“Four-alarm fire in downtown Moscow clears way for glorious new tractor factory. And, on lighter side of news, hundreds of capitalists soon to perish in shuttle disaster.” – Airplane II, The Sequel
I know how they feel. When my alarm goes off late – I end up Russian all morning.
Capitalism is a great system for allocation of winners and losers in an economy. It does this more or less automatically, because the transactions are voluntary on both sides. If I want weasel snouts and have money, and you have weasel snouts and want money, as long as we can come to an agreement, we both win. Nothing better than a warm weasel snout on a cold night.
Capitalism is good at creating rewards for those win-win transactions. Because it’s good at that, capitalism is probably the best creator of abundance the world has ever known outside of Bernie Madoff. Capitalism is also set up to be very compatible with those on the Right.
Transactions are based on free will and free exchange of goods, even transactions for things like natural gas. Here in Modern Mayberry, if I don’t want natural gas, I can cut firewood and burn it to heat my home. My insurance company would probably prefer me to get a fireplace first.
But natural gas is amazingly cheap because, thanks to capitalism-inspired innovation, it’s abundant. I would be foolish to try to heat water in my house over a wood stove in summer when I can spend the $12 or so a month for hot showers. I choose that because of free will, and also because I don’t want The Mrs. killing me in my sleep. I think that was one of the things on her list before she accepted my marriage proposal – “Does he sleep heavier than me?”
Veganism is like socialism. They’re both fine, unless you like eating.
Capitalism has positive incentives – make someone else happy with the transaction, and you win. If you do it in a significant enough way? You can win bigly. If you don’t win bigly? You can at least do better than your parents.
That has been the fuel of what we’ve called the American Dream, the idea that you could have your own struggle and the outcome is determined largely based on your effort, along with a bit of luck. Heck my boss gave me a raise yesterday. He said he wanted my last week here to be happy.
The United States has been a place of abundance for the last 75 years. Have there been recessions and setbacks along the way? Certainly. Has there been poverty? Absolutely. I like to do my best to fight poverty, but I’ve found the homeless aren’t very good at wrestling.
Where can you hear songs about poverty? Singapore.
One of the things that has been proven by President Johnson’s attempt to make a “Great Society” is that, despite trillions in .gov spending on poverty, it will always be with us. Even before Johnson’s “Great Society” program, the poverty rate had dropped to below 15%. That’s why a Mercedes-Benz® and poverty are the same: Princess Diana couldn’t stop either of them.
Since 1966, poverty has bounced around between 11% and 15%. Perhaps, in some fashion, these programs have prevented higher levels of poverty during recession? It is certain, however, that we didn’t even have an official poverty measure until 1959.
The structure of the economy, however, began to change. A typical factory job, obtainable with a high school degree, provided enough money for a house, car, and necessities for a family. Note I said job – wives working was something that happened before the kids were born and after they were in school, at least in the growing middle class. The middle class has learned that, while money can’t buy happiness, poverty can’t buy anything.
Even though a typical family is now supported by a working husband and wife, things had been good. At least some of the additional wages from both spouses working went to an upgraded lifestyle – capitalism was more than happy to provide new things to buy with the income, like Zima® wine coolers and Dan Fogelberg™ CDs. Capitalism had taken us from the scarcity and hunger of the Great Depression to abundance and humongousness of actual obesity caused by an abundance of cheap, excess calories.
Although it’s trivially easy to prove that communism is nearly certainly the most evil system ever devised on the planet, capitalism has its faults, too: Capitalism has no soul. It is a blind force that will sell you anything, even if it’s something bad for you. Taken to an extreme, capitalism will provide more than just immoral items, it will provide things that are illegal. And never mix Islam with capitalism – they don’t like profit jokes.
Capitalism also provides incentives to manipulate. Advertising does a wonderful service when it makes us aware of new products that can help us, but advertising can manipulate desires, like Edward Bernays’ propaganda campaign to convince women (who didn’t smoke at the time) that smoking cigarettes was exciting and fashionable. Now? Type “women smoking” into Google®, and you’ll get 810,000,000 matches.
Another fault of capitalism is that it produces products that are designed to fail. Want your iPhone® to last five years? Good luck with a battery that lasts only three. Apple™ did one better: it made software changes that slowed older iPhones™ down. Why? To get you to buy a new iPhone©. I did click on one of those, “You just won an iPhone®” pop-ups. Thankfully, it was just a virus.
It could be yours, for only 36 payments of $375,221.43.
Making your products bad isn’t new. Lightbulbs, when initially manufactured, lasted too long. A cartel devised a standard that made sure that light bulbs were constantly failing. Why? So you would have to buy more. Another example?
Two words: printer ink.
Those failures of capitalism, however, are a symptom of abundance. People can afford those things, so companies do whatever they can to get as much of their money as possible.
I fear our economy may be slipping into scarcity. Not next week, not next month. But as we see increased tensions, the possibility of prolonged outages of things we take for granted are likely. Higher rates of unemployment are likely, too.
There is a sign that the government attempting to prop up the economy is starting to create disastrous distortions. From today’s news, this story (LINK) describes how the Federal Reserve’s® pumping of trillions of dollars into the system is having the effect of blowing bubbles in the economy. Color me surprised.
Abundance of the “one income for a family” type is gone for many professions, if not most. If the Fed™ decides that it wants to keep blowing bubbles with trillions of dollars just made up on the spot, the result will be inevitable: a currency reset.
People will blame this on capitalism. I won’t. The condition we find ourselves in is the result of decades of currency manipulation. You can’t print money forever without an impact. What we will be left with is a contracting economy. What system works best in an economy that’s getting smaller, not larger?
I know what will be sold – communism. The reason people keep falling for this one is in times of difficulty is that they believe that it will solve their problems. The reality, every single time, is that communism will end in murder, scarcity, and hunger – it’s like a game of Russian roulette, but in this game a few hundred million die. But, hey, maybe this time?
Unemployed leather workers have nothing to hide.
Capitalism has been the only reliable way to deal with economic crisis in the past. The incentives it provides minimized the hunger and the pain of the Great Depression. But it’s not the “capitalism” we see today. The people of the United States in the 1930s helped each other, and capitalism was a way to run the economy, not the highest moral good.
Was it a massive Federal program that saved people during the Great Depression? For the time during the Great Depression, the spending of the Federal government tripled compared to years before the Great Depression. In my reading, the Federal government enacted thousands of policies, many contradictory to each other. Unemployment was still 14%+ when World War II started. The war clearly ended the Great Depression.
But people helped each other back then during the Depression – Great Grandpa and Grandma McWilder even took in kids from families that couldn’t afford to raise them. The United States was a far more united place, and the shared morality was more than a shared economic morality, like we see today. Did you get aid only if you were moral and upright, or a widow?
If you get to choose what Hell to go to, pick the communist one. It will be out of coal and molten sulfur.
Yup. If you could work, you were expected to work. But yet, in 1950s America before the advent of our current bouquet of welfare programs, did citizens let people starve?
No.
The best answer is capitalism, but a smaller, more local, and more moral version of it. Nearly every problem we have in the United States was created by increasing power in a large central state and huge metropolitan areas.
More on that in Friday’s post, where we’ll talk about how the problems created by modern life are more than economic.