• Tag Archives capitalism

  • Alexandria Ocasio-Cortez Says She Opposes Capitalism. A Recently Taken Photo Suggests Otherwise

    Posted on by Azrael Comment

    There are many who speak loudly against capitalism, all the while still enjoying its benefits. To illustrate this point, just look at Alexandria Ocasio-Cortez texting from her iPhone, wearing a Movado watch, and drinking a Starbucks coffee. A democratic socialist, who thinks of capitalism as an immoral system, seems to enjoy the goods provided by big corporations. It is not only Alexandria Ocasio-Cortez, however; this is common behavior in Western societies.

     

    This behavior derives from the confusion between political ideology and practical politics. Political ideology is a theoretical framework of how society should work, whereas practical politics is the actual implementation of these ideas in the real world. Because of this confusion, people fall into two fallacies. First, they focus on ideological principles rather than practicalities. Second, they judge policies by their intentions rather than their results.

    Starting with the first fallacy, take the example of the term “capitalism.” Countries such as the US, Canada, and Sweden are, in principle, capitalist countries, despite the fact that they differ tremendously in terms of economic and social policies. Nevertheless, people view “capitalism” as something negative and universal in its definition and applications.

    The majority thinks of capitalism as it was perceived in the 19th century; a system associated with the unrestrained power of big corporations and the exploitation of the working class. That’s why many free-market advocates, in order to distinguish capitalism from this negative connotation, use other terms, such as free-market capitalism, crony capitalism, etc.

    A survey conducted by the Harvard Kennedy School showed that most Americans aged 18 to 29 don’t support capitalism while not supporting socialism, either. Specifically, 42 percent of young Americans support capitalism, and 33 percent support socialism.

    While, in principle, capitalism is related to private property, voluntary exchange, operation for profit, and free markets, it is not perceived as such. According to another poll, the vast majority of people tend to agree with the statement, “Most people are better off in a free market economy, even though some people are rich and some are poor.” Although people disagree with capitalism, they seem to agree with the results it produces.

    The second fallacy comes through judging policies and programs by their intentions rather than their results. The famous saying “That wasn’t real communism” finds its roots in this particular fallacy. In contrast to Nazism, an ideology associated with racism and hatred, communism was presented by Marx and Engels as a goal for an ideal society where everyone would be equal. Marx described this society with the famous slogan: “From each according to his ability, to each according to his needs!’’ with socialism being the transition to communism.

    Based on this premise, the crimes and failures of communist regimes are discarded because they don’t fit with the ideal society Marx described. Political assassinations, forced labor camps, famines, and mass killings are thought of as not real communism and disregarded or overlooked by modern socialists. Once again, political ideology is confused with practical politics.

    Political ideologies often lead us to fallacies and false conclusions. I suppose that even if Alexandria Ocasio-Cortez read this article, she probably wouldn’t change her views on capitalism. Nonetheless, if someone tells you they don’t like capitalism (and they are not wearing a hammer and sickle cockade), ask them what exactly they disagree with. In the end, they might just agree with you.

    This article was reprinted from Speak Freely.


    Evangelos Andreou

    Evangelos Andreou is a student of Political Science at Panteion University and Economics at the American College of Greece. He is also a Local Coordinator at European Students for Liberty.

    This article was originally published on FEE.org. Read the original article.



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  • Tucker Carlson’s Critique of Market Capitalism Suffers from a Flawed Premise

    Posted on by Azrael Comment

    Much attention has been given to a cable show monologue from Tucker Carlson. There, Carlson argued that “market capitalism is a tool, like a staple gun or a toaster.” Implied is the idea that markets are simply meant for human use, something to be picked up but that can also be put aside, ignored, or directed.

    Since the monologue went viral, many critiques have been leveled, as well as defenses made. One such defense by Hillbilly Elegy author J.D. Vance declares the “market is not a Platonic deity, floating in the sky and imposing goodness and prosperity from on high.” In support of his critique, Vance cites various threats to our “social fabric” giving the opioid epidemic special attention. He concludes, referencing drug companies and other corporations, that “these entities are doing what the market demands, and in some ways, it’s hard to blame them. But shouldn’t our laws and policy make life harder for them?”

    But if we think of markets as a mere tool, we mistakenly believe we can discard them when convenient or fruitfully direct it toward our preferred ends. The “just a tool” mindset is prone to mistaken beliefs that making it harder is enough for good social outcomes. The tool metaphor suggests that the changes in job markets, culture, family structure, or even addiction are the manifestations of undisciplined free markets which can be corrected by“the man of system.”

    Tucker and Vance appear to defend an old concept, that markets, like a tool, can be employed as deliberately or as purposefully as a toaster, staple gun, or hammer, as the metaphor implies, to repair perceived harms. Yet this assumption misses key realities about the nature of markets, which makes them more than a tool.

    First, markets are expressions of human cooperation. They are a medium of human interaction that allows individuals and groups to coordinate—at times over long distances and even temporally—efforts and resources. In this sense, it is important to understand that even if labeled a tool, markets are a description of human interactions and processes that emerge to coordinate within the context of scarcity and constraints.

    The primary, but not exclusive, mechanism to coordinate human economic activity is price. As F.A. Hayek explains, the marvel of the price system signals the value of resources by tapping into vast networks of human knowledge. The price system acts as an information surrogate revealing the “particular circumstances of time and place.”

    This insight has been foolishly tested, most notably in communist regimes, which abolished prices and instead chose to stumble in the dark without this expression of human coordination. Rationing and poverty became the norm; increasing vulnerability to—and even creating—famines that claimed the lives of millions.

    This may not have been the greatest atrocity of these totalitarian regimes, but it was a dominant feature, and the consequences were disastrous. In socialist regimes, the absent price leaves no signal for production or distribution. Resources and capital are misallocated, directed according to the needs of the government, or what central planners perceive to be the best use of those resources without the wisdom of markets and market participants.

    The United States has forayed into this planning fallacy in the past, though on a smaller scale. The Great Depression was a time of economic experimentation, including policies meant to influence prices. This attitude of market control led to perverse programs, which, during a time of hunger and economic distress, would expend resources in nonsensical ways, such as President Franklin Roosevelt randomly designating the price of gold or paying farmers to not farm—a policy that persisted in some form into the current century.

    More recently, gasoline shortages in the late 1970s were at least partiallycaused by price controls. Since price was removed from the work of rationing and encouraging a growth in supply, the government had to step in with its own rationing scheme. Additionally, the cost of gasoline appeared in the form of time consumption as people desperate for gas waited in long lines at the pump. We have run this experiment many times of varying scales only to find attempts to control human coordination negatively impacted prosperity.

    One need not support a totalitarian regime to commit this error, only bear the mindset that markets are simply tools to be used to construct policy and society rather than expressions of individuals responding to their respective incentives and constraints to realize their preferences. This hints at a broader truth: free markets and prices are a key part of the social fabric.

    As Ludwig von Mises wrote:

    The pricing process is a social process. It is consummated by an interaction of all members of society. All collaborate and cooperate, each in the particular role he has chosen for himself in the framework of the division of labor.

    Attempts to manipulate markets toward particular policy goals often threaten the social fabric as they target a fundamentally social process.

    Not every free market arrangement is coordinated via the pricing mechanism. Economists such as Ronald Coase and Elenor Olstrom described alternate arrangements for coordinating efforts between individuals, such as firms or complex systems of self-governance, which often arise to solve problems where price has not materialized.

    Most important, though, is that these are part of the emergent order of free-market systems to serve members of society, subject to the churn of the market process. Allowing that process to take place avoids capture by the political system and strengthening social ties.

    Second, when decisions are not made by free markets, then political markets take control. Distribution of resources then becomes a question of the political process. Here, the currency is rarely as transparent as the price mechanism. The currency of the political economy is often money, but it is also votes, political favors, rents, power, and special legal treatment. The incentives shift from serving others through mutual exchange and coordinating resources and talents to maintaining political power and subjecting resources to political ends. Political markets are the natural outcome of turning free, or capitalist, markets over to the political process.

    This observation is clear: that markets are more than just a tool, but in some regards a reality of human behavior. Leaving a market where price and choice govern substitutes it for other forms of human coordination, each with their own currency. The political system seeks to maintain the status quo, entrenching incumbent market and political actors.

    Markets aren’t perfect, and we should not expect every outcome to meet such an ideal. People lose work, are injured or die, or fall into addiction. None of these are to be lightly dismissed, but the long-term trend is that each of these can be addressed through the market process. In the free market, we find the ability to deal with downsides as we see fit, in coordination with others through voluntary transactions made through mediums of human exchange. Alternatively, government action is often less responsive and monopolizes solutions to complex sociological problems.

    Giving government the monopoly on dealing with the downsides of choice hinders coordination in the market to ease the burdens on individuals, families, and societies from those very problems. It impedes the process of creative destruction and cooperation.

    This reveals a third reality of free markets that makes them more than tools. Markets lay out incentives for people to solve each other’s problems, constantly innovating, seeking to reduce transaction costs, and providing better outputs via the process of creative destruction. What we see often when governments interfere in market processes are the unintended and often worse consequences that spring forth from intervention. Interference in the free market is usually more costly than the perceived benefits.

    The costs and consequences of the political market are many. Redirecting resources reveals opportunity costs. Preventing people from their preferences raises the cost of enforcing laws and regulations against those preferences. People look to substitutes when prices rise, often turning to unsafe or even dangerous alternatives. The law of unintended consequences runs rampant in the world of economic intervention, and all of these costs must be accounted for when attempting to remove people from their preferences.

    Observing market behavior, in its entirety, allows for a comparative evaluation between free markets and their alternatives, the record is rather clear: free markets produce the greatest amount of prosperity, choice, and set of incentives.

    Perhaps we can treat the free market as a tool, as Carlson claims; much like a hand, foot, or eye can all be called tools. Yet, they are also more than just tools, as are markets. Embracing free markets allows us to pile “idea on idea,” as Deirdre McCloskey has written, and permit “market-tested betterment” to increase prosperity, as it has done.

    Markets are inescapable realities, part of social processes, and we stand able to choose which market process we employ—free markets or centralized political markets.

    Source: Tucker Carlson’s Critique of Market Capitalism Suffers from a Flawed Premise – Foundation for Economic Education




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  • I Grew Up in a Communist System. Here’s What Americans Don’t Understand About Freedom

    Posted on by Azrael Comment

    Individual freedom can only exist in the context of free-market capitalism. Personal freedom thrives in capitalism, declines in government-regulated economies, and vanishes in communism. Aside from better economic and legislative policies, what America needs is a more intense appreciation for individual freedom and capitalism.

    I was born and raised in communist Romania during the Cold War, a country in which the government owned all the resources and means of production. The state controlled almost every aspect of our lives: our education, our job placement, the time of day we could have hot water, and what we were allowed to say.

    Like the rest of the Eastern European countries, Romania was often referred to as a communist country. In school, we were taught it was a socialist country. Its name prior to the 1989 Revolution to overthrow the Ceausescu regime was the Socialist Republic of Romania.

    From an economic standpoint, a petty fraction of property was still privately owned. In a communist system, all property is owned by the state. So if it wasn’t a true communist economy, its heavy central planning and the application of a totalitarian control over the Romanian citizenry made this nation rightfully gain its title of a communist country.

    Socialism Creates Shortages

    Despite the fact that Romania was a country rich in resources, there were shortages everywhere. Food, electricity, water, and just about every one of life’s necessities were in short supply. The apartment building in which we lived provided hot water for showers two hours in the morning and two hours at night. We had to be quick and on time so we didn’t miss the opportunity.

    Wrigley’s chewing gum and Swiss chocolate were a rare delight for us. I remember how happy I was when I’d have a pack of foreign bubblegum or a bar of delicious milk chocolate. I’d usually save them for special occasions.

    Fruity lip gloss, French perfume, and jeans were but a few of the popular items available only on the black market and with the right connections. God bless our black-market entrepreneurs! They made our lives better. They gave us the opportunity to buy things we very much desired, things we couldn’t get from the government-owned retail stores which were either half-empty or full of products that were ugly and of poor quality.

    The grocery stores were not any better. I get it, maybe we didn’t need to be fashionable. But we needed to eat. So, the old Romanian adage “Conscience goes through the stomach” made a lot of sense.

    During the late 1970s, life in Romania started to deteriorate even more. Meat was hardly a consumer staple for the average Romanian. Instead, our parents learned to become good at preparing the liver, the brain, the tongue, and other giblets that most people in the West would not even consider trying.

    When milk, butter, eggs, and yogurt were temporarily available, my mom—like so many others of our neighbors—would wake up at 2:00 a.m. to go stand in line so she’d have the chance to get us these goodies. The store would open at 6:00 a.m., so if she wasn’t early enough in line she’d miss the opportunity.

    In 1982, the state sent their disciples to people’s homes to do the census. Along with that, food rationing was implemented. For a family of four like us, our rationed quota was 1 kilogram of flour and 1 kilogram of sugar per month. That is, if they were available and if we were lucky enough to be in the right place at the right time when they were being distributed.

    The one television channel our government provided for us often focused on programs related to crime and poverty in the western world. After all, people were poor and suffering because of capitalism, so we were told, so we needed socialism and communism to solve the inequalities of humanity.

    Capitalism Advances Private Property

    Considering the shortages created by the government-controlled economy of my birth country, I came to understand and appreciate capitalism, the one system that had the most dramatic effect in elevating human civilization.

    The layman definition of capitalism is the economic system in which people and businesses engage in manufacturing, trading, and exchanging products and services without government interference. A free-market capitalist system works in a more efficient manner when not tampered with by government or central bank intervention in the credit markets, monetary policy, and interest rate fixing.

    Private property and private property rights are at the core of capitalism. When in school, we learned that private property makes people greedy and is considered detrimental to society. Private property was associated with capitalism, the system that our textbooks claimed failed.

    Allocation of Resources

    Romania was rich in natural resources, yet the difference between our standard of living and those from the West was quite dramatic. It was indicative of a flawed economic system that most countries in Eastern Europe adhered to during the Soviet Era. But one may ask why was there so much poverty when natural resources are so abundant?

    Economics is the study of the allocation of scarce resources which have alternative uses. Efficiency is thus of primary concern when the goal is economic progress.

    In a centrally-planned environment, the various government individuals who are assigned the task of planning the economy could not possibly know how to properly allocate the scarce resources of an entire nation, no matter how smart or educated they are. Shortages are one of the consequences of improper allocation of the scarce resources.

    The free market, however, through the multiple spontaneous interactions of businesses and consumers, directs the allocation of resources via the amazing process of supply and demand. It is precisely due to the profit and loss events that economic efficiency is stimulated.

    Free Markets Attract Capital

    Due to its profit incentives, capitalism encourages innovation. Innovation leads to progress and an increase in the standard of living. But progress and the climate which offers humans a high standard of living cannot be created without the capital to transform and turn resources into the final products that give us the—relatively—cheap energy and food, smartphones, fitness gyms, and overall the life we currently afford. Capital moves in the direction of less regulation, less government intervention, and less taxation. In short, capital moves to where there’s more economic freedom.

    In contrast, communism, socialism, fascism, or just about any government-controlled system lacks the profit incentive. The people, who are the human resources, have no desire to engage in a business where the reward is not attainable (unless it’s done in the black markets). They accept the state and its bureaucratic cronies to dictate their faith.

    Capital is chased away due to the high risk associated with governments who engage in high levels of controlling their economies and, often, corruption. The overall standard of living is dramatically lower than in most capitalist places, and the poverty is higher. Consequently, the collectivist country falls into an economic and social trap from which it is hard to escape. Only capitalism can save a nation from the failure of its central economic planning.

    Capitalism Helps Us Be Better Individuals

    Similar to the old Soviet lifestyle, let’s remember what the typical Venezuelan family of our times worries about on a daily basis. Food to put on the table and the safety of their children. They wake up in the morning wondering how many meals they can afford that day, where to get them from, and how to pay for them.

    We, the lucky ones to live in a relatively free-market system, don’t have these kinds of worries. We go to work, get leisure time to be on Facebook, watch TV, be with our families, read books, and enjoy a hobby or two. In short, we have the personal freedom to engage in and enjoy a variety of life events because of capitalism.

    But there’s another important motive to desire to live in a capitalist society. We are free to create and come up with all kinds of business ideas, no matter how crazy some might be. Because we don’t have to worry about tomorrow, we have—or make—the time to read, explore, and innovate.

    Capitalism makes it possible for us to challenge ourselves, to have goals, and to put forth the sweat to achieve them. It gives us the freedom to try new things and explore new opportunities. It gives us the chance to create more opportunities. It helps us build strong character because when we try, we also fail, and without failure, how do we know we’ve made mistakes? Without failure, how do we know we must make changes?

    Individual Freedom Can Only Exist in the Context of Free Markets

    Before immigrating to the U.S., I had to go through a rigorous process. One of the events was the immigration interview with the American counselor who, among many other questions, asked why I escaped Romania and why I wanted to come to America. My short answer was freedom. Then he posed the interesting question: “If America was to go through a period of economic devastation with shortages similar to Romania, would you still feel the same way?” I didn’t think too much about it, and I said, “Yes, of course, as long as I have freedom.”

    In retrospect, that was a dumb answer on my part. After several decades, I came to believe that the human condition of individual freedom can only exist in the context of free markets. Shortages are created by the intrusion of the state into the complex activity of the markets, whether it’s price controls or poor allocation of resources.

    When shortages are powerful and long enough to dramatically affect lives, people resort to revolt. Large revolts call for serious governmental actions including, but not limited to, eroding or completely eliminating individual rights (the right to free speech and to bear arms), the institution of a police state, and the enacting of a powerful state propaganda system. Capitalism is the path to the individual rights and liberty that build the solid foundation of a free society.

    Is America a True Capitalist Economy?

    The short answer is no. Most of the world refers to the American system as being a capitalist one. Based on my short definition of capitalism, it is obvious that it is not quite a pure one, and I wish to clarify that the U.S. is not a truly free-market capitalist system.

    The economic policy of the 19th Century with limited regulations and minimal taxation attracted the needed capital to our country. The Industrial Revolution made spectacular advancements in human conditions due to the capital concentrated in the region. America lost its number one place due to legislating higher regulations, taxation, and protectionist policies.

    But we are still enjoying some of the fruits today. Compared to many countries in the world, we still maintain stronger capitalist traits than most, however Hong Kong, Singapore, Switzerland, New Zealand, and a few other nations who lead the way in economic freedom have surpassed us (see the latest statistics).

    What America Needs

    Aside from better economic and legislative policies, what America needs is a more intense appreciation of individual freedom and capitalism. Such a crazy idea is not acquired through public schools or becoming a public servant. Young people don’t need more years of schooling with more worthless college degrees and student loans in default. America needs more entrepreneurs and businessmen. It needs more people with drive and ambition, more self-starters, more innovators, more people who are willing to take chances.

    It starts in our own backyard, in our home, in our small group, in our community. It starts with loving, involved, and dedicated parents who’d instill the values of personal responsibility and delayed gratification in their children. It continues with an education that entails both theory and hands-on practice in environments conducive to learning how to think independently and how to acquire life- and work-skills. It evolves into a purpose-driven life rich in learning and experiences. And this may be just the beginning of attaining the intellectual maturity to perceive the value that free markets and individual freedom afford most of us.

    Carmen Alexe


    Carmen Alexe

    Carmen Alexe escaped Communist Romania during the Cold War. Her motive was individual freedom. She has close to 30 years in the lending industry, currently working as a Commercial Real Estate Consultant. She’s been a real estate investor since 2001. She’s also a passionate Salsa dancer. She’s a free spirit doing research on and practicing how to live free in an unfree world. She shares her zeal for free markets, individual freedom, and personal responsibility by writing on her blog.

    This article was originally published on FEE.org. Read the original article.



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