In his latest New York Times column David Brooks defends capitalism against socialism:
I came to realize that capitalism is really good at doing the one thing socialism is really bad at: creating a learning process to help people figure stuff out. If you want to run a rental car company, capitalism has a whole bevy of market and price signals and feedback loops that tell you what kind of cars people want to rent, where to put your locations, how many cars to order. It has a competitive profit-driven process to motivate you to learn and innovate, every single day.
Socialist planned economies — the common ownership of the means of production — interfere with price and other market signals in a million ways. They suppress or eliminate profit motives that drive people to learn and improve.
It doesn’t matter how big your computers are, the socialist can never gather all relevant data, can never construct the right feedback loops. The state cannot even see the local, irregular, context-driven factors that can have exponential effects. The state cannot predict people’s desires, which sometimes change on a whim. Capitalism creates a relentless learning system. Socialism doesn’t.
The sorts of knowledge that capitalism produces are often not profound, like how to design the best headphone. But that kind of knowledge does produce enormous wealth. Human living standards were pretty much flat for all of human history until capitalism kicked in. Since then, the number of goods and services available to average people has risen by up to 10,000 percent.
If you’ve been around a little while, you’ve noticed that capitalism has brought about the greatest reduction of poverty in human history. In 1981, 42 percent of the world lived in extreme poverty. Now, it’s around 10 percent. More than a billion people have been lifted out of poverty.
You’ve noticed that places that instituted market reforms, like South Korea and Deng Xiaoping’s China, tended to get richer and prouder. Places that moved toward socialism — Britain in the 1970s, Venezuela more recently — tended to get poorer and more miserable.
You’ve noticed that the environment is much better in capitalist nations than in planned economies. The American G.D.P. has more than doubled since 1970, but energy consumption has risen only modestly. America’s per-capita carbon emissions hit a 67-year low in 2017. The greatest environmental degradations are committed by planned systems like the old Soviet Union and communist China.
The Fraser Institute is a free-market think tank that ranks nations according to things free-market think tanks like: less regulation, free trade, secure property rights. The freest economies in the world are places like Hong Kong, the U.S., Canada, Ireland, Latvia, Denmark, Mauritius, Malta and Finland. Nations in the top quartile for economic freedom have an average G.D.P. per capita of $36,770. For those in the bottom quartile, it’s $6,140. People in the free economies have a life expectancy of 79.4 years. Those in the planned economies have a life expectancy of 65.2 years.
Over the past century, planned economies have produced an enormous amount of poverty and scarcity. What’s worse is what happens when the political elites learn what you can do with that scarcity. They turn scarcity into corruption. When things are scarce, you have to bribe government officials to get them. Soon, everybody is bribing. Citizens soon realize the whole system is a fraud. Socialism produces economic and political inequality as the rulers turn into gangsters. A system that begins in high idealism ends in corruption, dishonesty, oppression and distrust.
I believe he’s probably communicating better by using the words “capitalism” and “socialism” but they don’t really convey what’s actually happening here in the United States. Whether the rich become powerful or the powerful become rich, it’s really the same battle. Planned economy or market economy? Both Venezuela-style planned economies and crony capitalist ones like ours are centrally planned, the former for the benefit of government officials and the latter for the benefit of big companies.
Don’t kid yourself. Neither Democrats nor Republicans have a smidgeon of problem with crony capitalism. The evidence for that is the number of politicians of both parties who have become rich over a lifetime of alleged public service. It is simply not credible that for a politician to begin a life in elected office with a negligible net worth and amass a fortune in the tens of millions over 30 years of holding office without political corruption. Or leave political office with few if any other credentials and receive a million dollar salary without what you’re peddling being influence.
Big companies are able to twist the power of government against their competitors. The return on investment of that is fantastic. For a few thousand in political contributions or a few million in jobs given to former politicians or government employees you can realize billions. There are thousands of examples of how this works including extending copyrights to absurd lengths, as Disney has managed to do, or getting regulations tailored so they help you and hurt your competitors.
For many of the ills in our society, from low levels of capital investment to income inequality, you need only look at the consolidation that’s taking place in practically every sector.
“Neither Democrats nor Republicans have a smidgeon of problem with crony capitalism.”
That’s a steve-like generalization. An overwhelming proportion of Democrats have no problem with government mechanisms, and therefore government interference, and the inevitable crony capitalist result. The corporatist Republicans – RINO’s – are similarly inclined. Real conservatives are not.
Brooks has apparently been reading Friedman. Better late than never. But once again we find commentary resorting to citations of the evils of a relative handful of BigCo’s as the problem with capitalism. No doubt another Rube Goldberg government “reform” is dancing in people’s heads. I’m not hopeful.
Those of us who reside in SmallCo-ville have a different view. And we represent the overwhelming number of businesses populating the country. And the big engines of job creation. Just leave us alone. We don’t need or want the governments, ahem, help. In fact, dismantle government mechanisms and they can’t bribe their way to competitive dominance through their favorite puppet politician.
As for consolidation, yes, sometimes its monopoly seeking. That’s generally BigCo’s and facilitated by government. That is a key feature of crony capitalism. However, more often it is driven by adverse (very competitive) market conditions. aka: survival. I’ve lived it. I’ve presented merger proposals to the SEC. I wouldn’t worry too much that a plastic injection molded widget’s price will go through the roof if two $100MM revenue molders combine. I’d spend my time with Big Media, Big Social Media, Big Insurance, Big Ag…………
I was referring to elected officials. Are there any “real conservatives” in the Congress any more?
It takes a government to enforce a monopoly. Ma Bell being a prime example.
The problem with the old trust busters in the early 1900’s is they applied a mercantilist outlook to capitalistic monopolies, forgetting the classic example of the Penny Black stamp. They assumed that once a company cornered a market, they would raise prices to whatever that market would bear. Reality was different. Because at the time government was not in the business of enforcing monopolies, Standard Oil kept prices low to prevent competitors from coming in taking market share. There are similar examples which the trust busters could not explain away.
Ma Bell was different. In the name of National Security they made a deal with the government. Government-sanctioned monopoly paid for by allowing ridiculously high long-distance call pricing to offset subsidized local lines. It also suppressed innovation big-time because under the agreement Ma Bell had to make every improvement to products and service available to everyone at once including Mr. Wayback-in-the-Mountains in north Nevada as well as Ms. Stay-at-Home in Manhattan. Ruinously expensive.
“Real conservatives are not.”
All 3 of them.
Steve
Might be the same battle in general terms but you know in the real world you’d rather do business here than Venezuela.
Interesting to me to watch Amazon try to corner the market on everything. Retail, pharmacy, space race, cloud storage , television, delivery. Have I left anything out? Is there any precedent for this? Doesn’t Bezos have to fall flat on his face running this hard in every conceivable direction?
This year.
Bezos? Owning the Washington Post will do him in.
“This year”
Sounds like you should give Trump another look. Look past his warts.
“Hong Kong, the U.S., Canada, Ireland, Latvia, Denmark, Mauritius, Malta and Finland.”
“you’d rather do business here than Venezuela.”
This is a good example of why discussions about socialism and capitalism are pretty useless. Conservatives choose the worst examples of socialism, like Venezuela, and claim the tis what people on the left want. When people on the left want more govt involvement, they are thinking Canada and Denmark.
“Brooks has apparently been reading Friedman. Better late than never. But once again we find commentary resorting to citations of the evils of a relative handful of BigCo’s as the problem with capitalism.”
Couple things on that. Business in the US has been consolidating. Criticizing that handful of companies is criticizing a very large chunk of our commerce. The other thing is that “true conservatives” in theory oppose crony capitalism. In reality they occasionally complain about in blogs whenever capitalism in general is questioned, but they do nothing to address the problem, rather they support continuing the policies that breed crony capitalism. On top of that they then put the ultra wealthy who benefit from crony capitalism in charge of government ensuring that the problem will not be addressed.
“Look past his warts.” And see more warts.
Steve
I would never make that claim but I’m not a conservative. I don’t think that anybody wants Venezuela, least of all the Venezuelans.
I do think there’s a risk that’s what you’ll get even if it isn’t what you want. From my perspective there’s a cargo cult aspect to a lot of the discussion about welfare states. Proponents pick one aspect of a country like Denmark with the population of Cook County and think that aspect can be reproduced freely absent the support of their entire culture. Denmark is also (at least until quite recently) ethnically homogeneous and culturally Lutheran. Anybody who’s listened to A Prairie Home Companion can guess what that means. I don’t think that we can reproduce Denmark or Sweden here because there will be too many people trying to get rich off it.
And Venezuela is also a small country. Culturally homogeneous for that matter (I think). And why is it that if there is a risk that we supposedly could end up like Venezuela that we also dont have the risk of ending up like one of the South American banana republics if our version of capitalism keeps progressing?
Steve
Oh yes, we’re at risk, but mainly from the rising threat of direct Democracy. One of these days you’re going to see all three government branches led by Socialists and the people will cheer, their dreams come true. Nirvana. Slice and dice the filthy rich. Troops in the streets. Power shortages, water shortages, empty shelves, medical supplies on back order for months. Dream come true.
I think there very well may be. I think there’s a slippery slope and we’re already well down it.
Direct democracy is fine, preferred even, in a consensus-based society of which there are many. But we’re not one of them. We are much more individualistic.