Tuesday, May 12, 2009

Do we live in a capitalist country?

And can we blame the recent fallout on "market failure"? Well, first we should define capitalism. The answer according to this well (and vehemently) argued case, is no:

"Nobody's abandoning capitalism here."

True. Capitalism was abandoned -- destroyed, actually -- long ago, beginning around 1913, when the last of free banking was destroyed with the creation of the Federal Reserve and the imposition of a fiat money supply controlled by that Fed.

Since that point in time, what has existed in the United States is a "mixed economy", with continuously-diminishing elements of freedom mixed with continuously-growing elements of statism in the form of fascist controls and regulations on business and economic activity as well as socialist welfare-state looting and redistribution-of-income schemes.

It is true that a whole host of non-government entities and players have helped urge on this destruction of freedom. Lots of big businesses have lobbied for regulations to strangle their competitors -- labor unions of all sorts have lobbied for regulations that permit them to coerce higher-than-market wages. "Special interest group warfare" -- as Ayn Rand called it -- is an inevitable result of government having the power to regualate the economy and dispose of the citizen's money, against their will.

But the main point is that what exists in the U.S. at this time is not capitalism. Capitalism does not feature, among other things:

1) Capitalism does not feature fiat money.

2) Capitalism does not feature a central bank -- the Fed -- with total control over that money, with power to expand it or contract it at will -- with the power to dictate interest rates and enforce capital requirements for fractional-reserve banking that leverages commercial banks at 20-to-1, investment banks at 50-to-1, and government-sponsored entities at 1000-to-1.

3) Capitalism does not feature bank regulators that enforce legislation like the Community Reinvestment Act, the Fair Housing Act, the Equal Credit Opportunity Act, the Community Development and Regulatory Improvement Act and the American Dream Down Payment Act, regulations which banking regulators can and did use to pressure lenders to make billions in loans to people who, under capitalism, would not have qualified for those loans.

3) Capitalism does not feature government-sponsored entities, like Freddie and Fannie and Ginny Mae, that create secondary markets to help encourage nervous lenders to continue making shaky loans. Nor does it feature federal agencies like the Federal Department of Housing and Urban Development (HUD), the Federal Housing Authority (FHA), the, the Federal Housing Enterprise Oversight Office and the Federal Home Loan Bank -- all of which were created because those selfish, stingy lenders wouldn’t give money to people they suspected would not pay it back.

4)Capitalism does not feature a government-controlled cartel of investment rating agencies, which all issuers of securities are required by law to use -- and which are still in business, and whose "services" are still being forced on the investment community, even after these ratings agencies disastrously rated securities containing sub-prime loans as "AAA".

5) Capitalism does not feature “bailouts” of failed companies in the form of taxpayer-financed loans or loan guarantees -- bailouts that insure the incompetent remain in business to further waste capital and further bleed the taxpayers..

6) Capitalism does not feature government-takeovers of failed companies, with government intervening to head off bankruptcy.

7) Capitalism does not feature massive labor regulations such as the Equal Employment Opportunity Act and the agency that enforces it -- the EEOC; or the Americans with Disabilities Act; or the Occupational Safety and Health Act; or the Family Medical Leave Act; or the state laws mandating Workman’s Compensation Insurance; or the state laws mandating Unemployment Compensation Insurance.

11) Capitalism does not feature corporate welfare programs, like the billions of dollars given to farmers who are paid not to produce or who are guaranteed prices -- all paid for by taxpayers who don’t have, and cannot afford, the lobbying power that such corporations or interests can bring to bear.

12) Capitalism does not feature an income tax and welfare system that rewards the lazy, the incompetent, the shiftless, the foolish, the ignorant and the just-plain-no-good by providing them free economic goods and services, paid for by seizing the earnings of the most rational, most productive, most responsible, most creative and most entrepreneurial members...

13) Capitalism does not feature a “code of Federal Regulations” -- now 75,000 pages in length -- that dictates the details of virtually every aspect of our financial and economic life -- a set of regulations that has steadily increased under every president and which, at present, would stretch for over 1.5 miles if its pages were laid end to end -- 1.5 miles of double-columned, small print, both-sides-of -page regulations.

14) Capitalism does not feature a government with departments designed to interfere, intervene and overrule the market in housing, transportation, healthcare, education, energy, mining, agriculture, labor, and commerce.

15) Capitalism does not feature a government in which the actions of the aforementioned departments are amplified by more than one hundred federal agencies and commissions, the most well-known of which include, besides the IRS, the FRB and FDIC, the FBI and CIA, the EPA, FDA, SEC, CFTC, NLRB, FTC, FCC, FERC, FEMA, FAA, CAA, INS, OHSA, CPSC, NHTSA, EEOC, BATF, DEA, NIH, and NASA.

As this quick overview of our current system shows, whatever else one may argue about, the claim that what exists in the U.S. today is capitalism is ludicrous beyond belief -- fully as ludicrous as the corollary claim that said non-existent capitalism is to blame for this “financial crises”.

Capitalism is dead -- long dead. What you are witnessing is the self-destruction and failure of the fascistic regulatory/welfare state that killed it -- a fascistic regulatory/welfare state that, in its death throes, is being vastly expanded in one last desperate attempt to loot whatever else can be looted from the remaining productive American taxpayers.

Martin wrote:

"We're not abandoning capitalism, because capitalism is all about protectionism and bailouts. It always has been. Capitalists don't want free markets."

That’s nonsense, Martin. The meaning of the term “capitalism” does not change because those participating in what’s left of the system are advocating destroying still more of it.

If the police and judges stopped enforcing the law -- and instead began advocating allowing more and more criminals to go free, that would not mean that the term “law enforcement” now means, “not enforcing the law”. “Law enforcement” is a term which, like “capitalism”, has a specific meaning that is not a function of what those participating in the system happen to advocate at any one time.

Posted by: Michael Smith | May 12, 2009 6:58:06 PM
From Cafe Hayek. I tried to throw some funny links in there. This was edited for brevity's sake. However, he does make a compelling case for the extent of generalized intervention in normal market processes. Just click on each one of those links for Federal agencies. It's staggering. Maybe we should begin to start blaming our troubles on a "mixed economy" instead of "capitalism"... Kinda like the first step in AA, you know? Admit that you have a condition, and it's not what you thought it was.

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