CAPITALISM is the “supply chain”

Rep. Matt Rosendale, R-Mont., told Newsmax that empty shelves across the country due to the supply chain shortage is making the U.S. look a lot like Russia.

”If you would watch the newsreels now, you would think that you were watching something out of Russia from about 20 or 30 years ago, with bare shelves and supply chains being shut down,” Rosendale said Wednesday on ”The Chris Salcedo Show.”

”The administration is already warning people that if they want to have presents under the Christmas tree this year, they need to start ordering them now. The problem is, you can’t get them, and if you can, they’re probably about 30-50% more expensive than they were this exact time last year.”

The lesson? Supply and production matter.

The other lesson? Capitalism IS the supply chain. Under socialism, you will diminish or eradicate supply. When you get rid of freedom and accountability — which is what socialism does — then you get rid of production. It is that simple. The events of 2020 and 2021 have shown us that this rule of human behavior applies even in the United States of America.

For over a year, the government has disrupted economic behavior. It imposed lockdowns, mask mandates, gave out huge unemployment benefits, ordered social distancing and now vaccination requirements. All of these things have led to a disruption in the economic activity that otherwise would have taken place. Witness the results.

Note that the economic disruption was NOT caused by a virus. Viruses have come and gone before. Nothing like this ever happened. What DID happen this time, that has never happened before, are lockdowns, huge unemployment benefits and now vaccination mandates which have also caused an employee shortage because anywhere from 30-50 percent of the population will quit before getting vaccinated.

You cannot do these things to an economy without consequences.

The “economy” is really just an abstraction referring to the transactions and activities of billions of people every day. The “economy” doesn’t care whether the disruption is due to government intervention in the name of socialism, Communism, or a virus. Disruption is disruption. And eventually, we all pay.

The hubris and ignorance among Americans about economics is truly monumental. We don’t have to be economists; most of us aren’t, and that’s OK. Given the quality of most economists today, that’s actually a good thing. But more of us should be able to understand that full shelves don’t happen by accident. And there’s a reason why shelves have always been full in America, while they were never full in Soviet Russia, and are not full today in places like Cuba and Venezuela (the latter of which used to have full shelves).

On our present course, with more and more government intervention in the economy, we can expect more problems. Already we’re seeing inflation, including rising gas prices, as well as slowdowns and shortages. Christmas presents and celebrations are important to millions of people. Those will be disrupted, not because of any virus — but because of economics, i.e, because of government intervention in the economy.

There is no utopia. But in a free market economy — where government does not interfere — there will be the fewest problems possible, and problems will always be temporary. This is because human beings, even at their worst, have rational incentives to improve or correct errors … when they are accountable for their actions. In a free market economy, where there is very little taxation and regulation, but also very few or no bailouts or subsidies, everyone is accountable.

We no longer have that; not like we used to. Shelves fill up for a reason. They get empty for a reason, too. If more Americans don’t learn to accept and grasp this simple fact, we’re going to see a lot more problems — even nightmare scenarios such as widespread starvation or hyperinflation.

I used to think we were only one election from all this happening. History will ultimately tell us if the 2020 election WAS that election.

Michael J. Hurd, Daily Dose of Reason

Ludwig von Mises: Defender of Capitalism

Ludwig Von Mises is important because his teachings are necessary to the preservation of capitalism and thus of civilization.

September 29, 2021 is the 140th Birthday of Ludwig von Mises, the greatest economic defender of capitalism in the 20th Century. Here is Reisman’s Tribute to him written in 1981, on the occasion of Mises’s 100th birthday. – George Reisman

Today, September 29, 2006, is the one-hundred-and-twenty-fifth anniversary of the birth of Ludwig von Mises, economist and social philosopher, who passed away in 1973. Mises was my teacher and mentor and the source or inspiration for most of what I know and consider to be important and worthwhile in these fields—of what enables me to understand the events shaping the world in which we live. I want to take this opportunity to pay tribute to him because I believe that he deserves to occupy a major place in the intellectual history of modern times.

Mises is important because his teachings are necessary to the preservation of material civilization. As he showed, the base of material civilization is the division of labor. Without the higher productivity of labor made possible by the division of labor, the great majority of mankind would simply die of starvation. The existence and successful functioning of the division of labor, however, vitally depends on the institutions of a capitalist society—that is, on limited government and economic freedom, private ownership of land and all other property, exchange and money, saving and investment, economic inequality and economic competition, and the profit motive—institutions everywhere under attack for several generations.

When Mises appeared on the scene, Marxism and the other socialist sects enjoyed a virtual intellectual monopoly. Major flaws and inconsistencies in the writings of Smith and Ricardo and their followers enabled the socialists to claim classical economics as their actual ally. The writings of Jevons and the earlier “Austrian” economists—Menger and Böhm-Bawerk—were insufficiently comprehensive to provide an effective counter to the socialists. Bastiat had tried to provide one, but died too soon, and probably lacked the necessary theoretical depth in any case.

Thus, when Mises appeared, there was virtually no systematic intellectual opposition to socialism or defense of capitalism. Quite literally, the intellectual ramparts of civilization were undefended. What Mises undertook, and which summarizes the essence of his greatness, was to build an intellectual defense of capitalism and thus of civilization.

The leading argument of the socialists was that the institutions of capitalism served the interests merely of a handful of rugged “exploiters” and “monopolists” and operated against the interests of the great majority of mankind, which socialism would serve. While the only answer others could give was to devise plans to take away somewhat less of the capitalists’ wealth than the socialists were demanding, or to urge that property rights nevertheless be respected despite their incompatibility with most people’s well-being, Mises challenged everyone’s basic assumption. He showed that capitalism operates in the material self-interests of all, including the non-capitalists—the so-called proletarians. In a capitalist society, Mises showed, privately owned means of production serve the market. The physical beneficiaries of the factories and mills are all who buy their products. And, together with the incentive of profit and loss and the freedom of competition that it implies, the existence of private ownership ensures an ever-growing supply of products for all.

Thus, Mises showed to be absolute nonsense such clichés as “poverty causes communism.” Not poverty, he explained, but poverty plus the mistaken belief that communism is the cure for poverty, causes communism. He showed that if the misguided revolutionaries of the backward countries and of impoverished slums understood economics, any desire they might have to fight poverty would make them advocates of capitalism.

Socialism, Mises demonstrated, in his greatest original contribution to economic thought, not only abolishes the incentive of profit and loss and the freedom of competition along with private ownership of the means of production, but makes economic calculation, economic coordination, and economic planning impossible, and therefore results in chaos. For socialism means the abolition of the price system and the intellectual division of labor; it means the concentration and centralization of all decision-making in the hands of one agency: the Central Planning Board, or the Supreme Dictator.

Yet the planning of an economic system is beyond the power of any one consciousness: the number, variety and locations of the different factors of production, the various technological possibilities that are open to them, and the different possible permutations and combinations of what might be produced from them, are far beyond the power even of the greatest genius to keep in mind. Economic planning, Mises showed, requires the cooperation of all who participate in the economic system. It can exist only under capitalism, where, every day, businessmen plan on the basis of calculations of profit and loss; workers, on the basis of wages; and consumers, on the basis of the prices of consumers’ goods.

Mises’s contributions to the debate between capitalism and socialism—the leading issue of modern times—are overwhelming. Before he wrote, people did not realize that capitalism has economic planning. They uncritically accepted the Marxian dogma that capitalism is an anarchy of production and that socialism represents rational economic planning. People were (and most still are) in the position of Moliere’s M. Jourdan, who never realized that what he was speaking all his life was prose. For, living in a capitalist society, people are literally surrounded by economic planning, and yet do not realize that it exists.

Every day, there are countless businessmen who are planning to expand or contract their firms, who are planning to introduce new products or discontinue old ones, planning to open new branches or close down existing ones, planning to change their methods of production or continue with their present methods, planning to hire additional workers or let some of their present ones go. And every day, there are countless workers planning to improve their skills, change their occupations or places of work, or to continue with things as they are; and consumers, planning to buy homes, cars, stereos, steak or hamburger, and how to use the goods they already have—for example, to drive to work or to take the train, instead.

Yet people deny the name planning to all this activity and reserve it for the feeble efforts of a handful of government officials, who, having prohibited the planning of everyone else, presume to substitute their knowledge and intelligence for the knowledge and intelligence of tens and hundreds of millions. Mises identified the existence of planning under capitalism, the fact that it is based on prices (“economic calculations”), and the fact that the prices serve to coordinate and harmonize the activities of all the millions of separate, independent planners.

He showed that each individual, in being concerned with earning a revenue or income and with limiting his expenses, is led to adjust his particular plans to the plans of all others.

For example, the college student who decides to become an accountant rather than an artist, because he values the higher income to be made as an accountant, changes his career plan in response to the plans of others to purchase accounting services rather than paintings. The individual who decides that a house in a particular neighborhood is too expensive and who therefore gives up his plan to live in that neighborhood, is similarly engaged in a process of adjusting his plans to the plans of others; because what makes the house too expensive is the plans of others to buy it who are able and willing to pay more. And, above all, Mises showed, every business, in seeking to make profits and avoid losses, is led to plan its activities in a way that not only serves the plans of its own customers, but takes into account the plans of all other users of the same factors of production throughout the economic system.

Thus, Mises demonstrated that capitalism is an economic system rationally planned by the combined, self-interested efforts of all who participate in it. The failure of socialism, he showed, results from the fact that it represents not economic planning, but the destruction of economic planning, which exists only under capitalism and the price system.

Mises was not primarily anti-socialist. He was pro-capitalist. His opposition to socialism, and to all forms of government intervention, stemmed from his support for capitalism and from his underlying love of individual freedom and conviction that the self-interests of free men are harmonious—indeed, that one man’s gain under capitalism is not only not another’s loss, but is actually others’ gain. Mises was a consistent champion of the self-made man, of the intellectual and business pioneer, whose activities are the source of progress for all mankind and who, he showed, can flourish only under capitalism.

Mises demonstrated that competition under capitalism is of an entirely different character than competition in the animal kingdom. It is not a competition for scarce, nature-given means of subsistence, but a competition in the positive creation of new and additional wealth, from which all gain. For example, the effect of the competition between farmers using horses and those using tractors was not that the former group died of starvation, but that everyone had more food and the income available to purchase additional quantities of other goods as well. This was true even of the farmers who “lost” the competition, as soon as they relocated in other areas of the economic system, which were enabled to expand precisely by virtue of the improvements in agriculture. Similarly, the effect of the automobile’s supplanting the horse and buggy was to benefit even the former horse breeders and blacksmiths, once they made the necessary relocations.

In a major elaboration of Ricardo’s Law of Comparative Advantage, Mises showed that there is room for all in the competition of capitalism, even those of the most modest abilities. Such people need only concentrate on the areas in which their relative productive inferiority is least. For example, an individual capable of being no more than a janitor does not have to fear the competition of the rest of society, almost all of whose members could be better janitors than he, if that is what they chose to be. Because however much better janitors other people might make, their advantage in other lines is even greater. And so long as the person of limited ability is willing to work for less as a janitor than other people can earn in other lines, he has nothing to worry about from their competition. He, in fact, outcompetes them for the job of janitor by being willing to accept a lower income than they. Mises showed that a harmony of interests prevails in this case, too. For the existence of the janitor enables more talented people to devote their time to more demanding tasks, while their existence enables him to obtain goods and services that would otherwise be altogether impossible for him to obtain.

On the basis of such facts, Mises argued against the possibility of inherent conflicts of interest among races and nations, as well as among individuals. For even if some races or nations were superior (or inferior) to others in every aspect of productive ability, mutual cooperation in the division of labor would still be advantageous to all. Thus, he showed that all doctrines alleging inherent conflicts rest on an ignorance of economics.

He argued with unanswerable logic that the economic causes of war are the result of government interference, in the form of trade and migration barriers, and that such interference restricting foreign economic relations is the product of other government interference, restricting domestic economic activity. For example, tariffs become necessary as a means of preventing unemployment only because of the existence of minimum wage laws and pro-union legislation, which prevent the domestic labor force from meeting foreign competition by means of the acceptance of lower wages when necessary. He showed that the foundation of world peace is a policy of laissez-faire both domestically and internationally.

In answer to the vicious and widely believed accusation of the Marxists that Nazism was an expression of capitalism, he showed, in addition to all the above, that Nazism was actually a form of socialism. Any system characterized by price and wage controls, and thus by shortages and government controls over production and distribution, as was Nazism, is a system in which the government is the de facto owner of the means of production. Because, in such circumstances, the government decides not only the prices and wages charged and paid, but also what is to be produced, in what quantities, by what methods, and where it is to be sent. These are all the fundamental prerogatives of ownership. This identification of “socialism on the German pattern,” as he called it, is of immense value in understanding the nature of all demands for price controls.

Mises showed that all of the accusations made against capitalism were either altogether unfounded or should be directed against government intervention, which destroys the workings of capitalism. He was among the first to point out that the poverty of the early years of the Industrial Revolution was the heritage of all previous history—that it existed because the productivity of labor was still pitifully low; because scientists, inventors, businessmen, and savers and investors could only step by step create the advances and accumulate the capital necessary to raise it. He showed that all the policies of so-called labor and social legislation were actually contrary to the interests of the masses of workers they were designed to help—that their effect was to cause unemployment, retard capital accumulation, and thus hold down the productivity of labor and the standard of living of all.

In a major original contribution to economic thought, he showed that depressions were the result of government-sponsored policies of credit expansion designed to lower the market rate of interest. Such policies, he showed, created large-scale malinvestments, which deprived the economic system of liquid capital and brought on credit contractions and thus depressions. Mises was a leading supporter of the gold standard and of laissez-faire in banking, which, he believed, would virtually achieve a 100% reserve gold standard and thus make impossible both inflation and deflation.

What I have written of Mises provides only the barest indication of the intellectual content that is to be found in his writings. He wrote approximately twenty books. And I venture to say that I cannot recall reading a single paragraph in any of them that did not contain one or more profound thoughts or observations. Even on the occasions when I found it necessary to disagree with him (for example, on his view that monopoly can exist under capitalism, his advocacy of the military draft, and certain aspects of his views on epistemology, the nature of value judgments, and the proper starting point for economics), I always found what he had to say to be extremely valuable and a powerful stimulus to my own thinking. I do not believe that anyone can claim to be really educated who has not absorbed a substantial measure of the immense wisdom present in his works.

Mises’s two most important books are Human Action and Socialism, which best represents the breadth and depth of his thought. These are not for beginners, however. They should be preceded by some of Mises’s popular writings, such as Bureaucracy and Planning For Freedom.

The Theory of Money and Credit, Theory and History, Epistemological Problems of Economics, and The Ultimate Foundations of Economic Science are more specialized works that should probably be read only after Human Action. Mises’s other popular writings in English include Omnipotent Government, The Anti-Capitalistic Mentality, Liberalism, Critique of Interventionism, Economic Policy, and The Historical Setting of the Austrian School of Economics. For anyone seriously interested in economics, social philosophy, or modern history, the entire list should be considered required reading.

Mises must be judged not only as a remarkably brilliant thinker but also as a remarkably courageous human being. He held the truth of his convictions above all else and was prepared to stand alone in their defense. He cared nothing for personal fame, position, or financial gain, if it meant having to purchase them at he sacrifice of principle. In his lifetime, he was shunned and ignored by the intellectual establishment, because the truth of his views and the sincerity and power with which he advanced them shattered the tissues of fallacies and lies on which most intellectuals then built, and even now continue to build, their professional careers.

It was my great privilege to have known Mises personally over a period of twenty years. I met him for the first time when I was sixteen years old. Because he recognized the seriousness of my interest in economics, he invited me to attend his graduate seminar at New York University, which I did almost every week thereafter for the next seven years, stopping only when the start of my own teaching career made it no longer possible for me to continue in regular attendance.

His seminar, like his writings, was characterized by the highest level of scholarship and erudition, and always by the most profound respect for ideas. Mises was never concerned with the personal motivation or character of an author, but only with the question of whether the man’s ideas were true or false. In the same way, his personal manner was at all times highly respectful, reserved, and a source of friendly encouragement. He constantly strove to bring out the best in his students. This, combined with his stress on the importance of knowing foreign languages, led in my own case to using some of my time in college to learn German and then to undertaking the translation of his Epistemological Problems of Economics—something that has always been one of my proudest accomplishments.

Today, Mises’s ideas at long last appear to be gaining in influence. His teachings about the nature of socialism have been confirmed in the most spectacular way possible, namely, by the collapse of the former Soviet Union, and by the substantial conversion of Mainland China, Russia, and the rest of the Soviet Empire to capitalism.

Some of Mises’s ideas have been propounded by the Nobel prizewinners F.A. Hayek (himself a former student of Mises) and Milton Friedman. His ideas inspired the “miracle” of Germany’s economic recovery after World War II. They have exerted a major influence on the writings of Henry Hazlitt, Murray Rothbard, and the staff of the Foundation for Economic Education, as well as such prominent former students as Hans Sennholz and Israel Kirzner. They live on with increasing power and influence in the daily work of The Ludwig von Mises Institute, which publishes books and journals and holds conferences, seminars, and classes on his ideas.

Mises’s works deserve to be required reading in every college and university curriculum—not just in departments of economics, but also in departments of philosophy, history, government, sociology, law, business, journalism, education, and the humanities. He himself should be awarded an immediate posthumous Nobel Prize—indeed, more than one. He deserves to receive every token of recognition and memorial that our society can bestow. For as much as anyone in history, he labored to preserve it. If he is widely enough read, his labors may actually succeed in saving it.

To learn about every aspect of the case for capitalism, read my Capitalism: A Treatise on EconomicsOriginally published at the blog of George Reisman. Copyright 2006 George Reisman. All rights reserved.

Why Nazism is Socialism and Socialism is Totalitarianism

My purpose today is to make just two main points: (1) To show why Nazi Germany was a socialist state, not a capitalist one. And (2) to show why socialism, understood as an economic system based on government ownership of the means of production, positively requires a totalitarian dictatorship.

The identification of Nazi Germany as a socialist state was one of the many great contributions of Ludwig von Mises.

When one remembers that the word “Nazi” was an abbreviation for “der Nationalsozialistische Deutsche Arbeiters Partei — in English translation: the National Socialist German Workers’ Party — Mises’s identification might not appear all that noteworthy. For what should one expect the economic system of a country ruled by a party with “socialist” in its name to be but socialism?

Nevertheless, apart from Mises and his readers, practically no one thinks of Nazi Germany as a socialist state. It is far more common to believe that it represented a form of capitalism, which is what the Communists and all other Marxists have claimed.

The basis of the claim that Nazi Germany was capitalist was the fact that most industries in Nazi Germany appeared to be left in private hands.

What Mises identified was that private ownership of the means of production existed in name only under the Nazis and that the actual substance of ownership of the means of production resided in the German government. For it was the German government and not the nominal private owners that exercised all of the substantive powers of ownership: it, not the nominal private owners, decided what was to be produced, in what quantity, by what methods, and to whom it was to be distributed, as well as what prices would be charged and what wages would be paid, and what dividends or other income the nominal private owners would be permitted to receive. The position of the alleged private owners, Mises showed, was reduced essentially to that of government pensioners.

De facto government ownership of the means of production, as Mises termed it, was logically implied by such fundamental collectivist principles embraced by the Nazis as that the common good comes before the private good and the individual exists as a means to the ends of the State. If the individual is a means to the ends of the State, so too, of course, is his property. Just as he is owned by the State, his property is also owned by the State.

But what specifically established de facto socialism in Nazi Germany was the introduction of price and wage controls in 1936. These were imposed in response to the inflation of the money supply carried out by the regime from the time of its coming to power in early 1933. The Nazi regime inflated the money supply as the means of financing the vast increase in government spending required by its programs of public works, subsidies, and rearmament. The price and wage controls were imposed in response to the rise in prices that began to result from the inflation.

The effect of the combination of inflation and price and wage controls is shortages, that is, a situation in which the quantities of goods people attempt to buy exceed the quantities available for sale.

Shortages, in turn, result in economic chaos. It’s not only that consumers who show up in stores early in the day are in a position to buy up all the stocks of goods and leave customers who arrive later, with nothing — a situation to which governments typically respond by imposing rationing. Shortages result in chaos throughout the economic system. They introduce randomness in the distribution of supplies between geographical areas, in the allocation of a factor of production among its different products, in the allocation of labor and capital among the different branches of the economic system.

In the face of the combination of price controls and shortages, the effect of a decrease in the supply of an item is not, as it would be in a free market, to raise its price and increase its profitability, thereby operating to stop the decrease in supply, or reverse it if it has gone too far. Price control prohibits the rise in price and thus the increase in profitability. At the same time, the shortages caused by price controls prevent increases in supply from reducing price and profitability. When there is a shortage, the effect of an increase in supply is merely a reduction in the severity of the shortage. Only when the shortage is totally eliminated does an increase in supply necessitate a decrease in price and bring about a decrease in profitability.

As a result, the combination of price controls and shortages makes possible random movements of supply without any effect on price and profitability. In this situation, the production of the most trivial and unimportant goods, even pet rocks, can be expanded at the expense of the production of the most urgently needed and important goods, such as life-saving medicines, with no effect on the price or profitability of either good. Price controls would prevent the production of the medicines from becoming more profitable as their supply decreased, while a shortage even of pet rocks prevented their production from becoming less profitable as their supply increased.

George Reisman

Laissez-faire Capitalism: Still the Unknown Ideal

Ayn Rand collected and published a number of her economic essays under the title, Capitalism: The Unknown Ideal.   She was not the first to identify the anomaly.  At the height of the Great Depression, Samuel Pettengill wrote:  “When it is said that free enterprise has failed, my answer is that we have not permitted it to work.”

Unfortunately, the debate over capitalism has largely overlooked the vital point Pettengill and Rand raised.  Thousands of words are written daily on the subject, but we have to wonder how many writers know what they are talking about?  Myths and misconceptions have plagued historical research and continue to hinder conceptual clarity on the question.

The capitalism we debate doesn’t exist.  There is Laissez-faire capitalism that respects productive labor, private property, and voluntary exchange.  Then there is crony capitalism.  By this arrangement corporate welfare benefits, privileges and immunities are awarded to well-connected lobbyists and special interest groups, invariably at public expense (if only for taxpayers).  Cronyism comes in a variety of flavors.  We speak of pork, bacon, earmarks, member items, constituent services, protective tariffs, farm, and business subsidies, bank bailouts, pay-to-play and too-big-to-fail.  And then there are the profits private, “non-profit” agencies reap by providing the services to which social welfare recipients are lawfully “entitled.”

These two economic models should not be lumped into a single unit of analysis and called “capitalism.”  Laissez-faire rejects the visible, invariably corrupt hand that crony politics plays.  Unlike genuine capitalists, counterfeit capitalists seek to mitigate normal market risks by getting the government to provide a safe bet or sure thing.  Hence is public power routinely put to private, pecuniary use (and thankful beneficiaries are happy to pay their benefactors a hefty price for the privilege).

Talk about myths and misconceptions, take the conventional reading of America’s past.  It is widely reported that the 19th-century American economy was essentially unregulated.  This economic “anarchy,” it is said, precipitated a long series of boom-and-bust business cycles.  So populists and Progressives naturally and “compassionately” demanded remedial measures to combat the hardships capitalist “progress” repeatedly produced.

Is any of this true?  First, the 19th-century economy was politically regulated every step of the way.  Perhaps government didn’t impose restraints on business enterprise (e.g., minimum wage or environmental mandates)  But at no point could the market freely go about its business.  Free enterprise must be free not just of acts that impede economic growth.  They must be free of public policies that positively promote economic growth, as well.

It turns out that the country’s long succession of financial panics and enduring depressions were precipitated not by free-market activities, but by crony capitalist policies?

Failed corporate welfare schemes, alone, created the “need,” and demand for social welfare reform from the Progressive Era to the New Deal and beyond?

Corporate welfare provisions helped some, harmed others, and severely distorted the pace and direction of business growth, especially with respect to patterns of capital investment.  Once the government’s best-laid plans bumped into flesh-and-blood, economic players, all bets for a happy ending were off.  Land and stock speculators saw their opening and took it.  They blew up the bubbles of prosperity that, for a while, happily expanded, then tragically exploded, leaving behind years of hardship.  In the history of the republic, this pattern forms an unbroken chain of events (down to 2008).  What is worse, the bold political efforts to revive a moribund economy only prolonged the pain.  Consider FDR’s New Deal.  Never before had an administration done so much to restore prosperity and never before had poverty spread so far and persisted so long.

The origins of the corporate welfare state can be traced to the second bill signed into law by our first president, the Tariff Act of 1789.  Indeed, a long succession of tariff acts benefited domestic manufactures but,  by crippling transatlantic trade, materially harmed farmers, planters, shipbuilders, seaport merchants, and thousands employed in the maritime and carting trades.  Every family paid more for the manufactured goods it purchased.  And since ever-higher tariff duties cut into Britain’s sale of textiles in America, her industries didn’t need as much southern cotton.  At a time when cotton was the country’s leading export, rising tariff duties devastated (1) those who labored in the soil and (2) the banks that issued their mortgages and loans.  In combination with Alexander Hamilton’s other “implied powers” and pragmatic financial plans, the young republic ran right into the Panic of 1792.

How did we get from that day to this?  Once the nation decided that some of its citizens had a right not to go out and get, but to lobby Congress and be given, it faced two daunting questions:  who else should be given and exactly how much should everyone get?  There was only one answer:  politics.  Out of the darkness of despair, men like John Dewey came along and promised a  bold, experimental path to reconstruction and growth.  The pragmatic politics of Progressivism would light the way.  We are just beginning to see where Progressivism is leading us.  What was the title?  The Road to Serfdom?

The conclusion is clear.  The boom-and-bust business cycle is a purely political, not an economic, phenomenon.  It occupies no space in a free, unfettered market governed only by Adam Smith’s Invisible Hand.  To this point, markets have not been free, but regulated for the benefit of a cacophony of special interests.  Drain the swamp, then watch what wonders a laissez-faire economy can generate.  Unbounded opportunity to pursue success in a multiplicity of human occupations and endeavors, outpourings of life-saving, labor-saving gadgets and inventions to bring affordable comforts and conveniences to the masses and lessen the burdens of daily life, this is what a laissez-faire future shorn of liberal, welfare socialism has to offer.  It’s an ideal worth working for and attaining.

Jerome Huyler

The Capitalist Manifesto

Here are the most important facts:

The capitalist revolution began in Great Britain in the late-18th century. Since that time, the capitalist nations have been the freest countries of history. In Western (and now parts of Eastern) Europe, in the United States, in Japan, Hong Kong and the other Asian Tigers hundreds of millions of human beings are guaranteed freedom of speech, of religion, of intellectual expression, of assembly, and of voting. Men are free there to earn and to own property – their own homes, farms and land. They are free to start their own businesses and to retain the profits that they earn. A hallmark of capitalism is a rule of law that protects private property, safeguards investments and enforces contracts. The fundamental moral principle upon which capitalism is based is that individuals have inalienable rights and that governments exist solely to protect those rights.

Capitalism requires the limiting of governmental power to maximize the freedom of the individual.

Capitalism, the system of individual rights, has brought increased freedom to men all over the world. In Europe, capitalism ended feudalism, the dictatorship of the aristocracy. In America, the principle of individual rights impelled the British colonists to throw off the rule of the monarchy and establish history’s freest nation – and the logic of the country’s founding principles led, in less than a century, to the abolition of slavery, a practice that existed everywhere in the world through all of history, and one still practiced widely today throughout the non-capitalist world. In post-World War II Japan, under America’s influence, a semicapitalist, vastly freer society replaced the military dictatorship that preceded it. In Hong Kong, Taiwan and South Korea, the freedom of their capitalist or semi-capitalist systems enabled those countries (or colonies) to become havens for millions of refugees fleeing Communist oppression.

More broadly, it is to the capitalist nations across the globe that immigrants come, millions of them, both historically and currently, often fleeing political and/or religious persecution in their homelands. They come on rafts to the United States from Cuba. By the millions and for 15 years, the Vietnamese “boat people” fled for their lives from Communism – and today, more than 1.6 million of them have found freedom, mostly in the West. Muslims seeking religious and political freedom flee to the Western capitalist nations from all over the Islamic world. And, of course, for more than 150 years, America has been the hope and the chosen destination of persecuted peoples from around the globe, including from Ireland, Jews from Eastern Europe, Sicilians suppressed by the 19th century remnants of aristocratic rule, and Chinese and Koreans oppressed by the Communists.

Finally, the Western capitalist nations, by inflicting military defeat on the Fascists, and political-economic defeat on the Communists, eliminated the scourge of totalitarianism from large parts of the earth, bringing greater freedom to hundreds of millions of human beings in Japan, Germany, Italy, Eastern Europe and Russia.

Capitalism is the system of freedom.

Freedom leads to dramatic economic results. The “great laboratory” of capitalist West Berlin side-by-side with communist East Berlin provided the most vivid example — West Berlin, a modern, prosperous commercial center, East Berlin so destitute and squalid that, by 1989, the rubble remained from World War II battles four decades earlier. The striking truth is that the capitalist nations are the wealthiest countries of history. For example, famine, the scourge of all non-capitalist societies, past and present, has been wiped out in the West. There has never been a famine in the history of the United States. Has there ever been one in any capitalist country? The author does not know of any.3

Regarding the empirical correlation between economic freedom, i.e., capitalism and prosperity: the Heritage Foundation and the Wall Street Journal jointly publish an annual survey examining the degree of economic freedom in the world. Its title is the Index of Economic Freedom. “The story that the Index continues to tell is that economically freer countries tend to have higher per capita incomes than less free countries… The more economic freedom a country has, the higher its per capita income is.” The editors organize 155 countries into four categories, which are, in ascending order – repressed, mostly unfree, mostly free and free. “Once an economy moves from the mostly unfree category to the mostly free category, per capita income increases nearly four times.” The mostly free countries, including Japan, Taiwan, Canada, Poland and Sweden, have an average per capita income of greater than $11,000. Additionally, the per capita income among free countries is, on average, almost double that of the mostly free countries. The free countries, including the United States, Great Britain, Hong Kong and Singapore show an average per capita income of greater than $21,000.4 Capitalism is the system of wealth.

But under statism, conditions are diametrically opposite. Many political systems have ruthlessly suppressed the rights and lives of individuals. Feudalism, military dictatorships, theocracies, National Socialism (Nazism) and Communism are merely several examples. What these and other such systems share in common is the denial of individual rights. These are the anti-capitalist systems in which the individual is forced to live and die for the state. The horrors of such lack of freedom are historically and currently manifest.

Under feudalism, for example, the common man – the overwhelming preponderance of mankind – was suppressed by the ancien regime. Heretics were often burned at the stake; countless women were condemned to death for practicing “witchcraft;” the serfs were tied to the land and possessed few rights; and the most advanced thinkers were persecuted – Galileo’s forced recantation under threat of torture was merely the most notorious such case.

In the 20th century, statism reached its most virulent form. The National Socialists plunged the world into the most catastrophic war of history and butchered 25 million innocent victims in a 12-year reign of terror. The Communists were just as prolific in their commitment to brutality, establishing in Russia, China, Cambodia, North Korea and elsewhere totalitarian regimes that murdered a numbing 100 million victims in 80 years.

In Africa, oppressive dictatorships and ghastly tribal slaughters are the norm. In Sudan, the Islamic regime currently holds tens of thousands of blacks in slavery. In Rwanda, Hutu “militia” in 1994 hacked to pieces 800,000 victims, mostly members of the Tutsi tribe. In Somalia, endless, bloody warfare rages between rival warlords. In Zaire, the dictator, Mobutu, bankrupted the economy, pushing countless individuals into starvation by embezzling billions of dollars. In Zimbabwe, the Marxist dictator, Mugabe, stole the land from commercial farmers with the inevitable result: famine for millions of people. The shocking truth is that more than 225 years after the American Revolution, freedom is virtually unknown around the globe.

Statism – the subordination of the individual to the state – leads inevitably to the most hideous oppression.

Further, just as the freest nations, i.e., the most capitalist ones, are the wealthiest – so the most repressed countries are the most destitute. For example, according to one economist, Angus Maddison, feudal Europe and its aftermath was as miserably poor as is commonly believed.

Economic growth was non-existent during the centuries 500-1500 — and per capita GDP rose by merely 0.1 percent per year in the centuries 1500-1700. In 1500, the estimated European per capita income was roughly $215; in 1700, roughly $265.

In the 20th century, China under Mao suffered massive famine that killed anywhere from 20 to 43 million individuals – and hundreds of millions subsisted on less than a dollar a day. Also under the Communists, conditions were similar in North Korea and worse in Cambodia. The Soviet Union and its slave states of Eastern Europe were miserably poor by Western standards. The repressive dictatorships of Africa are countries where per capita living standards are measured in hundreds – not thousands – of dollars. Across the globe, the oppressed nations of Asia, South America and the Middle East are unspeakably poor.

For example, the Index of Economic Freedom shows that the repressed nations – including Cuba, Iran, Iraq (under Saddam Hussein) and North Korea – have an average per capita income around $2800. The mostly unfree countries – including Russia, Saudi Arabia, Egypt and Brazil – possess an average per capita income of approximately the same. This means that the freer countries – the semi-capitalist and capitalist nations – enjoy per capita incomes from four to ten times as great as those in the non-capitalist world.

Additionally, it must be pointed out that the unfree nations of the world have per capita incomes as high as $2800 for primarily one reason: the enormous aid they receive in various forms from the West, especially the diffusion of American technology. Without investment, loans, aid, technical training and supplies, etc., from the capitalist nations, the unfree countries would subsist in vastly worse misery than they already do. As merely one example, without massive food shipments from the West, an incalculable number of human beings would starve to death in the endless famines that recur in the unfree countries, from Ethiopia to North Korea to Zimbabwe.

Statism – in all its forms – is the system of appalling destitution. The facts show that capitalism is the system of freedom – and that it creates wealth. The facts similarly show that statism is the system of repression – and that it causes poverty. Capitalism is the system of freedom and prosperity. Its antithesis – statism in any form – is the system of oppression and destitution. Despite these facts, however, widespread antagonism toward capitalism exists; and generally from among society’s most educated members – Humanities professors, writers, artists, journalists, teachers, clergymen and politicians.

Anti-capitalist intellectuals and writers present a constellation of related criticisms. They hold that capitalism creates inequalities of income, that it exploits the workers and the impoverished, that it supplants spiritual values with materialism, and that it leads to imperialism and war. Successful businessmen, according to their view, accumulated fortunes largely by means of fraud and peculation. Such accusations come alike from socialists and conservative defenders of the current mixed economies, from secularists and religionists, from Marxists and from Catholic clergymen, from Jews and from Muslims.

Marx and Engels, for example, wrote:

“The bourgeoisie [the practitioners and supporters of capitalism]…has left remaining no other bond between man and man than naked self-interest and callous ‘cash payment’… In one word, for exploitation veiled by religious and political illusions, [the bourgeoisie] has substituted naked, shameful, direct, brutal exploitation.”

Pope Paul VI in the encyclical, Populorum Progressio, claimed:

“But it is unfortunate that on these new conditions of society a system has been constructed which considers profit as the key motive for economic progress, competition as the supreme law of economics, and private ownership of the means of production as an absolute right that has no limits and carries no corresponding social obligation.” The Pope went on to state that “a certain type of capitalism has been the source of excessive suffering, injustices and fratricidal conflicts whose effects still persist.”11

Such “liberal” modern American historians and writers as Charles Beard, Richard Hofstadter and Matthew Josephson routinely denigrated leading industrialists and capitalists, arguing that Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, J.P. Morgan, et al., built their careers by “exploiting workers and milking farmers, bribing Congressmen, buying legislatures, spying upon competitors, hiring armed guards, dynamiting property, [and] using threats and intrigue and force.”

The system of freedom and wealth is repeatedly and savagely attacked by many intellectuals and other highly educated individuals — worse, by men and women claiming to be “liberals,” humanists, lovers of man, i.e., the very individuals who should function as the protectors and preservers of human life. There is an enormous disconnect between the facts of capitalism’s nature and history – and the evaluation of these by many “progressive” writers and the millions whose thinking they influence. The facts of capitalism’s nature and history are not unknown. Certainly the educated critics are well aware of them. Capitalism’s enemies are simply unimpressed. Why? What is responsible for the great disconnect? The reason is that the objections to capitalism are not based on factual grounds – and all the evidence in the world establishing the freedom and prosperity of those living under capitalism will not influence the system’s critics to the slightest degree. The criticisms are motivated solely by moral and philosophical theories.

Since long before capitalism’s 18th century inception, moral theories antagonistic to egoism and profit-making have been dominant. From its birth, therefore, capitalism was an intellectual anomaly: a great boon to human prosperity that was unsupported, even opposed, by men’s dominant moral and philosophical codes. Hence the tragic historical spectacle of capitalism providing abundance for the first time for untold millions while sustaining repeated intellectual blows from its moral and philosophical enemies — from thinkers who claimed to care about mankind. For example, socialists – whether of a Marxist or non-Marxist variety – insist that it is an individual’s moral obligation to sacrifice himself for the state. Capitalism, they accurately point out, is not founded on principles of self-sacrifice. Rather, capitalism rests on an egoistic moral code – on the inalienable right of each and every man to his own life. The freedom that capitalism offers an individual to pursue his own personal, selfish happiness is, to socialists, anathema. To them, individual rights and political-economic freedom are appalling because they follow logically from an egoistic moral code that they regard as evil.

As a further example, modern egalitarians seek equality of income. But, contrary to their wishes, the freedom of the capitalist system will always lead to enormous disparities of income, because, in fact, individuals are not equal. They are not equal in talent, they are not equal in initiative, they are not equal in capacity to satisfy customer demand. Left free, some individuals will cure cancer, some will make the baseball Hall of Fame, some will drop out of school, some will work in the local grocery store, some will refuse to work and sponge off of families, friends and private charities.

The enormous general prosperity of the capitalist countries – the ability of capitalism to inherit widespread poverty and then proceed to create a vast middle class – does not and will not begin to impress egalitarians. The principle of economic equality – not universal prosperity – is their moral god. Consequently, they admire the “equal” destitution of Cuba’s citizens and repudiate the unequally-shared wealth of America. To them, it is morally superior if everybody subsists roughly equally on $1,000 annually and morally inferior if some possess millions while others live on “merely” $15,000 or $20,000 or $30,000. Rational men prefer to earn $15,000 in a country where others are millionaires to $1,000 in a country where others are equally poor. But egalitarians loathe the economic inequalities necessitated by the freedom of the capitalist system.

Finally, to a devout religionist, such as contemporary Islamists, what matters the earthly riches and comforts enjoyed by those in the capitalist countries? To them, all that matters is salvation in a higher world. If Allah repudiates the secularism, selfishness and materialism of capitalism, if such a life leads to eternal damnation, then the religionist must abjure it, even seek to annihilate it. Islamic terrorists, after all, did not destroy the towers of the World Trade Center simply because they were tall buildings. For years, they targeted those buildings because they were the nerve center of the world financial markets, located in the Wall Street area of New York City, the world’s commercial center. Those towers were, in terms both practical and symbolic, at the heart of global capitalism – and this is exactly why they were destroyed.

Too often, freedom’s supporters have limited themselves to responses that demonstrate capitalism’s unparalleled ability to increase men’s prosperity. While true and important, such defenses miss the essence of the criticism. It is as if a great dialogue regarding the most momentous issues held across a span of centuries has been conducted at cross purposes. The critics argue on moral grounds; the supporters on economic grounds. The critics, wedded to a moral code of self-sacrifice, are oblivious to capitalism’s practical success. The supporters, equally wedded to such a code, are morally disarmed against the onslaught of their antagonists — and are reduced to the citation of empirical facts and figures. The supporters, unable to break free of the conventional creed urging selflessness, have too often regarded capitalism’s inherent pursuit of self-interest as a guilty secret, akin to an unsavory skeleton in a family closet.

It is time to come out of the closet.

For two centuries, capitalism has cried out for its supporters to finally embrace the code of rational egoism as an undiluted virtue of which to be proud. That will be an important part of this book. The torrent of facts showing capitalism’s practical superiority will be presented within a philosophical framework showing that capitalism is the only moral system for human beings.

Two intellectual tasks must be accomplished in order to establish capitalism as the ideal social system. The first is to factually document the enormous practical benefits to man’s life wrought by capitalism. These are the tasks of history and economics. The second is the job of philosophy: to show that morality arises only because of the factual requirements of man’s life on earth, i.e., the concepts “good” and “evil,” “right” and “wrong,” are based in the facts of human nature, specifically in the objective requirements of human survival and prosperity. Only when the good is shown to be that which promotes man’s life will it be possible to understand and appreciate the enormous moral virtue embodied in capitalism’s unparalleled ability to do precisely that. All codes upholding human sacrifice must be exposed as anti-life, therefore, antigood, i.e., immoral. When the philosophical job is accomplished, then and only then will men have the moral code by means of which to properly evaluate capitalism’s stunning, life-giving success.

The tragic spectacle of capitalism’s life-promoting achievements evaluated by means of moral philosophies woefully unequipped to understand or appreciate them will finally, after 200 years, end. Part One of this book performs the practical task. In examining capitalism’s essence, its predecessors, and its earliest days, it provides sufficient factual evidence to establish the system’s historic achievements and to refute the common misconceptions that have been fostered about its nature and its past. The data presented are illustrative of the moral-philosophical theories of egoism, individualism and man’s mind as his means of survival — theories that are later identified and articulated as the intellectual foundation upon which capitalism rests.

Part Two — the book’s most important section — is dedicated to the philosophical task: the explanation of the rational moral theories necessary to understand capitalism’s nature and achievements — and to finally assess them properly. After two centuries, the great disconnect between facts and evaluation will mercifully be brought to an end. The book’s thesis will be clear: capitalism is the only moral political-economic system because it alone embodies the rational principles upon which human survival and prosperity depend.

Part Three refutes the chronic moral accusations levelled against capitalism — that it is responsible for war, imperialism and slavery. It shows that, on the contrary, capitalism and the moral principles on which it is based represent the antidote to these horrors that have long afflicted mankind — and, conversely, that statism and the moral principles on which it is based bear causal responsibility for them.

Part Four is devoted to explaining the essential reason that capitalism is economically superior to any form of socialism or statism more broadly. The writings of the great economists both explain the workings of a free market and validate it as the only means by which to create widespread prosperity. That economics is relegated to the end of this book, therefore, represents no slap at the economists. Quite the contrary, for to a significant degree they have done their job superbly. It is time for the moralists and philosophers to do theirs.

Finally, the Appendix applies the moral principles elucidated in the book to the important and long misunderstood topic of the “Robber Barons.” When evaluated from the standpoint of a rational code of ethics that upholds the requirements of man’s life as the standard of morality, the enormous productivity of Carnegie, Rockefeller, Hill, Harriman, et al., stamps them as productive geniuses who were enormous benefactors of the human race. Originally, this chapter was included in Part One but needed to be cut because of space limitations. But the topic was too important to be removed from the book, so was included in its present form.

The overall goal of rational cognition in any field is to reduce a vast complexity of phenomena to a principle(s) that explain it. For example, consider the quest of the Pre-Socratic philosophers to explain the teeming multiplicity of nature in terms of a single material principle — whether water, air or Anaximander’s “boundless.” The Greeks called it “finding the one in the many.” Regarding the enormity of capitalism’s success, both morally and practically, in different centuries, on far-flung continents, involving a hundred issues, the explanatory principle that will emerge is: capitalism is par excellence the system of liberated human brain power. This principle will recur throughout the book.

The moral and philosophical theories presented in this book are grounded fully in the revolutionary intellectual work of Ayn Rand — and the reader is strongly encouraged to read her seminal novel, Atlas Shrugged, as well as her non-fiction works, The Virtue of Selfishness and Capitalism: The Unknown Ideal.

This book is written for the rational mind anywhere and anytime, whether the reader is a professional intellectual or an intelligent layman. It seeks to make the case for individual rights and freedom in terms intelligible to all rational men.

This book is in full, one-hundred percent support of capitalism, and repudiates all forms of the initiation of governmental force, whether in the economic or personal affairs of innocent men. As such, the presentation is neither balanced nor open-minded, if “open-minded” means the belief that all opinions hold equal cognitive weight — for they do not. Rather, the book is objective. It is open exclusively to facts and to rational argumentation. It is because of its objective method that its content is relentlessly pro-capitalist, for no facts exist and no rational arguments can be adduced to show the superiority of statism.

The author has a proudly selfish stake in promoting capitalism. As an American — though a teacher — he is rich, as are all Americans by both historic and current non-capitalist standards of wealth and poverty. Since capitalism is the only system capable of creating universal prosperity, he recognizes that his ongoing wealth depends on its continued 

Andrew Bernstein

Thanks to Capitalism, The Poor Get Richer

Everywhere, people trash capitalism.

But what they think they know about capitalism is usually wrong.

My new video debunks some myths about capitalism.

Do “capitalists get rich by taking money from others”?

“No one ever makes a billion dollars,” complains Rep. Alexandria Ocasio-Cortez. “You take a billion dollars.” In other words, capitalists get rich by taking money from others.

That’s nonsense, and Myth No. 1.

People believe that myth if they think that when one person wins, someone else must lose. It’s natural to believe that if you think there is a finite amount of money in the world. But there isn’t.

Free markets increase total wealth. Competition encourages entrepreneurs to find new ways to release more value from both people and resources.

Because capitalism is voluntary and consumers have choices, the only way capitalists can get rich is to offer us something that we believe is better than we had before.

That creates new wealth.

Steve Jobs became a billionaire. But by creating Apple, he gave us more: millions of jobs and billions of dollars added to our economy.

Research shows that entrepreneurs only keep 2.2% of the additional wealth they generate. “In other words, the rest of us captured almost 98% of the benefits,” says economist Dan Mitchell of the Center for Freedom and Prosperity.

“I hope that we get 100 new super billionaires,” he adds, “Because that means 100 new people have figured out ways to make the rest of our lives better off.”

But former Labor Secretary Robert Reich says we should “abolish billionaires.” He wants some form of wealth tax to hold their wealth down. “Entrepreneurs like Jeff Bezos would be just as motivated by $100 million or even $50 million,” Reich claims.

But Mitchell points out that if their income is limited, “Maybe they just take it easy … retire … sail a yacht around the world … consuming instead of saving and producing.”

I want them saving and producing! Billionaires have shown that they’re good at cutting prices or improving products or both.

As Michell puts it, “I’m not giving Jeff Bezos any money unless he’s selling me something that I value more than that money.”

Even if they don’t — even if they run out of ideas — their wealth is useful.

One reader called me “a complete moron” for saying that. He argues that “more money in the richest hands means money sitting in the bank doing nothing.”

But that’s an ignorant view of banks. Because banks loan that money out, they enable other people to buy homes, start new businesses and get educated.

Are “the rich are getting richer, while the poor get poorer”?

Still, I hear that “the rich are getting richer, while the poor get poorer!”

That’s Myth No. 2. Yes, the rich got lots richer, but the poor and middle class got richer, too.

“The economic pie grows,” says Mitchell. “We are much richer than our grandparents, and our grandparents were much richer than their grandparents.”

For thousands of years, the world had almost no wealth creation. Only when some countries tried capitalism did GDP grow.

Capitalists helped everyone, including the poor.

The media suggest that today’s wealth gap proves that’s no longer true. But they are wrong. Capitalism’s gradual progress continues. Census Bureau data shows that the average family today is almost a third richer than 40 years ago (yes, adjusted for inflation).

The media also say, “The middle class is in decline.”

It’s true, Mitchell points out. “It’s shrinking because more people move into upper-income quintiles! The rich get richer in a capitalist society. But guess what? The rest of us get richer as well.”

Next week, more myths about capitalism.

John Stossel

Where did All Those “Capitalist Pigs” Go

There are few ways in which a man can be more innocently employed than in getting money,” is an insight the famed biographer James Boswell attributed to Samuel Johnson.

Clients of the late Bernie Madoff, however, might take issue.

Over four decades, Madoff, acclaimed as the greatest fraudster of them all, ran a Ponzi scheme that swindled 40,000 people, including his closest friends, out of $65 billion.

But if “getting money” is among the most innocent of callings, America has more than its fair share of the goodly people who excel at it.

According to Forbes’s 35th annual ranking of billionaires, last year witnessed a population explosion. Some 660 new billionaires were added to the number for a total of 2,755.

And more than one in every four billionaires is an American.

According to Forbes, the richest man in the world is Jeff Bezos, founder of Amazon and owner of The Washington Post, with $177 billion.

Last year was the fourth in a row that Bezos led the list. His wealth exceeds the entire GDP of almost 150 nations.

Directly behind Bezos, at No. 2, is Elon Musk, chief executive of Tesla, whose wealth rose to $151 billion.

Numbers 4 and 5 were Bill Gates, co-founder of Microsoft, with $124 billion, and Mark Zuckerberg of Facebook with $97 billion.

“As a class billionaires added about $8 trillion to their total net worth from last year, totaling $13.1 trillion,” says the Washington Post.

“The United States had the most billionaires, at 724, extending a rapid rise in wealth that hasn’t happened since the Rockefellers and the Carnegies roughly a century ago. China, including Macau and Hong Kong, had the second highest number of billionaires: 698.”

This tripling of the wealth of the world’s billionaires and 30% increase in their number came during a year when America and the West endured the worst pandemic in a century and worst economic collapse since the Great Depression.

“While most of the world’s wealthiest people prospered during the pandemic, thanks in part to stock prices,” writes the Post, “millions of Americans grappled with job loss, food insecurity, debt, eviction and poverty.”

Query: Where was the outrage?

In previous times like these, where the rich got richer and the poor and working class rode the rails, we would have heard the excoriations of economic populists and echoes of TR’s “malefactors of great wealth” and FDR’s “forces of entrenched greed.”

But Forbes’ report of the population explosion among billionaires in 2020 passed seemingly without protest.

The dogs did not bark. Why not?

One reason: Whatever one may think of Bezos, Amazon, in 2020, was indispensable for delivering food and medicines to tens of millions of Americans who, given the “lockdowns,” depended on such deliveries for survival. You don’t castigate people providing your food and medicine.

Also, today’s billionaires’ boys club has come to understand how to make its astonishing wealth acceptable, by ingratiating themselves with their old ideological enemies.

Set up a tax-exempt foundation, fund it with billions of dollars, invite in liberals to sit on the board, and, at munificent salaries, to run it and distribute its income to liberal causes. The way to diminish leftist resentment at huge piles of private wealth is to give them a cut.

No wonder Elizabeth Warren’s wealth tax went nowhere.

However, they did it, America’s most successful capitalists have learned the lesson some previous generations of capitalists did not — how to preserve their wealth, privilege and economic power and avoid such derisive terms as “capitalist pig.”

Yet, of greater interest, and import, is that the China of the new Great Helmsman, Xi Jinping, a one-party Communist dictatorship, coexists with hundreds of Chinese billionaires.

What would Marx, Lenin, Stalin or the Mao of the Revolution that triumphed in 1949, who put his country through the Great Proletarian Cultural Revolution of the 1960s and 1970s, say of Chinese oligarchs and plutocrats, each of whom possessed at least a billion dollars in wealth?

Politically, China remains under an ever-tightening Communist rule.

But today, there are inequalities of wealth between the working poor and middle class, and the well-to-do and rich, that would have been anathema to the revolutionaries who founded Communist China.

Is China running a capitalist economy to generate the wealth to consolidate Communist Party control of the nation and grow China’s economic, military and geostrategic power until China displaces America as the first power on earth? So it would appear.

One wonders: Has China found the formula for global ascendancy that eluded the Soviet Union of Stalin, Khrushchev and Brezhnev?

Use state capitalism and market incentives to build the economic wealth that can be translated into the growth to enable China to ascend to a level of power where it is indisputably the first nation on earth?

Are the Chinese billionaires the geese laying the golden eggs for the Chinese Communist party? Is Communist doctrine being updated to accommodate the most successful Communist country of them all?

Patrick J. Buchanan is the author of “Nixon’s White House Wars: The Battles That Made and Broke a President and Divided America Forever.”

Let Us Be Clear Once and For All: Socialism Is Not at Root About Economics!

For the Conservatives, Capitalism is moral only to the extent that the capitalist lives to serve others. Self-interest can be smuggled silently in but not as a moral right or as a moral ideal. This means that “creeping socialism” always has the advantage and thus creeps unabated.

Over and over for decades, Conservatives have made the point that socialism does not “work,” that it does not create wealth but rather leads to poverty. This is true. Despite promising nirvana, “utopian” (socialist) communities and countries based on communism and socialism always failed economically.

Conservatives (including Wall Street Journal op-ed writers, right-wing think tanks, and pro-free enterprise economics departments) keep repeating the obvious and assert that people simply need better economic education to set them straight. Yet Conservatives keep losing every battle; the left repeatedly responds by ignoring their argument and rationalizing socialist failures.

The rationalizations run the gamut:

  • Previous socialist programs were not run correctly.
  • The moral ideal was right, but people are just too corrupt to practice it—there is a flaw in human nature.
  • The failure was caused by a plot by the U.S. (usually the CIA).
  • Socialism takes years to come to fruition and will triumph at some unspecified, future date….and so on.

What is striking is that no matter what the economic failures, true socialists rarely give it up. Why not. Because it has a moral base. Ayn Rand has made it clear that, “The power of morality is the strongest of all intellectual powers…men will not act, in major issues, without a sense of being morally right.” (quoted in Binswanger, 1986, p. 315).

Morality trumps economic facts if there is a conflict. This is true even if one’s accepted code of morality is objectively wrong. Millions have died fighting for Communism and Nazism (national socialism), including murdering millions of victims and keeping millions of others in hopeless poverty.

What is the problem with Conservatives (for more details, see Binswanger, 1986, pp. 95-100)? The Conservative argument is based on a contradiction: Capitalism is practical because most people want to live better, but morally it is defended by altruism, the premise that one must live only for the sake of others. Thus, Capitalism is only permissible so long as one lives, or claims to live, for “the public good.” For the Conservatives, Capitalism is moral only to the extent that the capitalist lives to serve others. Self-interest can be smuggled silently in but not as a moral right or as a moral ideal. This means that “creeping socialism” always has the advantage and thus creeps unabated. The hapless Conservative defense is routinely: “Hey, let us not overdo it. Let us have some capitalism. The welfare state will work better if capitalists have permission to function.” Socialists face no such internal contradiction; sacrifice for and of others is the morally right thing to do even when everyone stays poor, cf. Cuba and Venezuela. (See Locke, 2020, for a detailed discussion of Venezuela).

The socialist’s indifference to poverty reveals that there is a deeper moral (objectively anti-moral) layer than altruism which means sacrifice for the benefit of others. Since others do not actually benefit, the deeper standard is the destruction of economic freedom as an end in itself. This is pure nihilism, destruction for the sake of destruction: better to have everyone grovel in poverty than to let one person make a profit. Socialism is based on hatred for human life. In socialist societies, the worst people, power lusters, rise to the top, but they only rise because socialism gives them a moral sanction.

What then would change a socialist’s mind? Convincing them that socialism is anti-life and that Capitalism, which is based on individual rights, is morally good, i.e., that every individual has a right to their own life, which includes the right to trade freely with others, based on self-interest, and profit from it (i.e., without fraud or coercion). This would mean that capitalists would be admired, both practically and morally, rather than reluctantly tolerated as a necessary evil or totally forbidden. Economic education will only be embraced by people who think that Capitalism is not just practical but morally good. Moral education is needed as the proper base for economic education.

Some might ask about the puzzling situation of a Communist dictatorship, China, openly fostering Capitalism (though with numerous controls). This is a historically unprecedented event. So, what explains it? It is not based on respect for individual rights since communists deny them. It is based purely on power lust. For centuries China was backwards in relation to the west. Now they have decided to be imperialists, and they saw that the only way they could get the needed power was to create wealth which would give them the ability to intimidate or dominate other countries by using economic and military force together, e.g., massive exports, cyber-crime, building a large, military including a nuclear arsenal, trying to forcibly take over international waters in the South China Sea, threatening and harming fishing vessels from other countries, seizing islands they do not own to build military bases, stealing copyrighted and military technology from foreign countries, bullying countries which displease them (Australia), invasion (Hong Kong, Tibet), continual military threats (Taiwan), loaning money to poor countries, who will not be able to repay them, as a means of gaining power over them, cooperating with other dictatorships such as North Korea and Iran which are also building nuclear weapons to attack the U.S., etc.

China recently acknowledged that their use of Capitalism was only a strategic move until full socialism could be established. China, right now, is the single biggest threat to world peace and freedom. The old-line Marxists said capitalists would buy or make the rope that will be used to hang them. China wants to make their own rope and hang us with it. It remains to be seen how all this will turn out. Our weapons are:  the Declaration of Independence, the Constitution, our military might, Capitalism, and our commitment to freedom as a moral ideal–if we can keep them.

Edwin Locke

Celebrate Capitalism

We should not only allow global capitalism; we should welcome it and foster it in every way possible. It is time to rephrase Karl Marx: Workers of the world unite for global capitalism; you have nothing to lose but your poverty.

A version of this article was first published in 2003. CM is republishing it because its message still remains relevant today.

May Day will once again be celebrated by left-wing and environmentalist protestors united by a single emotion: a virulent hatred of capitalism, especially global capitalism. Why the hatred?

The advantage of a global economy based on free trade and capitalism is so obvious and so enormous that it is difficult to conceive of anyone opposing it. The benefit is based on the law of comparative advantage: every country becomes more prosperous the more it invests in producing and exporting what it does best (in terms of quality, cost, uniqueness, etc.), and importing goods and services that other countries can produce more efficiently. For example, let us say that Nigerian companies can produce T-shirts for $1 a piece whereas U.S. companies can only produce them for $5 a piece. Under free trade, Americans will buy their T-shirts from Nigeria. This division of labor benefits people in both countries. Nigerians will have more money to buy food, clothing and housing. Americans will spend less on T-shirts and have more money to buy cell phones and SUVs, and the investment capital formerly spent on T-shirts will be put to more productive uses, say in the area of technology or drug research. Multiply this by millions of products and hundreds of countries and over time the benefits run into the trillions of dollars.

How, then, do we reconcile the incredible benefits of global capitalism with the anti-globalization movement? The protestors make three claims repeatedly. First, they argue that multinational corporations are becoming too powerful and threaten the sovereignty of smaller nations. This is absurd on the face of it. Governments have the power of physical coercion (the gun); corporations do not; they have only the dollar–they function through voluntary trade.

Second, anti-globalists claim that multinational companies exploit workers in poor countries by paying lower wages than they would pay in their home countries. Well, what is the alternative? It is: no wages! The comparative advantage of poorer countries is precisely that their wages are low, thus reducing the costs of production. If multinational corporations had to pay the same wages as in their home countries, they would not bother to invest in poorer countries at all and millions of people would lose their livelihoods.

Third, it is claimed that multinational corporations destroy the environments of smaller, poorer countries. Note that if 19th-century America had been subjected to the environmental legislation that now pervades most Western countries, we ourselves would still be a third-world country. Most of the industries that made the United States a world economic power–the steel, automobile, chemicals and electrical industries–would never have been able to develop. By what right do we deprive poor, destitute people in other countries from trying to create prosperity in the same way that we did, which is the only way possible?

All of these objections to global capitalism are just rationalizations. The giveaway, and the clue to the real motive of today’s left and their hangers-on, is that all their protests are against–they are anti-capitalism, anti-free trade, anti-using the environment for man’s benefit–but they are not for anything. In the first third of the 20th century, most leftists were idealists–they stood for and fought for an imagined, industrialized utopia–Communism (or Socialism). The left’s vision was man as a selfless slave of the state, and the state as the omniscient manager of the economy. However, instead of prosperity, happiness and freedom, Communism and Socialism produced nothing but poverty, misery and terror (witness Soviet Russia, North Korea and Cuba, among others). Their system had to fail, because it was based on a lie. You cannot create freedom and happiness by destroying individual rights; and you cannot create prosperity by negating the mind and evading the laws of economics.

Furious over the fact that their envisioned utopia has collapsed in ruins, the leftists now seek only destruction. They want to annihilate the system that has produced the very prosperity, happiness and freedom that their system could not produce. That system is capitalism, the system of true social justice where people are free to produce and keep what they earn.

The fact that free trade is now becoming truly global is one of the most important achievements in the history of mankind. If, in the end, it wins out over statism, global capitalism will bring about the greatest degree of prosperity and the greatest period of peaceful cooperation in world history.

We should scornfully ignore the nihilist protestors–they have nothing positive to offer. We should not only allow global capitalism; we should welcome it and foster it in every way possible. It is time to rephrase Karl Marx: Workers of the world unite for global capitalism; you have nothing to lose but your poverty.

Copyright 2003 Ayn Rand Institute. All rights reserved. That the Ayn Rand Institute (ARI) has granted permission to Capitalism Magazine to republish this article, does not mean ARI necessarily endorses or agrees with the other content on this website.

ABOUT EDWIN A LOCKEEdwin A. Locke is Dean’s Professor of Leadership and Motivation Emeritus at the R.H. Smith School of Business, University of Maryland. He is a Fellow of the Association for Psychological Science (APS), the American Psychological Association, the Society for Industrial & Organizational Behavior, and the Academy of Management. He is the recipient of the Distinguished Scientific Contribution Award (Society for I/O Psychology), the Lifetime Achievement Award from the Academy of Management (OB Division), the J. M. Cattell Award (APS) and the Distinguished Scientific Contribution Award from the Academy of Management. He, with Gary Latham, has spent over 50 years developing Goal Setting Theory, ranked No. 1 in importance among 73 management theories. He has published over 320 chapters, articles, reviews and notes, and has authored or edited 13 books including (w. Kenner) The Selfish Path to Romance, (w. Latham) New Directions in Goal Setting and Task Performance, and The Prime Movers: Traits of the Great Wealth Creators. He is internationally known for his research on motivation, job satisfaction, leadership, and other topics. His website is: