the replacement of the gold standard for Federal Reserve Notes and a fiat monetary system. Since the Federal Reserve Act of 1913, the purchasing power of the US dollar has fallen by 95.41% (the data can be found all over the web):

• US Dollar Purchasing Power


• The Long Goodbye: The Declining Purchasing Power of the Dollar


• US Inflation Calculator

You heard me correctly: 95%!! If you had taken $100 and buried it in your backyard in 1913.. You'd uncover that 2088% inflation made that $100 equivalent to about $4.57 of today. Or, in other terms, an item in 1913 costing $100 would cost you $2,188.76 in 2010.

The US was on track to recovery after the market crash of 1929 (Another Great Depression? By Thomas Sowell)

The Vedder and Gallaway statistics allow us to follow unemployment month by month. They put the unemployment rate at 5 percent in November 1929, a month after the stock market crash. It hit 9 percent in December-- but then began a generally downward trend, subsiding to 6.3 percent in June 1930.

That was when the Smoot-Hawley tariffs were passed, against the advice of economists across the country, who warned of dire consequences.

Five months after the Smoot-Hawley tariffs, the unemployment rate hit double digits for the first time in the 1930s.

This was more than a year after the stock market crash. Moreover, the unemployment rate rose to even higher levels under both Presidents Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in the economy on an unprecedented scale.

My point being, the recovery was abruptly halted when FDR made it illegal for US citizens to own gold.. He essentially repealed the gold standard in place of a fiat currency.. A currency that the government could control through the federal reserve, and thus, "tax" the people through inflation.

Since then, the value of our currency has plummeted as the Federal Reserve has devalued our currency. There's no doubt the government is doing much more harm than good. The only solution is to replace Federal Reserve notes with something that actually has intrinsic value.. Something that all people agree has value.. something that will NOT diminish nor fall to control of government. IE) Gold.

The bottom line is that rather than representing legitimate IOUs redeemable in specified weights of gold or silver, US Federal Reserve notes became IOU nothings, mere pieces of paper that bearers were free to circulate themselves, but which did not constitute any liability on the part of the issuer.

What that meant was that any value the dollar had would depend purely on its purchasing power, which in turn would depend on the financial strength of the US economy and how the supply of dollars was regulated. (Schiff, 54)

That pretty much sums up the extent of government involvement, and its destructive power over our economy. Through regulation via the Federal Reserve, the US government is able to control inflation, and dwindle the purchasing power of the dollar. All for what, you ask? Why, simple. When the dollar loses value, the interest and payments made on bonds and other government loans are also much less. In a way, the government is able to tax its people through this tricky tactic. The people are not even aware that their dollars are losing value, and that the money paid through bonds and other securities may actually place the investor at a loss due to high inflation.

The CPI and government numbers are actually quite inaccurate, so your loss may even be more than if you calculated using CPI numbers. In any case, we're delving heavily into economics.. From here, I suggest you pick up Peter Schiff's "Crash Proof", read up on the Austrian school of economics, or other means of self-education. The concepts of macroeconomics, including inflation, the business cycle, the gold standard and fiat currencies are too complex to adequately discuss here, and this post has gotten long enough already. Perhaps at a later time :-)

A Few Words on Keynesianism

Before I leave you to wander the interwebz in search of Peter Schiff and Ron Paul videos, I'd like to touch on another root cause of our current dilemma: You.

The Keynesian ideas of spend, spend, spend are greatly flawed. Savings is truly key. The invention of consumer credit has greatly hampered our economy. Previous generations lived below their means, saving wealth for retirement or the occasional big purchase. I believe government involvement and especially social security have given people a false sense of security.

Now, people are taking out second and third mortgages, ramping up thousands of credit card debt, and essentially spending well above their means. The purpose of credit was to make an investment that you believed would net you a nice return. People and businesses took out loans and used money they did not currently possess to make investments that were thought to earn them enough money to pay off the original loan and interest, as well as plenty for their own profits. IE) College education, purchase of capital goods-- Say, stoves for cooking companies, renovation, etc.. were all investments in which a return was anticipated. Nowadays people take out loans to buy cars when they have perfectly functional vehicles.. Purchase big screen TVs and gaming systems to keep up with the Joneses.

You see, when you make those "investments", you end up paying more for those purchases through interest. Sometimes, a whole lot more. So, why not be patient and buy the item when you can afford it? You end up paying much more for it, just to have it sooner. This overspending cannot be sustained. Eventually, like in the housing crisis, something you depend on for income will vanish. Then what?

What happens if there's a natural disaster or some other emergency? Whatever happened to saving for a rainy day? Savings, and the wealth accumulated through interest paid to you through investments (stocks, bonds, etc..) will result in much higher gross wealth than those who overspend. Blessed are those who are thrifty and live at or below their means :) These people are predominantly those in Asia. Their patience will be rewarded. Our demise is their resurrection.

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The Time is Now!

If we don't take some drastic measures now, then we are doomed. The world reserve currency status is the ONLY thing keeping us alive at the moment. As previously discussed, our overspending and high debt will eventually lead to other banks and countries to dump the dollar for something more credit-worthy. Federal Reserve notes are nothing but fiat currency, essentially dependent on the growth and prosperity of the United States.

But, if we cannot recover from our deficits, we will no longer be prosperous, or have a perfect credit rating. The dollar will fall... And I'm not talking 5-6%, I'm talking hyperinflation. Why would anyone own Federal Reserve notes when the US economy isn't even producing anything? Our golfing has run its course.

Again, we are saved by one thing: World Reserve Currency status. Other national banks are required to keep dollars on hand to trade in commodities. This creates artificial demand for the dollar -- a demand that would not otherwise exist. Hence, as long as other countries accept this and want dollars, we will be fine.

However, I would not count on sheer ignorance for long. We will eventually be found out, and the dollar will fall. Your investments, retirement plans, and life savings will be worth nothing. The only true hedge is to invest in gold, silver, or some other precious metal-- Something of intrinsic value. Once the shit hits the fan, gold will appear to skyrocket relative to the dollar (I like to think of gold as the standard, and any movement of the price of gold in dollars as movement of the dollar. The price of gold is fairly stable.).

And my favorite video of all time. A clever "rap" pitting Hayek and the Austrian school of economics up against Keynes and Keynesian economics. Enjoy :)

(Original Publication: Pedbsktbll; Edited by: HPB)