Adan Smith – Author of The Wealth of Nations and considered the founder of Capitalistic Economic Theory.

I have been contemplating for some time our American economy and American way of life.  Following is the first short observation, explanation or rant.  American society and way of life is a three legged stool.  One leg is the economy which has been on the ropes for many years.  It is not a Democrat or Republican thing as both parties have been guilty of eroding the economy to their benefit. 

Capitalism

Capitalism has been branded with a bad name.  It is blamed for all of mankind’s woes from poverty to war even though as an economic system it is too young to be the cause of these societal problems.  Capitalism evolved as man’s thinking evolved.  Most American workers do not even think about the many nuances of what is the most beneficial economic system ever to develop from the mind of man.  Why would they?  It is not a slam on the American worker;  after all how many people breathe without thinking about what goes into that simple act?  Who lives their day admiring gravity?  It just is and no one should be looked down upon because they don’t understand the scientific underpinnings of life.  Economic systems are like that too.  The only time they are thought about is when there is an occurrence that affects the life of the worker.  If people suddenly started to float away, if objects started to fall up you can be sure more attention would be paid to gravity.

So why has Capitalism been so maligned?  The reasons are as numerous as there are economic and political science professors but I have simplified it to two main reasons.  The deeply rooted animus towards Capitalism is based on the constant battle for control of man and the second reason is just one little word – envy.  The history of man shows the progression of the individual and one of the largest leaps made was the development of Capitalism.  Prior to Capitalism and the acknowledgement of rights of the individual we had societies based on what amounted to slavery.  If an individual was born into a certain class there was little possibility of ever rising above that class.   It is not happenstance that Capitalist economic theory developed during the period called “The Age of Enlightenment” (a period of history when mankind questioned everything and began to shrug off the chains of government control over their lives). When the Age of Enlightenment occurred men like Adam Smith, John Locke, Descartes, Spinoza and Hume laid the groundwork for the greatest advancement of mans development in the history of the world.  They and other great men of the Age were opposed by the establishment of the day.  The establishment were made up of those who believed in the Divine right of Kings to rule, which meant the entire bureaucracies whose livelihood was so dependent on the forced labor of others supported this system.  Is it any different today?  Envy is a tool that is used to create discord while at the same time they use it to merchandise and sell more goods, which you may or may not need but if your neighbor has one then you must get one like it or one better!  A dangerous cycle.

Our European cousins have long abandoned any vestiges of Capitalism. Even though it is from Europe that Capitalistic theory was developed it took an American revolution to change the status quo and it has been a struggle between the two forces ever since. And it seems at times that the forces of good are being depleted. But I believe that man gravitates towards liberty naturally and will overcome the forces that run counter to that which is good.  Even in America where the Founders touted Liberty and it’s blessings we had an opposing economic system in the South that was allowed to flourish and for all intents it was Socialism.  The government while not the sole recipient of the fruits of their labor not only permitted it but looked to expand it constantly. The slaves were given in some cases a minimal survival compensation but for the most part they were treated as property and taken care of as property meaning they were not intentionally destroyed (this is not saying that life as a slave in the South was not harsh and wrong).  Considered assets they were in reality a drain on the economic system of the South which eventually determined how the War Between the States ended.  Liberty, the most beautiful word in our language, is only possible under a Capitalist system.  The age old question of which came first the chicken or the egg comes to mind; was it the development of Adam Smiths economic theories or man’s drive toward individual liberty which came first?  In my mind it was the latter that brought about Smith and the others.  They are so closely connected though that the attack on one is an attack on the other.

A large number of our fellow citizens do not understand how intertwined the two are and I would venture to say that a large segment does not understand what Liberty is or means anymore.  And that is the failure of our educational system which is a topic for another day!  It is easy to get caught up in the minutiae of economics and the different economic systems so I have one criteria that I look for first; which system provides the most access to freedom.  The basic underpinning of Capitalism is its requirement of free association between individuals.  When that is interfered with the economic system will fail or enslave the populace.

The failure of an economic system does not occur overnight.  It took the Socialist/Communist system in Russia just over 70 years to collapse.  “Red” China less time.  What was accomplished within those countries during that time period?  Hundreds of millions of deaths.  The psyche of billions of people devastated and the growth of what can now be considered nothing more than “mafia” style governments that have allowed more personal freedom but extracts the wealth of it’s people for the benefit of it’s rulers.  Some point out that it isn’t much different here in the USA and we have a “capitalist” system in place.  I have grown to agree with the initial premise but I also see this country having abandoned it’s capitalistic roots and with that; the corruption of politicians flourishes.  Are the two political parties that run our government and our lives any different than the Gambino crime family? It is the politician that interferes with the operation of a free market and they do it to benefit themselves.   Under the guise of “helping” they have disrupted the natural free interaction between people which not only jeopardizes our freedom but also adds significant costs to every interaction.  The span of time for a economic system or nation to live is determined by the amount of governmental/political interference in the  everyday action of the people. Where are we?

Greed is considered to be the driving force of Capitalism and the dollar sign is always associated with Capitalism.  So when used, it is generally used in a derogatory manner to signify greed.  But the dollar, yen, franc, pound, ruble or Euro are but a small part of any economic system be it Capitalism, Socialism or Communism. Our society today is heavily focused “making a buck”.  In many respects excessive greed has overtaken our society but is that due to the failure of Capitalism or a failure of our National morals and ethics?  As our Nation has moved to a more “secular” society we have become less moral and ethics is a word not understood by most and only studied as an elective.   The erosion of the moral and ethical base of America is not the fault of Capitalism but has in fact led to many distortions for which Capitalism is criticized.

Unfortunately for  the world and the United States in particular the focus on the dollar as the be all and end all of any endeavor is distorting the system. The “bottom line” mentality has led to short term thinking and behavior and in many ways it is a true reflection of our society. We are led to believe that it has always been that way but that is not the case.  Distortions in an economy are a natural but short term living creates more of them and while natural corrections occur everyday the more distortion the harder the correction.  The stock market crashes of 1929; 1987; 2000 and 2007 corrected situations where the stocks were over valued and “bubbles” were created.  The rise of labor unions in the early 20th. century was a correction to the growth and abuses of large companies and since the 60’s and 70’s we have seen a decline in union membership as they became more powerful and abusive.  The decline in Union membership has brought about more corporate abuse of the workforce.  Excesses and corrections are natural and any attempt to stop either action only serves to enlarge them.

Capitalism has spawned several different economic ideologies which claim to be an improvement to the original.  In actuality they are the old establishment caste system that seeks control for the benefit of the few.  The most insidious offshoot is “Corporatism”, which I will address later.  But for those interested in opening their minds up and understanding Capitalism there are many good books on the subject.  Many libertarians disagree but I like Milton Freidman’s “Capitalism And Freedom” and “Free To Choose” (written with his wife Rose); anything written by F.A. Hayek, Walter Williams and Thomas Sowell will turn you into a capitalist loving individual.  Murray Rothbard is good but is as dry as sawdust.  Henry Hazzlit’s “Economics In One Lesson” is also a very good and easy to understand book to start your journey.  And start you should because it is the only way to protect yourself from the mind stealing “educated” proponents of Socialism.  Capitalism is the only moral and ethical economic system out there.  The others lead to the destruction of the individual – which we all are whether we like it or not.