Capitalism—The Unknown Country

   This is a picture of a real leader. Discuss

The students at the University of Missouri, engaging in the “Revolution,” are using a code so perfect that no one understands it, not the outside world OR those using it. Perfect. I have no idea what they’re talking about and neither do they. Unbreakable.

    Do not think about, write about or deal with  human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.

Wherein we see the inevitable result of our educational system. Capitalism is pilloried and socialism praised in our government schools. Government workers praising government–I never. They make a nice living so the government will ensure everyone does.

Is the Public Turning against Capitalism?
Free markets are crucified for the sins of government
Marian L. Tupy

According to a recent YouGov poll, American’s have grown more skeptical of capitalism:

Out of 1,000 Americans polled, 55 percent believe that in a capitalistic system the rich get richer and the poor get poorer… Additionally, only 49 percent of Americans believe that free enterprise is better at lifting people out of poverty than the government.

The reality is at odds with public opinion, but the YouGov poll raises important questions about the future of the free market as we enter the election year.

First, as Gary Burtless of the Brookings Institution showed in a much-cited paper last year, after-tax income of American households in the bottom fifth of the income distribution rose by 49 percent between 1979 and 2010. That was much less than the rise in after-tax income of the top 1 percent, which grew by 202 percent. Yes, income inequality has increased, but that does not mean that the poor have gotten poorer.

Second, the government’s role in reducing poverty is as contentious as the poll suggests it is. Take the poverty data compiled by the 2015 Nobel Prize-winner in economics, Princeton University Professor Angus Deaton. As Deaton shows, much of the poverty reduction happened before President Lyndon Johnson’s introduction of the Great Society welfare programs in 1965. In 1965, 17.3 percent of Americans fell below the official poverty line. In 2011, 15 percent did so. This is not a great public policy accomplishment.

The international data is even more damning. According to the World Bank, global poverty is rapidly receding. By the end of 2015, the Bank estimates, “less than 10 percent of the world’s population will be living in extreme poverty.” Contrast that with 1980, when global absolute poverty rate was estimated at 50 percent.

As many scholars have pointed out, the fall in global poverty is primarily due to the rise of Asia in general and China in particular. And that rise is, unambiguously, a result of economic growth spurred by the abandonment of central-planning and integration of many Asian countries into the global economy. To give one example, following economic liberalization in China in 1978, real incomes rose thirteen-fold.

The rise of China has, incidentally, brought about a decline in global inequality, by narrowing the income gap between the West and the rest. But, I digress.

The YouGov poll also notes that only 30 percent of Americans think that “what is good for business is good for society generally” and “65 percent of Americans think that most of the world’s biggest businesses have taken unethical actions like dodging taxes.” According to the YouGov poll, “there is an almost universal belief that the world’s biggest businesses have cheated and polluted their way to success.”


   Dodging taxes–who wouldn’t want to give more money to governments which are always ethical and efficient?

Now we are on to something, for it cannot be stressed often enough that defense of free market capitalism is not the same as defense of large corporations.

As the British writer Matt Ridley, who launched his new book at the Cato Institute on Wednesday, wrote,

I hold no brief for large corporations, whose inefficiencies, complacencies, and anti-competitive tendencies often drive me as crazy as the next man. Like Milton Friedman, I notice that "business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger."

They are addicted to corporate welfare, they love regulations that erect barriers to entry to their small competitors, they yearn for monopoly and they grow flabby and inefficient with age.

In recent years, it has become de rigeur to describe the American economic system as “crony capitalism.” Yet, corporate welfare – subsidies, protective tariffs, bailouts, etc. – is not capitalism. As Professor Allan Meltzer once put it, “Capitalism without failure is like religion without sin. It doesn’t work.” The basic understanding of fairness as well as economic health of the nation demands that corporations compete on an even playing field and underperforming enterprises are allowed to fail.

To that effect, it makes no more sense to describe the contemporary American economic system as “crony capitalism” than to describe it as state interventionism or just good old-fashioned corporatism. As such, Sen. Bernie Sanders’ popularity, while understandable, is ultimately dangerous. An even heavier government intervention in the economy, which Sanders advocates, would almost certainly result in greater economic deformation. Anyone doubting me should consider the incestuous relationship between the social democratic government of Germany and German corporations, best exemplified by the Volkswagen emissions mega-scandal.

To question Sanders’ recipe for corporate welfare, however, is not to endorse the GOP. By reviving the Import-Export Bank, the Republicans in Congress have shown themselves to be as hypocritical as the current occupant of the Oval Office, who called for the ending of the Import-Export Bank when he ran for the Presidency in 2008. Both parties have shown themselves to be incapable of cutting the umbilical cord that ties them to their corporate friends.

There are no quick solutions to the problems of corporate welfare, but if there is to be hope, it must start with the understanding that the root cause of corporate welfare is not too little government, but too much.


   It’s so much easier to lobby the government for advantage than it is to out-compete. I don’t know what system we have now, but it sure isn’t capitalism.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Power Teaching: How to Find Someone to Teach Your Child when the Education System has Failed.
Cui Bono–Cherchez les Contingencies



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