Why America Doesn't have a "Free Market Capitalist" Economic System

I say quite often that America does not have a Free Market Capitalist economic system and sometimes the befuddled looks I get from those that hear this provokes them to question what I mean by it. The answer is simple and can be broken down into two parts, the two definitions of what is being asked.

"What is a Free Market?" and "What is Capitalism?"

The answers to these two questions together with an understanding of the current mode of economic activity gives a clear indication that the statement, "America does not have a Free Market economic system" is true.

So what is a free market economic system?
Free Market principles point to an economic system where business are unfettered by regulation, licensing, special fees and taxation, a system where all manner of salable goods are on the market without prohibition or exclusion. It is a system where the buying habits of those consumers would drive the manufacturers and distributors to produce or stock items that were valued by customers and discontinue or remove goods that have lost favor or marketability and sales numbers. This provides that customers are able to actually drive the economy by their buying habits and wants, without the interference of an outside entity.

This would of course be in contrast to the current system of high regulation, increasing taxation, special licencing, educational requirements and so on the American system is plagued by. Economists who advocate this idea of unfettered markets, also see that allowing prices and wages to form naturally and the availability and manufacture of goods to lie in the interest of those who have the capability to produce and the want to produce in trade for profit is a nearly unfailing concept in the ways of maximum efficiency of producers as well as maximum favorable market conditions for consumers.

With this some may say that the deregulation of businesses will (could/would) lead to businesses being able to skirt environmental concerns, livable wages, price gouging, and so on. In response to this one can argue on the case of environmental concerns that the information that a retailer or manufacturer was damaging the environment, the consumers voice could be heard by lowering or altogether abandoning or boycotting the product, manufacturer and retailers and distributors. When profits and sales decrease a signal is sent that certain practices are not favorable or condoned. This is the aspect of "market self regulation".

On the issue of wages. Wages should be set by employer and employee. If in the scenario an employer is offering too little pay the potential employee can ask for more or refuse. By no means should the wage of any person be determined by anyone other than the laborer and the job provider. In the system we have now wages are set by government decree, in an attempt to make a fair wage government actually provides yet another hurdle for a prospective employee to jump in order to gain employment. If the set wage is too high for the business, they will refuse to hire. Minimum wage laws also hinder the ability of these businesses to adjust wages based on experience of each employee, there is always a floor that they cannot overcome. Again a control on the level of wages offered by businesses is not a Free Market principle. It is a system of control.

Pricing controls work similar to wage controls, being that wages are prices and vice-versa, it stands that any interference in the marketable value being set by someone other than the seller negates the definition of free market practice.

So what is Capitalism?

Capitalism is defined many ways depending on the social structure lense those defining it look through. To make this easier we can go with two differing opinions, one from Wikipedia (which I use because of it's high use of editing from other editors) and then a definition from the website WorldSocialism.org (including this one because it highlights the idea that the word has different meanings depending on who you ask and how they define it).
According to Wikipedia Capitalism is "is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit. Central characteristics of capitalism include capital accumulation, competitive markets and wage labor.  In a capitalist economy, the parties to a transaction typically determine the prices at which assets, goods, and services are exchanged."  This is the definition, or close to it, that most non socialists agree upon.

With this definition in mind we can see that there are a large number of businesses and services that are not privately owned, ran, or funded but are so called public services and are controlled by government, whether county, state, or federal, and are funded through taxation instead of consumerism. This leads me, to say that we may define America as a mixed economy, but definitely not a pure Capitalist economy.

According to the website WorldSocialism.org though Capitalism is something to be feared and abhorred based on their claim of worker exploitation. The definition they detail is,"Capitalism is the social system which now exists in all countries of the world. Under this system, the means for producing and distributing goods (the land, factories, technology, transport system etc) are owned by a small minority of people. We refer to this group of people as the capitalist class. The majority of people must sell their ability to work in return for a wage or salary (who we refer to as the working class.)"

They go on to say,"The working class are paid to produce goods and services which are then sold for a profit. The profit is gained by the capitalist class because they can make more money by selling what we have produced than we cost to buy on the labor market. In this sense, the working class are exploited by the capitalist class. The capitalists live off the profits they obtain from exploiting the working class whilst reinvesting some of their profits for the further accumulation of wealth."

And with this in mind we can ask the socialist this question, "isn't the worker also a capitalist, as they value their time and effort less than the wage they are paid? If they did not value the wage more than the time or effort they would not work, as in a socialist society, goods are given freely based upon need and taken based upon production, or better said by their economic muse Karl Marx, "From each according to his ability, to each according to his need". This proclaims that no matter how productive you are, your effort is only for the benefit for the others who wish not to work or do not perform as you do. What incentive does that leave to work hard, or even harder? What incentive does that leave to work at all? What incentive does that leave to create, to innovate, or to improve upon goods? If there is no benefit for someone to excel at a good or service it will be done at a minimum speed and quality.


With that being said we can look at the American economy as a partial capitalist economy and a partial socialist economy. There are many areas that the State has complete control over production or service. Roads, Schools, Protection Services, Old Age Insurance are a few of the largest and easiest to see. In that the capitalist is still beholden to government entities in order to start or continue in their business. We can also see THAT is in no way a "free market" system.

Breaking Bad toys Being Pulled by Toys R Us.

A story popped up last week where a Florida mother was concerned about a product she had seen on the shelves of Toys R Us while shopping with her children. The subjectively offensive products were figurines of characters in AMC's hit TV show Breaking Bad. From the Newspaper U-T San Diego's website,"Susan Schrivjer of Fort Myers was not happy when she found the meth-making mastermind Walter White doll alongside the partner-in-crime Jesse Pinkman doll on toy store shelves not far from Barbies and Disney characters."  

Now while this may seem like a pretty easy case for people to hash against Toys R Us, what it shows to me is that a consumer driven market economy is in effect working as it should.
Let me explain, when businesses get word that their customers are upset about a product or service or even a remark made by an employee or CEO they let that company know by differing means, that company, when made aware of these feelings or demands can choose whether or not to cave to pressure or stand by their decision. Toys R Us decided to cave to the demands of the petition signers. This is the markets way of self regulation and also of effective competition breeding. When one store will take down a product or get rid of a service, a competitor can move in to offer them.

I think this whole story has been blown way out of proportion and a real look at the market effectiveness we can see that it can be a good indication that consumer driven markets are working as they should.

Now I'm off to buy some Breaking Bad collectible figurines... Not really... I don't like the show.

More "Security" Without The State?

Down with the Police State! No More Police! Things like this get thrown out a lot by social libertarians and anarchists alike, even getting the attention and involvement of a few Republicans and Democrats who see the brutality of the police without noticing the monopoly of force they impose on the regular. There is however an aspect of ridding ourselves of this compulsory reactionary force of police missed by a majority of people; the fact that without the police of today, the ones who are paid for through compulsory and mandatory taxation, without recourse or ability to address grievances, we COULD have more security personnel.

Crazy aspect right? Not really. Many of the advocates of ending the Police State and the obligatory manner in which they are funded and operate are also proponents of private property and the rights of the owners. Under this idea the owners of every property, whether commercial or residential COULD have the possibility to hire their own private security services. Under this model every store you walk into in a mall type setting could have their own security officers, from different service providers. Also, in the residential sense, each home COULD have their own services being provided, not much unlike security systems installed in their homes already, but enlarged or advanced to include property security, investigations in the instance of property violations, and preventative security measures to reduce or preclude any attempt violations of property.

Local story of an prior law enforcement officer starting a private security firm. Click Here.

As the police today are for the most part becoming an aggressive force, one that needs to be checked by the people. Market provided services and funded by voluntary means COULD provided a service of security while ridding the public of compulsory funded, hyper-aggressive and increasingly militarized agents of the government. I stress the word COULD in this because without a doubt, this is only in theory but I feel should be at least recognized and investigated as an alternative. It is also only a COULD because as security is a personal value assessed by individuals, it is up to the owners of each property to make the choice to have security or not.

Radio Show I did over the Weekend.

I was asked to come onto a radio show by the host and talk about the blog and about other things, current news, a bit into the economics of police and the increasing militarization of police forces across the country as well as subsidies and the alter effects of taxation. It is a short 30 minute show and the host and I were able to get through a lot of topics and issues.

Take a minute to listen to a spot I did with Rakkur Crowley on his radio program Austrian Circle. You can find his entire playlist on the Voluntary Virtues Network Youtube channel.


https://s3.amazonaws.com/AustrianCircle/Podcasts/Austrian+Circle+Travis+Wilson+web.mp3

Bolstering Bad Business

There should be a separation of business and government. When, like now, that separation doesn’t exist, bad things can and will happen. It is no secret that government run programs often fall victim to the worst in economic practices. We do not have to look far to see many recent examples of government bolstering bad businesses. With that in mind, two interesting articles came across my newsfeed this week and both are related in effect and cause. The two also show a failure in economic practices, and both deserve to be answered with some sort of rational economic thinking.

The first article I read showed that Amtrak, the mass transit rail program created by Congress in 1970, has been running huge deficits every year, supported by taxpayer subsidies. These subsidies have allowed a failing business to continue to operate on bad principles and creates a form of corporate welfare; all paid for out of taxpayers’ pockets. Altogether, taxpayers foot an average $1 Billion dollars annually into this program and it is only getting worse. One thing is for certain, if the business was made to live on its own revenue, like private business, it would either find a way to rid itself of detrimental wasteful lines or it would have gone out of business long ago.

The other was about the United States Postal Service and their quarterly loss of $2 BILLION. I am sure most of us can remember the price of stamps and services when we were younger, and I am sure we all remember almost every single time they were raised. But what makes this different than just rising with the rate of inflation, set and attempted to be managed by the Federal Reserve, is the annual rise in prices and services is met with an increasing deficit and an increasing annual subsidy from the taxpayer’s pocket.

Simple economics suggests that whenever a business receives bailouts or subsidies from government it is at the expense of not only the taxpayers but also at the expense of the market economy. As anyone should be able to see, the use of government subsidies coming from the pockets and paychecks of the American Taxpayer bolsters bad businesses and deepens a negative effect on sound economic principles. 

What is the answer to Detroit?

I was watching a show Forgotten Planet and one particular episode caught my attention. It was an episode on Detroit, its heyday and its demise. For a long time Detroit was seen as the industrial mecca in the US, turning out automobiles, steel works, mining operations and one of the country's best school systems. But all of this was to come to an end in the wake of economic policies and disastrous government programs. Detroit now sits in ruin. So what would it take to return this city to the forefront of production and the ability for its citizens to prosper? Is the answer to just get government out of the way?

In an article written in 2013 Patrick Barron makes his case for a "Free Detroit".  His idea is to rid the city of all regulations and all taxation. Barron asks, "What if Detroit became a free city in which government provided for public safety, honest courts, protection of property rights, and little else? Might not unabated free enterprise take hold as it always has in America?" adding next, "All that Detroit really needs is economic freedom and secure property rights. Give Detroit its freedom from all manner of government, including the federal government. Declare Detroit a free city. (You can rest assured, Detroit, that America will come to your rescue if those bloodthirsty Canadians attack!) In other words, no one would pay any federal taxes whatsoever or be subject to any federal regulations whatsoever. Wouldn’t it be nice not to pay federal taxes, not even Social Security and Medicare taxes? Do the same with Michigan taxes. No taxes BUT also no federal or state aid either."

How can they have it both ways? You cannot allow zero taxation and have a funded government, even miniscule government compared to the current model.

The rest of the article reads pretty much how one can envision any free marketer article going. Cooperative experiences between citizens without the need for bureaucratic red tape, restrictions licenses, regulations and of course the end to the state sponsored welfare state.

All of these things are in line with the thinking of most Laissez Faire proponents, and of course with most who are familiar with the great Henry Hazlitt and Ludwig von Mises.

What Detroit has become is, in large part, due to the enormity of its city government, the State Government and helped along by the Federal Government. Programs that were meant to help the poor or working poor were in fact reducing them down to a life of dependency, and of course when the government finally runs out of other people money to give away, catastrophe ensues. The lesson to be learned from its fall is that there is such a thing as too much government.

But what is the answer to get it going again?

As Mr. Barron states it may lie in doing the complete opposite of the cause.

In response to Barron's writings on Detroit Chief Investment Officer of Universa Investments LP Mark Spitznagle writes, "Detroit can correct its past public-sector ineptitude and abuses by unleashing the private sector’s vast potential, rooted in the metropolitan region’s vibrant entrepreneurial and manufacturing culture, skilled workforce, and a robust technology base nurtured by world-class institutions like the University of Michigan. The city’s position on an important border crossing and access to an enormous fresh-water supply from the Great Lakes, not to mention the business community’s unrelenting support, enhance its prospects further."

Echoing the late Murray Rothbard, such a collapse “is the ‘recovery’ process, and far from being an evil scourge, is the necessary and beneficial return, says Spitznagle.

I think Detroit can be the greatest study of if and how free market and Austrian economic principles and policies can work. Whether it succeeds or fails will be the greatest milestone in the sake of accepted economic means to ends.

Tahmooressi and the Border Issue

The latest battle between political parties and their followers and pundits is the issue of Borders, Securing those borders, Immigration and Amnesty. It has in the past few months become the most visible topic by candidates, commentators and political junkies alike. The story of ex-US Marine Sgt. Andrew Tahmooressi has reignited this issue and has left myself with more than enough questions to the idea of borders and the sincerity of either political party and their adherents to the motives of their stances. The idea of borders, definable lines arbitrarily drawn on maps and fought over, has consumed the airwaves.

As always, the issue is made to be seen as only two options. Pro Immigration and Anti Immigration or Pro-Amnesty and Anti-Amnesty. The first option is to allow amnesty to persons already in the country "illegally" and the second is to continue deportation and criminal charges against those living in the United States borders without having gone through the immigration process, the "legal" way as they call it. The line these two beliefs draws is apparent and approachable by yet other paths. The history of immigration into the United States is riddled with laws, regulation, restrictions, hate, fear, death and hypocrisy. Beginning the Idea of America on the act of Immigration, Genocide and Conquest doesn't lend well to the history of immigration into this country and the resulting years and decades since the first Illegal Alien stepped foot on American soil. If we were to respect borders of any countries our military armaments would rust and its soldiers be taken back to private employment. If one reduces this issue down to its base it is a belief that one person may have say over the movement of another, this is to say that one person holds rule over another, or that any government have the right to restrict travel in any way.

We have seen wars fought over land, deaths in foreign countries in the name of this land and a new breed of bigots and hypocrites arise from the simple act of movement and travel around the globe. The mainstream accepted idea on immigration is to subject other human beings to tests and health restrictions, to perform up to certain levels, to curtail freedom and to allow themselves to be robbed of wealth in the process. Every year hundreds of people die in an effort to reach "The Most Free and Most Prosperous Country in the World". They die in their attempt to reach a land that promises freedom and prosperity, they die for a lack of freedom to enjoy a better life, they die for a lack of freedom to move about the earth unhindered and uninhibited. The act of Legalized Immigration is an act of barbarity and exclusivity.


To say you believe in the closing of borders, demarcations of land used in exclusion by one government entity, You have not only barred any entering of outside persons but have also confined oneself to the same rule. You have created your own prison.

The economic theory behind the want of closed borders is this. As more and more immigrants come into this country they will, without fail, turn and send these American dollars outside of our borders. In a proper understanding of Economics this isn't seen as a negative as any country that bars it's currency from foreign circulation fails to have that currency to buy products from the foreign markets. If this theory were to hold water, countries would have difficulty acquiring goods from foreign markets for lack of foreign funds. Now one might say to convert these currencies would be the answer and to reduce trade to currency exchanges and money manipulation. There is also the prohibition of allowing workers into trades within a country. Lower skilled workers who enter into a foreign marker make much lower wages, while this is seen on its surface as a negative, is actually a positive. Lower wages equal out to lower costs and in effect lead to lower prices. "Let's look at the problem of immigration from another angle. There exists a market demand for low-skilled cheap labor. Part of this demand is being met by outsourcing of jobs overseas. The rest is met by vast numbers of immigrants coming to this country. Illegal immigration is the market supplying a demand. A demand is being met and satisfied. When viewed this way, how is this a problem? This triumph of the market is not in itself a problem." says Wade A. Mitchell

Now to the Hypocrisy Part.

Ex-US Marine Sgt. Andrew Tahmooressi sits in a jail cell in Mexico for this very act, and the hypocrites on every side of the political aisle are in fervor for his release and an escape from the very laws they seek to impose on their own borders. The Marine, who had been visiting friends had supposedly come upon a border crossing station and checkpoint run by the Mexican Federal Government. Tahmooressi alledges to have informed the guards that he had registered weapons in the vehicle and had just made a wrong turn. Enforcing their own laws the border agents arrested Tahmooressi and the ensuing battle over his release has brought a new wave of nationalistic border builders and wall wishers. Whether Tahmooressi had or had not meant to cross into Mexico and whether or not he informed them of his weaponry, the Mexican Border Agents did the job of upholding their national law. This law may not be agreeable to me but it is to those that wish to "secure" the US's borders in the same fashion. It is hypocritical to say that a man from America should be released from custody yet scream and push for the same actions from your own border agents and administration.  This is the real gap in reasoning I see in the issue.

The gap in this is the face of the issue, subjective value and nationalism. Nationalism, to believe that the nation of your residence is befitting a higher status and therefore more rule over any other. The Subjective Value to reduce a mans worth and the worth of all others to the geographical location of their birth. The happenstance of birth in any place of the world  does not predispose one to a higher place in the world or a higher rule over others. It should not be seen as a benefit or hindrance where one is placed on the earth and it should not be restricted or inhibited in any way to any place he wishes to travel.

The issue of borders can best be seen from afar. Space. In the pictures of earth from above there are no borders, there is only earth, all of us together, all of us combined in this experience.

Tesla Motors is going Open Source.

Tesla Motor's CEO  Elon Musk put out a short statement on the car makers website June 12th 2014. This statement was to address the decision to completely release all of the patents currently held by Tesla Motors. This is a great step forward in the effort to bring the zero emission and alternate fuel based vehicles into a better field of collaboration and competition. In the economics study of the Austrian field competition is seen as a great motivator to reduced prices and better services. I hope with this in mind more companies seek to not try and hold onto patents but allow open sourcing to make great strides in not only the competition area but also in the technological advancements area. Below is the letter written by Mr. Musk explaining his decision in a bit more detail and reasons why this move was made. 

"Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.
Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.
When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.
At Tesla, however, we felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales and marketing power to overwhelm Tesla. We couldn’t have been more wrong. The unfortunate reality is the opposite: electric car programs (or programs for any vehicle that doesn’t burn hydrocarbons) at the major manufacturers are small to non-existent, constituting an average of far less than 1% of their total vehicle sales.
At best, the large automakers are producing electric cars with limited range in limited volume. Some produce no zero emission cars at all.
Given that annual new vehicle production is approaching 100 million per year and the global fleet is approximately 2 billion cars, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis. By the same token, it means the market is enormous. Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.
We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.
Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard."

Doing this Tesla Motors has opened the doors for innovators and engineers to review and modify the original plans and designs of the motor company's model lines. In the hopes that these "outside eyes" see what can be done to make the cars better, safer, or all around redesign the looks.

 Tesla Motors is leading the way in the new era of innovation and collaboration for car makers, and I for one am ecstatic about the future of this concept. Imagine if every patent were released for open source. Imagine the college engineering students getting together with the Medical students to design and build a better prosthetic organ. Imagine the advancements we could see when the ideas and processes are open for peer review and  public review. Adding your ideas into a larger concept that can literally change the world and history as we know it.

But many people are against the idea of open sourcing and not patenting works and ideas. While many hold a belief in patents and copyrights being a foundational  need in society, there are those that dispel this myth and make the case for open dispersion of ideas.

Stephen Kinsella, a Patent Attorney who has rethought his stance on the use and viability of patents after consideration as to what the actual patent or copyright does has much to say on this topic.His books and articles explain these issues better. Patents said to be a protection of the original creator of any ideas, but they also have the effect as to limit and restrict any others from ever reproducing this thing later on even with their own property. It is a violation of the rights of use of another mans property.

This point can be seen clearly by those who reject the act of restricting rights of men for any reason and therefor is not a universal thought. The act of restricting what any other person can do with their property because a man has had a state give him a numbered file in a bureaucrats office.

Tesla Motors, for me, is moving the game to a whole new level and I am excited to see what the world makes of these cars with their new ability to redesign and innovate using the car as their base.

The War Boom Fallacy

There is a persistent fallacy that is used by people in terms of economic thought and practice. The War Boom Fallacy is The Broken Window Fallacy used to try and explain War Time economics. Under the theory war brings jobs, production and wealth to workers and producers. At its base is the assumption that ALL things produced in War or for War are needed. War being described as the engine for new prosperity and returned wealth gains not only for the individual workers but also for the State through higher tax rates. Economists have long warned that war is not a driving force behind the building of capital but the greatest destroyers of capital. This fallacy has been used for decades following the great depression and the ending of World War 2 and again when used to explain lower unemployment numbers during the Bush years in office. 

This piece by Jeffrey Tucker in 2004 puts into detail the War Boom Fallacy.

"FEE.org caught this revealing piece from the Washington Post: “Across America, War means Jobs”

 In this corner of a critical presidential-election battleground state, the economy is surging with the urgency of a boom. But it wasn’t President Bush’s tax cuts, Federal Reserve interest rate policies or even a general economic turnaround that did the trick. It was war.
In the first three months of this year, defense work accounted for nearly 16 percent of the nation’s economic growth, according to the Commerce Department. Military spending leaped 15.1 percent to an annualized rate of $537.4 billion, up from $463.3 billion in the comparable period of 2003, when Bush declared major combat operations in Iraq over. …
It is impossible to know how many of the 708,000 jobs created in the past three months are defense-related, since the Labor Department does not track defense contractor employment. But anecdotal evidence suggests the contribution is significant….
In inflation-adjusted terms, the war’s cost will surpass the United States’ $199 billion share of World War I sometime next year. Coming on top of three major tax cuts, that spending will drive the federal budget deficit to more than $400 billion this year. That borrowing will eventually have to be repaid in higher taxes or reduced government services and benefits.
Economists have long argued that war is an inefficient use of government revenue. A dollar spent on a highway not only employs workers but also creates a lasting, broadly shared benefit for the economy. A dollar spent on military equipment is soon lost to enemy attack or the rapid wear of war. If it bought a bomb or bullet, it simply explodes.The families of thousands of National Guard members and reservists have been dealt severe financial blows by the extended deployments of breadwinners…."

The frenetic activity is repeated all over the country. New kilns in California bake ceramic body-armor plates. Apparel plants in Arkansas, Alabama, Florida and Puerto Rico struggle to keep up with uniform orders. Once-idle textile mills in South Carolina spin rugged camouflage fabric. Army depots operate 24/7 to repair and rebuild the wreckage of war in time to ship it back with the next troop deployment.

Many of the younger adults and children are being feed this fallacy and are accepting it without question, aided by Public and Private school curriculum and professed by Economists of the Keynesian School like Paul Krugman. Krugman uses this fallacy without delay in defense of war time spending and stimulus spending by government. He goes even so far as to joke (at least that is what I hope he was doing) that to aid in a recovery from the slump driven by the ever long Iraq and Afghanistan Wars, a housing market collapse and a tanking Wall Street,an Alien Invasion, even if false, would jump start the machines of war and the country and it's economy would be saved.

In Mid 2011 Krugman was a guest on CNN's  "Fareed Zakaria GPS"

"If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months," he said. "And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better--"
"We need Orson Welles, is what you're saying," Rogoff cut in.
"There was a 'Twilight Zone' episode like this in which scientists fake an alien threat in order to achieve world peace," Krugman said. "Well, this time, we don't need it, we need it in order to get some fiscal stimulus."

 Krugman and the Keynesian School Economists who favor this fallacy fail to recognize the fact that as War Produced goods are built and destroyed products built outside of this false demand are what are wanted by consumers rather than required for war time measures. The theory is as if to say that to stimulate an economy citizens should burn their clothes once a year and replace them, this of course would lead to a rise in demand for clothes but at the expense of savings for other wants and needs, this false demand being used as an example would be fit if not for the thousands of other markets that would be wanting this policy in place to support a false demand for their products, we would see the annihilation of virtually every good in the name of economic steadiness and security. Carpenters not doing well, burn the houses and stores. Auto Industry sluggish, force people to crush their cars once every few years.So on and so on until every good becomes disposable by mandate and is done so to fabricate and support an economic lie.

The War Boom Fallacy or known better as the Broken Window Fallacy brought to us by Frederic Bastiat (The Law) and reaffirmed by Henry Hazlitt (Economics In One Lesson) is a leading factor in the US economy due to it's military budgets and affairs around the world. This act of destruction of goods to strengthen an economy is ridiculous in theory and practice yet is still the most taught fallacy to students through public education. I say to these students and teachers alike, burn your books, your clothes, your beds and backpacks, smash your computers, TVs, your cell phones, in the name of a fallacy you hold to be true, destroy your goods and wait for the stimulus and economic boom to kick you in the rear.

A great paper on the numbers and stats of the "General Discussion of Pre and Post WW2 economics" can be found here. Authored by David R. Henderson this working paper lays out the numbers of the myth and dispels false impulses with clear understanding.

Also look into the Great Myths of the Great Depression by Lawrence Reed, found here, these two essays can be the starting point to your own understanding of the Broken Window fallacy redressed as a War Boom Fallacy.

What are you paying for?

The raging wildfires in California brought up a unique point to my wife and she asked me to expound on it here.

When the people of this nation are extorted for billions of their hard earned dollars every year, when they are forced to pay the privilege of subservience, there is some level of belief that the funds they are paying in are going to be used for somewhat basic needs and variable necessities. But what if it doesn't? What happens when everything you thought you were funding is actually a farce? What is to be made of the fact that even for that belief in the priorities of the government your money is not being used in the ways it is advertised to you? What happens when a person is further hurt by the inefficiencies of government and their misuse of money?

Taking the recent wildfires raging in California as an example. The people whose homes are on the edge of destruction are probably expecting some sort of government intervention based on the money they have been forced to pay for services currently held in monopoly by the state and local government. But what is happening? The fire departments are deciding which homes to save and which ones to overlook. So who decides on the triage status of these properties? Who gets to decide if a home is to be saved or allowed to be destroyed? How should those people who have paid for a protectionist service such as a fire department be compensated for the inability of the department to provide the service they are intended for? What recourse do those that have now paid for services, and not received appropriate actions from these mandatory services, really have?

The same can be said of police departments and their "services". If a man is injured or killed and has paid for these protectionary  government agencies, what now happens to reclaim losses or injuries? The agency has obviously not performed a duty right? The police slogan being to protect and serve, the first mentioned duty as protectors has not been provided. In the instance of a man being robbed, the police are in most cases called after the act has taken place, these crimes go mostly unsolved as clues can not or will not (willfully) not be found. A great deal of what police officers do are what is known as reactionary measures. This means that police by and large do not stop crime from happening but merely respond after a crime has been committed. They try to recreate a scene and to collect information to further an investigation of the matter. This leaves people to still be victims and no recourse for the inability of police to "stop" crime from happening. Now this problem could be solved by the hiring of a private security force, to dispel any threats against the life and property of a contracted client. Mostly wealthy individuals choose this route as their preferred choice, knowing that in the instant a threat is made their personal protection agency and its enforcers are there to act. So what happens if a private security firm fails in their actions. The contract, if written to include clauses, could provide all recourse measures, including recuperation of monetary losses.  


It is a failure of government that highlights the free market alternative for fire and police services. In a world where people are free to choose their own protection and not be forced to submit authority or be extorted for money to fund mandatory services, a market of competing and cooperating companies is possible. Think of a service that includes the service of fire suppression and prevention for a fee, by contract and with means to collect losses if they occur. Think of a service that allowed person to hire security forces for themselves and to also collect looses on the occasion of breach of contracts or failure to provide adequate services to the contract holder. This is not so out of the ordinary or far fetched, it is simply a new way to look at the choices, preferences and right of association and contracts of free people and free markets. All the services currently held in monopoly by government can be provided in a market without the use of force or coercion.

Top Ten Capitalist Arguments – Explained

I found this rather interesting post on Reddit which sent me to this Liberty.me users profile. Ethan Glover gives an excellent rebuttal to this video trying to give a false impression of Capitalism.

It is not often that I respond to these things of such low quality as the video below. I vowed a long time ago that I am done with anarcho-communists. I do not debate them, and I do not talk to them. After many attempts of communicating with them, with 100% accuracy I was exposed to the most vile of creatures totally unable to act like adults, or even like human beings. I don’t like to generalize entire groups. I was sent a message by an anarcho-communist with some very helpful and enlightening information that gave me a better understanding of their philosophy once. Will Moyer, a leftist, wrote a brilliantly put together article that I responded to in “The Limits of Will Moyer“. But any efforts I have made to talk to them directly have resulted in the most pathetic and lowest of treatments.

The reason I so thoroughly enjoyed Will Moyer’s article is because, unlike the video below, it was not full of SCE (sarcasm, cynicism, exaggeration). His article made his points directly and he proved that he had an understanding of “right libertarianism,” or synonymously, and more accurately to me, anarcho-capitalism. He did not mince words and was not afraid to go against libertarianism, but at the same time he did not treat his writing as a BuzzFeed Top 10 list. It was meant to be of high quality, and it was meant to be taken seriously.

The video below was made for attention and makes no attempt to understand capitalism, but rather it only illustrates a reconfirmation of biases. I respond to it only at request, and grudgingly so. If the video creator wanted to be taken seriously he would have sucked it up, cut out the childish SCE and utilized a little CHI (curiosity, humor, impudence). Or to put it in other words, there’s no problem with disagreeing and rejecting the arguments of others, but if you don’t want to be torn apart, try to have some fun and create a real discussion. This video, in its despicably low BuzzFeed sarcastic style, does not deserve a bit of respect. I’d be willing to point out the positives in all other cases as I did with Moyer, but this will simply be the crumpling and throwing away of an undeserving piece of junk.

A note on how to read this article: This is not a thorough break down of anything in particular. Rather, it is merely a response to a poorly put together, quick list of arguments against capitalism (which are actually arguments against socialism). For the best way to follow this article, watch the video one item at a time, and then read the appropriate response. For example, watch #10 from the video, then read #10 in the article. #9 from the video, then #9 in the article and so on.

10. Capitalism promotes innovation

Many people do indeed fall into taking easy jobs and not looking for upward mobility. Of course, the socialist answer is usually to force everybody into a single system of being equally poor. Not everyone is capable of being innovative, and not everyone wants to sit around playing the guitar all day. Most people take normal jobs that require simple work and live their life outside of work. Work does not have to be some amazing thing that we love to do, there are always going to be shitty jobs out there to be done. What we can do is allow adults to make their own decisions, and run their own lives. You simply cannot force everyone to be an artist. If everyone were innovative, there would be no such thing as innovative.

Not only that, but the source that the video uses to show that only 13% of people are disengaged at work is a worldwide poll. The four highest countries for most engaged are the United States (mixed-economy, partially capitalist), Canada (mixed-economy, partially capitalist), Australia (market economy, third freest economy in the world), and New Zealand (market economy, fourth freest economy in the world). The most disengaged? East Asia (which with the exception of newly capitalist systems such as China and Hong Kong, most countries in East Asia have socialist command economies), Sub-Saharan Africa (a highly underdeveloped region with a long history of socialism and communism), and South Asia (a highly liberalized area, it’s fastest growing nation, Sri Lanka recently took on some capitalist policies). [Source]

As for the source on people not responding to financial incentive? Massively taken out of context. First, the study found that when it comes to mechanical skills, people respond to financial incentives, and when it comes to cognitive skills people respond to different kinds of incentives, but we’ll get back to that. The economic law that says people respond to incentives is still true. If you don’t pay a programmer enough, he’ll quit for a higher paying job. However, once the pay is good enough, he’ll start to look for other incentives like the ability to be autonomous and creative. What does this mean? High value employees are capable of demanding more, and do so. This is something we have found through capitalism. It is the still generally free market in the software world that has recognized this. This is why you see such incredible innovation in the workplace in places like Google and Amazon. This has been known for a long time, this research is only repeating what has already been discovered in, and put into practice in the free market.

Within the highly capitalist software industry, this is also where you see things like Apache, Linux, and Wikipedia. Large open source projects that are dependent upon free labor and donations. The “open-source way” does call for people to lead projects, but it also welcomes free labor. Open source has become one of the best ways for young people to gain experience and work with big projects. This is why they’re so popular. It provides an opening, and the people who are at the top, leading the project and running the show? They’re being paid. Of course, they’re being paid. It’d be silly to think that wasn’t the case. Open-source is a huge industry. All of this is a part of the free market. Being free of charge has nothing to do with socialism. This entire video is an idiotic misunderstanding of a simple word that can be looked up in the dictionary in about two seconds. Socialism means collective ownership. Guess what? The Wikimedia Foundation, The Apache Software Foundation, and Linux distributions such as Fedora? All owned and operated by full time employees.

Queue the canned rants about “global inequality” and how it’s not fair that everyone doesn’t have the same piece of the imaginary pie. First of all, wealth is not distributed, it is created. It is the socialist nations who end up poor. It is not the fault of capitalist nations that that is the case. It is the fault of the governments for holding people back and not allowing them to adapt to the world and build better lives for themselves. Second, you don’t need to be rich to innovate, the greatest innovators throughout the world come from humble and poor means. It is their striving to build something that pushes them into innovating in the first place. Does this mean it is capitalism itself that promoted that innovation? Sort of, on a general scale. But take it down to the individual scale as the video has, and it’s more because those innovators wanted to get rich and share their ideas.

Then there’s the idea, that’s repeated many times throughout the video that “capitalist education” destroys creative thinking and critical thought. Of course, the video is ignorantly referring to public schools, the exact thing it had just called for by saying that we are more than capable of providing education for everyone.

9. Free markets increase economic development

Immediately after saying the word “free market”, the video starts talking about the IMF, World Bank, and Free Trade Organization. These are not free market organizations, and it must be said that it is impossible to force free market on anyone. At that point, it is by definition, not free, nor capitalism. People must be able to trade among themselves freely in order for there to be a free market. You’d think that’d be obvious, right? It then suggests that protectionist policies such as anti-trust laws and banking bailouts are good for economies, and all the evidence that shows that protectionist policies are only to protect special interests (shocker!) don’t matter.

On the internet being a major innovation, let’s consider first where innovation on the internet has come from. To the government, the internet was nothing but a tool for the military, they had no idea of its power. It was only until the private sector started building on it that it became what we know of today. The internet that the video refers to is pure private sector. Not only that, but just because entrepreneurs use roads to drive to work, that does not mean the government is responsible for their innovations. In the absence of government, roads will still exist, just cheaper and more efficient. If the government never created the “internet”, it still would’ve been created, probably by the same private sector contractors. The internet and GPS, today, are old technologies that are only useful to the average person because of innovative entrepreneurs in the free market.

8. Markets are a rational means of organizing economic life.

The fact that the U.S. wastes so much food is a sign of prosperity (obviously). That prosperity comes from better technology and a (relatively) free market. The starving nations around the world (which are mostly under socialism and dictatorships) lack the agricultural technology that countries like the U.S. do. Even still, countries like the U.S. continue to send them food and care, causing their populations to rise disproportionally to their technology. This only makes things worse than they are. Socialist programs of just giving things away with no consideration as to the consequences and potential alternatives (such as abandoning intellectual property and business regulations that may allow companies to help these countries) are what cause the mass poverty in poor nations.

The New Deal (mentioned in one of the videos sources), by the way, destroyed the economy and it was only after Roosevelt’s death and the removal of his policies that the economy recovered from it and World War II.

As for planned obstination, this is primarily caused by inflation, which is caused by central banking. As the dollar loses value, people have less to spend, so they demand cheaper products. Companies respond to this demand by making… cheaper products. In order to do this, they must use lower quality material. This is as opposed to the post world war two era in which socialist public works programs were being dismantled and the pent up economy went through a major boom. This was an era in which cars, clothes and appliances were made to be very sturdy and long lasting. Today, people simply cannot afford such things and must choose lower quality products.

These cheaper products do not generate more profits, because they are lower priced products for lower priced material. Without planned obstination, there would be higher priced products with higher priced materials that would be more durable, and would not be replaced nearly as much.

When Keynes said that technology would lead to 15 hour workweeks he ignores the entire purpose of technology. Technology allows us to advance society. As technology rises, we create different kinds of technological jobs. The purpose of technology is not to create an imaginary, impossible Peter Joseph world. It is to raise the standard of living and to solve problems. Robots have replaced menial factory line jobs and have allowed more people to take on more challenging jobs in robotics and electronics. This is a positive that the video was complaining doesn’t exist from the very beginning. You don’t create more challenging jobs by playing the guitar for no pay, you do it by innovating in the free market to meet customer demand.

The videos source, which complains about people working longer hours, makes no mention of things like inflation and high tax rates. The countries mentioned such as the United States, Canada and Japan all have some of the highest individual tax rates in the world. As always, the socialist answer is just to pass regulation to shorten the workweek, which inevitably leads to mass poverty because no one can afford to live and afford all the socialist publics works programs at once. As for the article on “bullshit jobs,” it’s just a lot of complaints about necessary jobs and how the author wishes he could spend his life doing nothing productive.

You can work as long as you want, the free market (again) is by definition free. The market isn’t some magical being that doesn’t let you do less work. It is, however, inefficient and bad for the people to hire 100 people to work for half an hour each. To quote the video, “How stupid is that?”

The claim that everyone is working “bullshit jobs” to buy “bullshit products” is.. well.. bullshit. It’s entirely subjective opinion. My smartphone is not a bullshit product, nor is my laptop. I don’t own any bullshit products, because I don’t choose to buy products that I think are bullshit. I think socialist books are bullshit products and a waste of money. But some people don’t, so be it. Nobody “makes me want” anything, that again, is a bullshit argument. If you buy one thing over another, that does not make you superior, that makes you human.

7. We can prevent bad business practices through ethical consumerism.

The very first argument is that the media (state controlled) is advertising products to people and are, therefore, catering to the evil corporations. Advertising, overtime, has become much more subtle, internet marketing is about advertising products to people who already want that product. This has happened because people have begun to ignore advertisements, this is why adless mediums such as Netflix have become so popular over things like cable.

Yes, vegging out on the couch and watching TV is bad for you, but will it program you to go out and buy stuff? No. In the end, it is the individuals choice and responsibility to do so. Everyone, including the commentator of this video, has found a great product that they like (and is, therefore, subjectively not bullshit) through advertising. Advertising is not only a great way to drive down costs of certain things like YouTube (ads are the reason it’s free) but it’s a great way for us to discover new products that we might enjoy. A personal lack of self-control is no reason to vilify the entire thing. That’s like saying Mountain Dew should be illegal because I enjoy it too damned much.

But, the point of saying advertising is bad is because companies won’t advertise their own bad practices. Yes… that’s an actual claim. At no point have I ever heard a capitalist claim that companies should self-police. What I have heard is that the market is capable of self-policing. This means that there is no need for government intervention. Especially when there are things like Consumer Reports and the thousands of systems for product review out there such as with Amazon and eBay.

Just because single products bring multiple products together, it doesn’t mean a thing. Individual products and companies speak for themselves. What the video is referencing (but coyly doesn’t mention) is the “business practices” of companies in foreign socialist nations in which workers are treated like cattle, thanks to bad economies and regulations created by their governments.

At the end of this rant, the video says you can only vote with your money if you actually have any money. This shows a total misunderstanding of what voting with your wallet means. First of all, politics currently control and dictate most business products, especially things like food. Businesses can not cater to their customer because they are either held back by protectionist regulation or must use protectionist regulation to get ahead. Voting with your wallet has nothing to do with moving companies actions by yourself, it’s about making your own decisions. Yes, this gets increasingly harder as countries become more socialist, that does not negate the purpose.

6. Government regulations address the question of bad practices.

No. They don’t. They create them. This is not capitalism, it’s got nothing to do with it. What the video complains about is actually socialism.

Capitalism: The possession of capital or wealth; an economic system in which private capital or wealth is used in the production or distribution of goods and prices are determined mainly in a free market; the dominance of private owners of capital and of production for profit.

Socialism: A theory or system of social organization based on state or collective ownership and regulation of the means of production, distribution, and exchange for the common benefit of all members of society; advocacy or practice of such a system, esp. as a political movement.

The enforcement of collective ownership and social organization is government. The government, through socialism, chooses certain companies over others by creating protectionist regulations.

“Worker control” already exists due to government regulation, they’re called unions, and they only make things worse by deluding supply and demand.

5. Don’t you buy things from corporations? Doesn’t that make you a hypocrite?

No.

4. Capitalists put risk into their businesses.

It was challenging for Nazi’s to take power, and because it’s challenging to start a business, then it’s wrong? Wait, what if it’s challenging to build a socialist system that doesn’t collapse in five years? Does that make it wrong? This has nothing to do with challenge, it’s about the fact that when someone puts blood and sweat into building something, you can’t come along and claim that it somehow equally belongs to everyone on earth.

People voluntarily build businesses, other people voluntarily work for those businesses. In the same way that this video creator thinks you’re stupid for buying a smartphone instead of socialist literature, he thinks you’re stupid for working for a private company rather than working for the government or a cooperative. It is actively saying that you are too dumb to manage your own life and instead, your life should be run by a British teenager on the internet.

Socialists want to exercise their power over others by destroying systems that everyone explicitly agrees to and is perfectly happy with. Thankfully, they’re unwilling to take the risks of gaining actual support and tend to enact what they want through groups like the democratic party in the hopes that one day, the government will put a gun to your head and tell you that you own nothing, no matter what your personal beliefs are.

3. Living standards improve overall, even for the poor.

Living standards improved under Nazism and Fascism, therefore, it’s not a good thing that living standards improve under capitalism. Again, the video is going immediately towards the Nazi’s and saying, “Look, they did it!” If the video claimed that socialism improves living standards for the poor (as it does temporarily) I could claim the same thing. What’s more important is that capitalism and free trade permanently raise living standards and does not lead to mass famine and poverty as socialism and Keynesianism does.

Argentina has always had economic troubles and experienced the usual boom bust cycles that any Keynesian economy does. There’s nothing wrong with worker cooperatives and are perfectly welcome under capitalism. If they work, if they can meet customer demand, then they are totally OK. I would love to see more attempts at cooperatives, but only if they compete on the free market where people can decide which is best. It is important to mention that there are both pros and cons of co-ops. It is also important to remember that the customer is more important than the employee. This does not mean it’s OK to commit criminal actions against employees, but to say that working is a personal decision that is about serving others for the sake of future personal benefit.

2. Capitalism is the result of human nature.

First of all, capitalism has existed for at least 150,000 years. Second, of course it came after humans, humans created trade. Capitalism being a result of human nature has nothing to do with genetics as the video author very well knows. It’s about the fact that trade is a part of communication. It’s what allows us to build societies. The division of labor is the entire reason modern society exists.

Communicating with others and having friends has nothing to do with communism.

Communism: A theory that advocates the abolition of private ownership, all property being vested in the community, and the organization of labor for the common benefit of all members; a system of social organization in which this theory is put into practice.

The video is trying to suggest that capitalism means you can’t live with friends, have relationships or communicate. However, it is in communism that it becomes impossible to solve disputes because there is no recognition of ownership. Such a society quickly devolves into a primitive state.

Capitalism does not force you to charge your friends to help you to move. This, as the video creator and everyone on earth knows, is a ridiculous thing to say to begin with. Capitalism thrives on, and asks for cooperation, it is built on cooperation. Competition is not the opposite of cooperation, nor is it the only foundation of capitalism. And yes, competition is natural, if it weren’t, sports wouldn’t have been around for well over 4,000 years.

And then we get back to how public schools are capitalist schools. Over and over, this video talks about socialism and calls it capitalism. The public education system (which this video creator should adore) teaches an over exaggerated idea of “sharing is caring”. They do not teach fundamental reasoning, negotiation and critical thinking skills. If we had a capitalist education system, there surely would be plenty of schools that did just that, but alas, we have a socialist one.

1. Capitalism is the only system that’s possible.

No one is saying this. In fact, it is very rare to see capitalism today. It certainly does not exist in the US or UK. But the video doesn’t talk about that and the historical effects of socialism. Instead, it queues the pictures that are purely a result of the tragedy of the commons and the lack of private property. When all land is unowned, people have no incentive to take care of it.

It’s been proven time and again that the environment is not headed for collapse, and when the economy collapses it is often due to Keynesian practices and central banking which creates ridiculous and unnecessary boom/bust cycles.

The only need for social change is the need to get rid of government to allow people to act like adults and make their own decisions instead of bending to these ridiculous “common good” arguments that have never had a lick of actual reasoning behind them. (Mostly because there is no such thing as a common good, it’s an impossible concept.)

The only way you’re ever going to convince everyone that all companies should be cooperatives is to force it on them by regulation. The fact is that structured companies, which are responsive to the customer, not some bratty socialist employees, will always out compete them and the customers will always choose them as superior businesses.

As for anarcho-syndicalism in the Spanish Civil War, this system was indeed forced on those peaceful non-criminals who did not want it. The punishment for using money was death. There is no possible way to force a particular kind of anarchy without the use of coercion, in which case, it is inevitably a state. Of course, this is only in the few areas that anarchy was established. In the grander sense, the Spanish Civil War was fought between Nazi and Italian Fascist supporter Dictator Francisco Franco against the Soviet Union.

I get that anarchy makes places better than they are, I’m sure those parts of Spain under anarchy were in a better position than being under a long series of dictators who were constantly at war for the entirety of Spain’s history. Is this really the best case for “left libertarianism?” If so, it’s got nothing to stand on.

Conclusions

In reality, this video gives no real arguments against capitalism and why it is criminal. There are a lot of arguments against socialism and the usual whining of, “Why isn’t everyone as economically ignorant as me? I’ll make them that way!”, but nothing with any real content.

When the video says not to use, “rehashed, terrible phrases that mean nothing [that] are often completely inconsistent with reality” it ignores the fact that the video uses a stereotypically wrong view of capitalism pushed by socialist government and it ignores the realities of economics, something socialists like this have never been able to get straight in their entire history.