Capitalism—Academics Hate It, But Don’t Know What It Is

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

National Post
Robert Fulford

The capitalist paradox

Aid shifts money from being spent by the best governments in the world to being spent by the worst
— William Easterly

We do not appreciate capitalism, Financial Post author Peter Foster complains in a new book, Why We Bite the Invisible Hand: The Psychology of Anti-Capitalism. And who can blame us? Being grateful for capitalism is like being grateful for gravity, or air. Free enterprise has enriched billions of lives, but that’s a hard fact to grasp. The workings of business are not called the “Hidden Hand” for nothing.

Capitalism depends on genius, luck, inspiration and an acquisitive spirit. It’s unsystematic, chaotic, erratic and (as its enemies love to point out) unfair. It’s good because it works, not because it’s flawless.


     Compared to it alternatives, all of which have business guided by government employees, capitalism just looks flawless. Having government make business decisions is like having crabs lecturing on needlepoint.

A first-class business writer for this publication and others, Foster wants us to understand why we are rich. In the nicest possible way he suggests that those who look down on capitalism as immoral, while living comfortable lives thanks to its benefits, are hypocrites. He wants his readers to re-examine their moral assumptions.

His book is a relaxed, wide-ranging, crystal-clear piece of work, unlike just about any other book on economics you’ll encounter. It’s an extended essay, in the best sense. Foster makes many personal appearances, picking up arguments against top-down government economic planning, discussing life with his daughter, speculating on the nature of freedom, describing the calamitous theories of UN planners, nimbly choosing the most stimulating quotes.

Foster’s hero is Adam Smith, the 18th-century philosopher, author of The Wealth of Nations. His intended reader is me — or, rather, the me of some decades ago, when I believed (along with everyone I knew) that Smith was a back number.

The enthusiasm for state planning of John Maynard Keynes and his Canadian acolyte, J.K. Galbraith, seemed to make sense at the time. Certainly, I would never have endorsed Smith’s opinion: “It is the highest impertinence and presumption, in kings and ministers, to pretend to watch over the economy of private people.”

Perhaps I started changing when I developed a hatred for the bigotry in all those novels, films and TV shows that inevitably portrayed the rich as bloated ignoramuses. My opinion of Smith changed in my dealings with the public sector; increasingly, it was hard to avoid noticing its grave flaws, above all its insouciance about the public’s money. Involvement in the business side of the magazine I was editing educated me in the agonies that accompany enterprise. The 1973 oil crisis demonstrated that even the biggest organized economies were vulnerable. A lukewarm Liberal/ New Democrat, I turned into a lukewarm Conservative.


     Belief in Government Infallible is indeed fixed by dealing with Government. The flaccid incompetence and self-righteousness is terrifying.

Foster’s writing, always interesting, becomes especially urgent as he works through economic questions that lead toward moral issues. He argues that in trying to help the world’s poor countries, the West has invested its money, hopes and energy in weak theories, often after the theories are proved wrong. He allies himself with William Easterly, an economist, who emphasizes the great fortunes that vanish into the bank accounts of dictators: “Aid shifts money from being spent by the best governments in the world to being spent by the worst.” He notes that another skeptical economist said that foreign aid flows from “poor people in rich countries to rich people in poor countries.”

At one point, Foster visits Cuba and delivers some U.S. cash from a friend to a family involved in building a house. “They were effusively grateful for the money. It was difficult to get anything done in Cuba without American dollars, they said.” In the 1960s, I thought that the poor Cubans had the bad luck to fall into the hands of a tyrant who was not only vicious but also incompetent. A little later, I understood that all Marxist dictatorships are incompetent, unless (like the Chinese) they manage to stop believing in Marx.

Foster says nothing about Thomas Piketty’s fashionable, newly published 700-page Capital in the Twenty-First Century, a best-selling denunciation of wealth inequality that millions will soon be claiming to have read. Its English translation (from the French) appeared after Why We Bite the Invisible Hand went to press, but we can guess what Foster would say about it. Piketty proposes that all the prosperous states agree to levy a “global wealth tax,” taking money from the savings of the rich. Government officials would know how best to use it, managing it just as successfully as they have managed foreign aid, alternative energy and education.

It may be that Piketty’s central idea will turn out to be a smashing success, but history suggests otherwise. For the moment, we can be sure Peter Foster will place it securely among the top-down foolishness that has done so much harm to so many for so many years.


   Yes with the track record of governments, it’s astounding that anyone can have confidence in them. Their relentless propaganda machine, especially aided by public education and the leftish media, probably has something to do with the endurance and popularity of government “programs.”

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies


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