A critique of capitalism. By Ben “wannabe-economist” Pacini.
I consider myself to be a genuine proponent of free markets, personal freedoms, and limited government. I believe in these things unapologetically. This belief came about because I wanted to study how the world improved–how we eliminated poverty, we worked to end tyranny, and how nations shifted from taking advantage of their people to protecting their rights. I have spent my life trying to understand what makes people better off, and in particular, to study different economic and political systems to learn which ones help humanity.
That is not to suggest that I have all the answers. It is to suggest, however, that I’ve done all in my power to find them. And I find the hunt for those answers to be so compelling as to fill every spare moment with a drive toward answers.
So far, what I have learned makes me believe that liberal human rights, personal freedoms, the rule of law, and limited government are the basis on which free nations are built–and are the prerequisites to free markets. I have also come to believe that free markets are able to eliminate poverty and create wealth better than any other system that is presently in existence.
And yet, though I defend liberal democracy, I know that it has flaws. It is not as efficient as dictatorship, and ours is not as democratic as a communist government. As one political philosopher put it, “when faced with the choice between Judas and Jesus, parliament adjourns for the day, or calls on a committee to investigate the matter.” That philosopher was Carl Schmitt, one of the leading philosophers of the Third Reich, and one of the great critics of liberal democracy.
And the greatest weapon against Schmitt and the fascists? Admitting the flaws of democracy up front. I’m currently working on that in another place, and may share it here another time. The way to answer the critics is to be honest about the shortcomings that we face, and honest about the downsides to potential alternatives.
In the same spirit, I offer my critique of capitalism.
Capitalism does not mean “the status quo” or “oppression.” Capitalism means, essentially, property rights, the liberal freedoms (speech, religion, etc.), rule of law, and relative economic liberty. When people are allowed to voluntarily trade, they quickly begin to use prices to make decisions, and the profit motive forces people to help their neighbor if they want to help themselves.
For some reason, whenever someone begins to argue about capitalism, the question of “pure capitalism” or “totally free markets” comes into play. I do not believe either exist, as most people think of them, since markets rely on government for rule of law and establishment of property rights. More importantly, I am not advocating here for ideological purity. I am suggesting, however, that relative freedom of people will bring wealth and prosperity as compared to relative tyranny.
II) Making capitalism better.
To begin, let me offer a few things that could improve capitalism in the United States in 2017. Let me clarify something first, however: these are items that would push us toward a more capitalist, less socialist system. As such, those who use these items as critiques are critiquing the status quo, and not the capitalist system as currently existing.
1) Occupational licensure.
The system is rigged, but it isn’t just CEOs. It’s lawyers and doctors. In other words, it isn’t just the 1%, but also the 20%, and PhD professors are in that bucket too. They make more than they would if you removed occupational licensure, and there are a lot of liberals who are getting on board. This is an easy area of agreement on both sides. What should matter is whether you’re capable, not the fanciness of your piece of paper.
Our education system is a mess, and while I have many ideas on how to fix it, I can’t boil them down to anything resembling pithy. I think choice would be marginally better, but is not the silver bullet that some believe it to be.
I’m just barely this side of open borders. If we opened borders worldwide, the world’s wealth would double. And much of that wealth would go to the poorest. Literally by walking across an imaginary line, they’d increase their wages by tenfold. These are the poorest of the world.
4) Strengthening of liberal rights
Politics is downstream from culture, and culture is increasingly pushing freedom of speech, freedom of religion, and civil liberties out the window.
5) End all subsidies, quotas, trade restrictions
That means you, sugar farmers.
6) End all federal welfare and entitlements, to be replaced with a NIT
If we got rid of all welfare programs, we could end poverty by simply sending a check to the people currently getting welfare. This proposal is to do just that.
7) End all federal welfare and entitlements for anyone making over $200,000 per year.
I see no reason to pay Donald Trump to do nothing. Twice.
8) Higher ed: Means test Pell grants, and make them refundable. Increase scholarships and grants for the poor. End all state college sports funding. Create incentives for people to skip college, earn college credit in high school, and test out of coursework. Find ways to push schools to accept credits earned elsewhere.
9) End bail outs to banks and other large corporations (including oil and solar).
Bill Nye is one of my favorite people, and his science is usually quite good. He only gets attacked for political reasons. I like him, even when we disagree. But when you listen to him, note that he almost always goes back to his primary driver: getting government funds to pay scientists. I have a simpler way: stop paying oil companies a subsidy. Stop bailing out banks. It’s not that hard. And yes, stop paying solar companies.
10) End ineffective drug laws, and tell people to stay away from drugs. On this note, many of the problems we have with racial inequality stem from bad government intrusions. They are often (and inappropriately) blamed on capitalism.
III) The honest critique of capitalism.
I believe in everything I’ve said above, but I want to reiterate: all of those are ways we are moving toward MORE capitalism, not less. The question before us is whether doing so would present problems. The answer is yes, and the more we advocate for capitalism, the more honest about those problems we should be.
1) We have developed a science that studies how to generate more resources and wealth, and that science is economics. We should study it and learn from it just as we study and learn from biology or nuclear physics.
But we should know when we’ve moved from the domain of economics. Economics studies material wealth. It does not study the higher things of personal fulfillment, life satisfaction, morality, and the meaning of life.
Free markets will allow people to most effectively pursue their private ends, but is mute about what those ends should be. It is wise to be so silent, so long as we do not mistake the silence for nihilism. There are values and morals out there, and there are poor people who live meaningful rich lives, and rich people who live small and miserable lives.
Allowing people to exit the grinding poverty of generations is the first step in giving them the freedom to pursue the deeper things, but let us not imagine that material wealth really is the deeper things.
My great hope is that the next technological revolution will be in the realm of religion, morality, and psychology.
2) Free markets give us what we want, not what we need.
Freedom means that there is no paternal government parenting you into choosing good choices. You can watch cat videos on facebook all day, and free markets will proclaim that as good as searching wikipedia to cure cancer. Through the utilitarian lens, these two are the same.
And we see this everywhere: why do we have such vapid political discussions? Because politicians play to the people. Why is the media such a terrible mess? Because we pay them. Why is all of online advertising ridiculous click bait? Because when they say it will blow your mind, you believe them and click through.
We complain about the horror of the McDonalds on every corner, and then buy ourselves a cheap $1.00 soft serve cone to help us with our grief. You can’t complain that Chef Boyardee is everywhere, when you’re the one always buying Chef Boyardee.
3) The tyranny of ideology
Every ideology has purists, and those purists present at least three problems:
A) They are not willing to admit the flaws of the ideology nor do they see the “blind spots” wherein their ideology does not apply
B) They worry more about cheerleading for their ideology than productively fixing problems.
C) They do not look beyond their ideology to the next improved iteration.
I do not know what the next level of capitalism could be, and I do try to be imaginative.
4) There begin to be incentives in free markets for businesses and governments to incentivize consumerism, as it boosts growth.
5) Unions, guilds, and rent-seeking are all free market phenomena. They may seek power through politics, but they can cause plenty of havoc without any government intervention.
6) Add to these the many critiques of free markets that economists have already discovered: externalities, monopolies, market power broadly, public goods, and the list goes on.
7) A newer theory: inequality. Capitalism does cause inequality. I see that. And while most of the inequality is caused by wealth creation, it is fair to ask if any of that inequality is caused by negative forces.