Monday, April 20, 2009

Calling it 'capitalism' doesn't make it so

In a recent New York Times column, Richard W. Stevenson wrote:

In a series of comments in recent weeks, Mr. Obama has begun to sketch a vision of where he would like to drive the economy once this crisis is past. His goals include diminishing the consumerism that has long been the main source of growth in the United States, and encouraging more savings and investment. He would redistribute wealth toward the middle class and make the rest of the world less dependent on the American market for its prosperity. And he would seek a consensus recognizing that an activist government is an acceptable and necessary partner for a stable, market-based economy.

The article, 'Redefining Capitalism After the Fall,' reminds me of George Orwell's 1984 wherein the definition and meaning of words are modified by government. Just like the old joke: "How many legs does a dog have if you call its tail a leg? Four - calling it a leg doesn't make it so." If you take socialist-type practices and call them capitalism, it doesn't mean it's capitalism.

But let's look at what Pres. Obama has suggested.

"His goals include diminishing the consumerism that has long been the main source of growth in the United States, and encouraging more savings and investment."

There's a lot to be said for encouraging individuals to save and invest. However, such an approach is completely contrary to what government has done. Congress, under both Presidents Bush and Obama, has taken various steps to encourage spending - everything from direct 'stimulus' checks (which didn't 'stimulate' the economy) to the latest 'stimulus bill' which borrows against future generations in order to spend now.

How do you say people should save and invest when you are encouraging them to do the exact opposite? And if saving and investing is good in the long term, why are we not encouraging such activity now? How can people (or government) borrow now, incur huge debt and then expect to have any money left over to save in the future?

"He would redistribute wealth toward the middle class..."

Well of course he would. He said exactly that to Joe the Plumber. The problem with this scenario is, as Margaret Thatcher said, eventually you run out of other people's money. Under such schemes, the threshold of whose wealth is 'redistributed' continually goes down, meaning that those 'middle class' people who think they're going to be getting someone else's wealth find themselves classified as 'wealthy.'

As it is, Obama has said that 'rich' starts at earnings of $250,000. According to the most recent data from the IRS (2006), the top 10% of filers, those earning more than $108,904, paid more than 70 percent of all taxes. If you have two union members in a household working overtime, it is very likely they earn enough to put them into the top 10%. If the top 10% are paying 70% of all taxes, that means that 90% of the people are paying only 30% of the bill. How much more does wealth need to be redistributed?

Obama also wants to:

"...make the rest of the world less dependent on the American market for its prosperity."

While I certainly want other nations to be economically successful, I still want them to depend upon the American market. We live in a global economy and I want other nations to depend upon the American market. I want the United States to be in the driver's seat when it comes to the economy. I want our citizens to be the client the world's businesses want to satisfy. But the way to do that is through capitalism - not through a mandated version of what government thinks we want or need.

Finally, Obama says he:

"...would seek a consensus recognizing that an activist government is an acceptable and necessary partner for a stable, market-based economy."

Well that's not capitalism, which is precisely the point. The last thing our founders had in mind for this nation was an 'activist' government. They saw the results of 'activist government' and fought a revolution in order to free of us from such oversight.

Just look at the words: 'activist government' and 'market-based economy.' If government is determining the economy, it cannot be 'market-based.' Either the market determines the economy or government does. And you cannot redefine capitalism to remove the market-based aspect and replace it with government-based and still have 'capitalism.' Socialism or fascism, maybe, but not capitalism.

Leftist like to say that the so-called 'failure' of the economy is a result of our capitalism, failing to realize that the U.S. has moved so far from a free-market economy due to government interference, regulations, subsidies, support, etc. It isn't the failure of a free market that brought us to today's economy, it is the idea, practiced in many areas, that government can dictate to that free-market and still have a free market. If government hadn't mandated loans to individuals not determined, under normal circumstances, to be qualified, do you really think the burst of the housing bubble would have been so severe? When you order banks to consider unemployment insurance payments as income, is it any wonder that people who didn't have a job had trouble making their loan payments?

Of course, leftists also believe that the solution to problems government created is...more government.

Additionally, capitalism includes the possibility and consequences of failure - something government has now determined to prevent, via bailouts, loans and the 'too big to fail' concept. That's not capitalism, either, as capitalism requires reward commensurate with risk. If I risk nothing because I have a government willing to bail me out, I'm likely to take on riskier propositions. The situation becomes worse as a result of government guarantees against suffering the consequences of severe risk, i.e. failure.

Of course, the 'government' really isn't doing this. We, the taxpayers are - those same taxpayers who wouldn't invest their own personal funds in such endeavors are doing so, through taxation and distribution by government, after the failure has been achieved.

Again, that's not capitalism and calling such doesn't make it true.

It is these types of goals and ideas that have so many Americans worried and concerned over the future of their nation. While we're not a socialist country, yet, we see signs that we are moving in that direction and when Pres. Obama says those are his goals, is it any wonder every day citizens took to the streets to protest such aims at the Tea Parties?

For more on the free market, I highly suggest this article from the Foundation for Economic Education.

2 comments:

Joe C. said...

At least someone has noticed that the only reason Eurosocialism works to the extent that it does is because of the U.S. NOT being socialist. We are subsidizing their defense and R&D so that they can minimally function. If the U.S. goes the way of Europe, their economies will collapse.

Tim Higgins said...

Maggie,

If what we get from the current Administration is "an activist government is an acceptable and necessary partner for a stable, market-based economy", the tea parties is the least of the reactions that the federal government should expect.

WE DO NOT NEED THE GOVERNMENT to tell us what to do with our money, and their interference over the years is what has brought us to the very brink. What we need is for the government to get out of the way.

Lord help us for the next 3-3/4 years. The more we learn, the scarrier it gets.

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