Little is more hypocritical in public life than American capitalists championing the virtues of free markets, while depending on the government to ensure (i.e., privatize) their profits and insure (i.e., socialize) their losses.
Far worse though is that the government actually sanctions this hypocrisy, primarily by having the Federal Reserve prop up the U.S. economy with monetary policies (e.g., maintaining zero interest rates and continuing quantitative easing). These policies are aimed at stimulating and sustaining economic growth, but they mostly benefit corporations and rich folks.
This raises the question: How is this very visible hand of the U.S. government in its “free market economy” any different from the very visible hand of the Chinese government in its centrally planned economy?
Except, of course, that there’s nothing hypocritical about the Communist Party propping up the Chinese economy with monetary policies (e.g., devaluing its currency and funding state-owned enterprises).
It has become fashionable in America to talk about the government destroying jobs and the market creating them. Yet nobody can cite a single instance where the government was responsible for the cycles of economic bubbles and busts that have characterized the U.S. economy in recent decades; except insofar as the government failed to adequately regulate the irresponsible, if not corrupt, market practices that caused each and every one of them.
(“Hayekian Markets vs. Keynesian Economies,” The iPINIONS Journal, September 23, 2011)
Frankly, the 2008 financial crisis put paid to the virtues of free markets, such as they ever were.
For nothing marked this crisis quite like professed capitalists – from investment bankers to car manufacturers – going hat in hand to the government for financial bailouts; you know, the way oppressed communists – from China to Cuba – go to the government for welfare handouts.
If nothing else, this latest bailout should finally destroy the myth that the United States is running a capitalist, free market economy. After all, this (and the other government bailouts … which effectively privatized shareholder gains and nationalized losses), coupled with longstanding corporate subsidies, is indistinguishable from the way China runs its socialist, centrally planned economy.
(“Chickens Come Home to Roost on Wall Street…,” The iPINIONS Journal, September 16, 2008)
Now we’re witnessing the truly transformative spectacle of global markets relying more on Chinese communism than American capitalism for growth.
Perhaps this is what Karl Marx meant when he warned in Capital (1867) that capitalism contained the seeds of its own destruction, stemming from an inexorable economic evolution from feudalism through capitalism and socialism, and ending with communism.
In fact, this Marxist evolution has already become such that CNN Money reported on August 25, without any hint of irony or contradiction, that economists were “expecting Beijing to act to try and prop up stocks” in Western markets. Beijing did not disappoint:
The Dow raced 619 points higher on Wednesday, its most emphatic point gain since the 2008 financial crisis…
The huge rally represents a rebound following six days of dramatic selling that was driven by serious concerns about how China’s slowing economy will impact the rest of the world…
Earlier this week China sought to calm turmoil in global markets by slashing interest rates. The hope is the moves will help stabilize China’s economy and ease fears that the world’s second largest economy is slowing drastically.
(CNN Money, August 26, 2015)
In his classic tome on capitalism, The Road to Serfdom, acclaimed economist and philosopher F. A. Hayek wrote that:
Capitalism is the only system of economics compatible with human dignity, prosperity, and liberty. To the extent we move away from that system, we empower the worst people in society to manage what they do not understand.
But there’s no gainsaying that – with its corporate subsidies and bailouts, to say nothing of its dependence on and indebtedness to China – the United States has moved far away from that system (down the road to serfdom?). Indeed, the China phenomenon suggests that communism, not capitalism, is more compatible with prosperity and human dignity, even if at the expense of human liberty.
Mind you, I’ve always found free marketers who hail the virtues of capitalism every bit as self-righteous as pedophile priests who hail the virtues of celibacy. Here, for example, is what I wrote in “Global Plan to Nationalize Banks Leads to Historic Gains in Markets Worldwide,” October 14, 2008, while we were in the throes of that 2008 financial crisis.
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As a Keynesian (aka a big-government liberal), I never believed the free-market fairytale that an ‘invisible hand’ would cause profits generated by the investments of greedy corporations and rich folks to trickle down to poor folks.
Instead, I’ve always believed that government intervention was necessary not only to stimulate economic growth and regulate the private sector, but also to ensure the equitable redistribution of the wealth of nations.
Therefore, bailing out Wall Street is only the first step. Because, to prove that they have really seen the light, governments in these purportedly capitalist nations must now follow through by bailing out Main Street as well (e.g., by forgiving the mortgage and credit-card debt of all citizens who make less than $100,000).
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Alas, Main Street is still waiting for the socioeconomic benefits that, according to capitalism, will “trickle down” from rich to poor, naturally.
Meanwhile, don’t get me started on the corporate subsidies and tax breaks the government routinely gives to corporations … under this specious theory of capitalism. Not to mention the myth that private corporations fund innovation.
After all, the U.S. government has funded almost every major innovation we take for granted today, including GPS, touch screen, search algorithm, and voice technology. For example, with all due respect to the genius that was Steve Jobs, he pilfered government-funded research to “invent” Apple’s smartphone. (I refer you to the Entrepreneurial State: Debunking Public vs. Private Sector Myths (2013), by Mariana Mazzucato, for more on this “I built that” myth.)
Coming full circle, nothing damns the capitalist system quite like its legacy of making the rich richer and the poor poorer. This was brought into tragic relief during Hurricane Katrina – the 10th anniversary of which many politicians made quite a show of commemorating ten days ago. Specifically, that every rich person survived using personal resources, while so many poor people died from salutary neglect, demonstrated (in black and white) just how incompatible capitalism is with basic humanity, let alone lofty notions of human dignity.
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