Here's what was published in the Bozeman Chronicle, followed by a response and my rejoinder:
I recently saw a bumper sticker that read, "Hang the rich." How absurd. If I could, I would ask this person who gave them a job, or where the money for their paycheck comes from. Was it someone on welfare? A panhandler on a street corner, perhaps? No, all of us who work for someone else were hired by someone with money.
The rich create businesses that hire and pay people to produce their product. They fund a disproportionate share of society. According to the IRS, the top 1% of wage earners pay 39% of all income taxes. Furthermore, since 1986 when their income tax share was 25.75%, upper tier wage earners have been paying a steadily increasing share of the tax burden.
But there are those who believe the rich are immoral or don’t pay their fair share. While it’s certainly true in some cases, I would say that people who stereotype this way don’t understand how people interact with each other. They don’t understand the potential rewards or the risks of loss in life. They don’t understand how or why achievement is rewarded.
They certainly don’t understand capitalism.
Consider the vapid caricatures associated with capitalism. Greedy fatcats. Evil. Exploiting the poor. The rich get richer and the poor get poorer. These are simply glib slogans appealing to superficial thinkers in order to obscure the reality.
Here’s reality: Capitalism is simply the legal, willing exchange of things of value. That's it.
Before you run to your computer to write about all the terrible things done by big business, please note first that that stealing, cheating, or harming someone are all illegal. Therefore they cannot be capitalism. By definition, capitalism must involve legal exchanges, so anything illegal is not capitalism. Illegal acts are violations of capitalism.
Capitalism is the natural state of Man. It is quite simply, positive, mutually beneficial human interactions. Capitalism is not evil. It is not a system that needs to be “reined in,” controlled or curtailed; it only needs to be unleashed. True capitalism always results in the satisfaction of all parties.
Government intervention into these legal, private transactions is ideally minimal. All government needs to do as it applies to capitalism is to protect private property, enforce contracts, and ensure rule of law. In other words, government’s role in capitalism is to prosecute violators of capitalism.
We are all capitalists in practice. For example, if I go into a grocery store to buy bread, the grocer and I enter into an informal contract to exchange things of value. The grocer wants my money more than his bread, and I want his bread more than my money. The subject of the exchange is legal, and we were not coerced, cheated, or misled. Legal, willing exchange = Capitalism.
Capitalism is self-correcting, because people will always gravitate away from the violators of capitalism and buy from those who treat them fairly. There is no need for heavy-handed central planners. Government meddling unbalances the economy, and we see the results of that meddling every day. In fact, if we truly understand capitalism, we will soon realize that interventionist central government is the enemy of liberty, and liberty facilitates capitalism.
Boiled down to its essence, capitalism is humanity. It uplifts, innovates, improves, and creates. It satisfies needs, it prospers the poor, it feeds the world. Capitalism is the most beneficial, moral, and life-affirming activity engaged in by man.
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S.E.'s response:
Rich, where have you been? You are still spouting the lines of Ayn Rand on the virtues of capitalism and minimal government [column, Dec 30]. Have you not been reading the papers? Do you not realize that our whole economic system nearly came crashing down on us a year ago? Exactly as in the Great Depression it followed a period of rampant capitalism.
Your fellow disciples, worshiping at the altar of capitalism and zero regulation, have all recanted; pull up former Fed Chief Greenspan's testimony to Congress. He and the others, e.g. White House Economic Adviser Larry Summers, finally realized that capitalism only works if man is by nature, moral. Man is not; he is selfish, so regulation is necessary. From Reagan onward regulations were eased, and we just lost tens of trillion of dollars: Government bailed the banks and us out.
Remember, credit froze up entirely. You are a businessman so I don’t have to explain to you the importance of credit. As businesses laid workers off, the recession nearly spiraled out of control, but spending was taken up partly by governent and unemployment did not rise as high. Do you think customers would have frequented your business if they were even more concerned about being laid off? Tax breaks proved useless as that money was not used for spending, but to pay down debt.
Your religion of capitalism does not take into account human psychology. All nations have a mix of capitalism and socialism; we like public schools, police, fire, military, homeland security, Medicare, Social Security. If you prefer to live without those things, I suggest you either move to central Africa, Russia or Kazakhstan; there you can be an unfettered capitalist and pay less taxes. Life is better in countries with slightly more social benefits. In your definition of true capitalism, where do the hedge fund managers sit?
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my rejoinder:
I read your recent letter with interest. Permit me the opportunity to respond.
I have never read Ayn Rand, so I doubt I would be spouting lines from her writings. I do know enough about her to know I am not interested in her objectivism, nor do I care for her atheism. I suspect that your intent in linking me to her is a form of ad hominem, but you can tell me if I’m wrong.
Indeed I have been reading the newspapers, and a lot of other resources as well, both from the left and from the right. I make it my practice to study what both sides are saying, so that I can actually understand the various positions. Based on your letter it appears you simply accept the “conventional wisdom” about the various economic issues we face and do not understand what people like me believe. Hopefully I can correct that.
Your use of phrases like “rampant capitalism” betrays an ignorance of the events that led up to the recent downturn. You seem to have completely accepted the superficial mainstream media analysis. If that is true, then you actually know precious little about what has really happened over the past year.
Your use of quasi-religious terminology is troubling. I worship at no man-made altar, particularly the one you seem to have vested so much faith in: Government. Indeed, I have no faith in capitalism apart from its utility. Further, I do not, and have never advocated “zero regulation.”
It seems to me that you impute to government the characteristics of Diety. You use the same language, you draw the same conclusions, and you seem to be a true believer. It is a curious thesis you put forth, that regulation enforces morality. Does it really? Do more laws make us more law-abiding? Does government action increase our character? Does obeying the law makes us moral?
I have never heard anyone argue such a thing. The way I see it is that God deals with all our moral failings via the cross of Christ. By contrast, government punishes lawbreakers. Morality is an internal thing that might never manifest in behavior. God deals with the inner man, and government the outer man. I wonder if you see a difference?
I very much doubt that Lawrence Summers had any sort of epiphany regarding the necessity of morality. But I do wholeheartedly agree that morality is necessary in carrying out capitalism; indeed, morality is necessary for the whole of life. But I wonder, you must then disagree with the vapid statement that “you cannot legislate morality,” because It certainly appears to me that you advocate bringing the weight of the legal system upon those who are immoral. I sure would like to hear your explanation of that.
You write: “All nations have a mix of capitalism and socialism; we like public schools, police, fire, military, homeland security, Medicare, Social Security…” This really puzzles me. The military in particular is a constitutional activity of government and has nothing to do with economics. Ditto for Schools, police, and fire, which are powers delegated by the people to state and local governments, and also have nothing to do with socialism. What is your definition of socialism?
It is a non sequitur to imply that I or any other person who advocates capitalism are anarchists. It is also puerile to suggest that central Africa, Russia and Kazakhstan are characterized by, founded upon, or are in pursuit of capitalism. What were you thinking?
Your assertions that we aren’t regulated enough, that we don’t have enough socialism, that we need government to control our morality, and that our government programs are what makes us great are specious and contradictory. Our greatness as a country was achieved by liberty, not government programs. What makes America great is its people, not its government. Our slide into irrelevancy began when we started embracing centralized power and the forced labor of our citizens to fund it.
I see that you recite even more “conventional wisdom” about the effect of government activities in the aftermath of the downturn. So I ask you, did the government bailout of banks loosen credit? The answer is no. Banks continue to be tight with credit, and I don’t blame them. Who in their right mind would lend to anyone not knowing what the rules are going to be next month or next year? I mean really. If the government can waive the provisions of the mortgage contract, then what bank would bind itself to one?
Did the stimulus reduce unemployment? No, we were warned that it would exceed 8% if nothing was done, but we are currently at 10% with the stimulus. If we include people who have stopped looking, it is more than 17%. If we exclude government hiring, we are at 22%. Now that’s what I call a successful government program. Sorry for the sarcasm, but any objective person must call these bailouts a complete failure.
Once again I am confused. You claim, “Tax breaks proved useless as that money was not used for spending, but to pay down debt.” Are you suggesting it is better for people to spend their windfall than it is to pay off debt? How do you know it’s better to spend it? When debt is paid off, does that money disappear somewhere or go out of circulation? And how do you measure the equation to determine that tax breaks were useless? Once again, I can hardly wait for your answer.
As I read your letter I wondered if you were really interested in anything other than what you were writing. I, however, have been asking you direct questions throughout this response, because I am interested in bringing clarity to your inscrutable writing.
But you finally asked me a question at the end of your letter about what I believe: “In your definition of true capitalism, where do the hedge fund managers sit,” you ask. This question has little to do with my editorial, and I’m not even sure what you’re asking. So, I’m not going to go into any depth about hedge funds other than they are an investment strategy used by investors and businesses to lessen their risk. According to the definition of capitalism, the transaction is legal and the participants are willing. That’s as much as I can say without knowing what you are asking.
Perhaps if you decide to respond you could clarify some of your thinking. That would certainly help.
