Tuesday, March 15, 2016

Capitalism and the moral high ground

When I saw the meme below I re-posted it on Facebook and attracted more than one active commenter.  The exchange below was quite detailed and I thought was worth assembling here. In it, I am able to address a number of important issues and questions brought forward by the commenter, which I have shown in blue.  

Comment: Are you complaining about wealth distribution? We're playing monopoly while 50% of the world is playing feed my family - living on $2.50 per day. Hunger is the leading cause of death worldwide. 1% of world population owns 50% of global wealth. http://www.bbc.com/news/business-30875633
My reply: I am not complaining about wealth distribution so long as it is within a free society where rights are objectively defined and protected by government. In such an economy, the poorest people are far better off than in a country where rights are violated, productivity is punished instead of rewarded and cronyism is de rigueur.

I do complain about the lack of rights, freedom and protection that persists in large parts of the world, despite the example set by the West over the last couple of centuries, clearly showing the path to prosperity and long life. I also complain about the path the West is on, headed back to various forms of collectivism and away from the freedoms they earlier enshrined in their societies. I complain about the tremendous loss of lives and progress due to the lack of freedom and rights and encourage people to rediscover the true meaning of freedom and its political-economic corollary, laissez-faire capitalism.

For all of human history hunger, disease, climate and murderous governments and groups prevented humanity from learning, experimenting, discovering and progressing. Until the renaissance, enlightenment and the founding of a country on the principle of individual rights, no country in history was even close to having a system proper for the life of man - the rational being. Hunger is a problem quickly solved in countries that embrace rights and freedom.

In just over two short centuries, men in mostly free countries advanced so fast they virtually eliminated the problems of food supply, shelter, clothing, protection from the climate and predators, education and physical violence, among others. Those who remain stuck in pre-capitalist societies are poor and hungry because of their desperate lack of capitalism and not because of the wealth produced under more free economies. If we owe anything to them, it is to share the message of how to create wealth through productive activity, the protection of rights and trade with others.

Comment: Where to begin? It seems you are not aware that laissez-fair capitalism - trickle down economics - has been proven to be a broken model. While capitalism is the uncontested winner overall, left to it's own (unrestricted) mechanisms, wealth is not distributed in a way that helps the world most.

Laissez-faire capitalism leads to the rich getting richer, and the poor getting poorer. The Monopoly analogy is equivalent to saying: OK, all the properties have already been purchased, but jump into the game and try to get ahead on $200 of income. (80% of the worlds lives on just USD $10 per day - so $200 is not far off).

In terms of freedoms, I am not sure why you are so opposed to taxation. Is it abuse your fear? I think you believe in insurance, so why not just consider taxation your insurance contribution... health insurance (for all), education insurance (for youth), security insurance (army, police, courts - for all).

I want to live in a society that works collectively to manage collective issues - like health, education and security. I also want to live in a society that values progressive contributions. From each according to their capacity, to each according to their need. This can get distorted, but the principle is one I do believe in.

The dollars lost on individual abusers does not compare to the dollars lost on corporate abusers. We think Apple, Google and others are wise for juggling their finances in such a way as to take advantage of international tax opportunities. But this is faulty and we need a global taxation system to respond. Corporations should be taxed on revenues earned in a country, according to the tax policies of that country. Becoming an Irish-based corporation should not free a company from their tax liability in Canada, US or elsewhere.

Part of my personal experience of freedom comes from living in a system that restricts capitalism, has a progressive tax system and supports those in need. If I pass by a homeless person, for example, I am free not to care too much, as there are supports for that individual. That's is a wonderful freedom. I am delighted to have health care, free education and police. Aren't you?

The US is probably the closest country to model your version of laissez-faire capitalism, but look where that is getting them. The class divide is growing and inequality is at record highs. Their health care and education scores are at the bottom of "rich" countries. The middle class has been shrinking for 40 years. By 2040, it is estimated that 50% of the population will only make minimum wage.

But somehow, I feel like maybe you are ok with that. I think you feel that laissez-faire capitalism provides everyone with equal opportunity. If governments would just get out of the way, capitalism will lead all to a happier, healthier life. Right? Competition and the markets will regulate themselves.

I certainly agree that capitalism is good. And there is no doubt that it has lead to the prosperity that the modern, developed world enjoys. Greed works. It motivates wonderfully.

However, the 2008 financial collapse, resource oligopolies and the shrinking middle class are all examples of why greed needs to be mitigated and restricted. Similarly, aging seniors, kids with special needs and refugees are all examples of why a social welfare element to capitalism is necessary and positive.

We Canadians tend to believe in an economic approach that is kinder and gentler than laissez-faire capitalism. This is true of most of Europe. And, it is working. Most every report suggests that cities in these parts of the world are amongst the best places to live. US cities generally don't make the cut. Countries with capitalist economies and a high measure of social-minded programs/taxation tend to score highest on health, education, and quality of life. For me, that counts.
My reply: I think we have to go back to basics here to make sure we are talking about the same thing.

When I say capitalism I mean the social system where the right of individuals to life, liberty, property and the peaceful pursuit of their own happiness is recognized as the fundamental basis for society. The recognition of rights means that physical force and fraud must be banished from society since it is the only way rights can be violated. Thus, there is an absolute need for a government for the purpose of protecting those rights and its sole responsibility it to intervene when rights are physically violated or threatened and to arbitrate when there are non-violent disputes among individuals. Any other actions require the violation of rights and are thus immoral. Under capitalism all economic activity is done through productive action and voluntary exchange of values. If one man wishes to trade his production with another man, he is free to do so and no one has the right to stop him or to interfere in the exchange. Capitalism is the system of individual rights and freedom.

While there has never been a truly capitalist country, the US did come closest in the 19th century and the result was the greatest improvement in the human standard of living in all of history as the potential of the human mind was released from the various forms of collectivism that had enslaved and suppressed it for many centuries. From a world where poverty, starvation and disease were almost universal there arose such wealth that a poor person in a partially free country today has easy access to a standard of living un-dreamed of by kings before the coming of the freedom-fueled industrial revolution.

Capitalism is the ultimate system of voluntary cooperation since it empowers everyone to pursue any goal they wish, so long as they recognize the right of others to do the same. Capitalism is the most kind, gentle and benign form of government discovered. Under partial capitalism, lifespan, health, education, safety and all other measures of quality of life advanced more than in all previous centuries combined. These advances were not because people were ordered to do this and forced at gunpoint if they refused, but by free men of good will working together for mutual gain. A free market enables everyone to experiment withe different ideas and to compete with all other ideas to discover which ones work best and are preferred by their fellow men with whom they trade values.

Being in favour of capitalism means I am against all forms of tyranny, slavery, oppression and other versions of the violation of individual rights. It means I advocate for a society where not only is your right to your own life protected from force applied by other individuals, it is specifically protected from the force of government, thus the need for a constitution that defines and delineates the proper function of government. Force does not become moral when two people decide to use it against a neighboring individual, when ten people get together in a gang, or when a population votes to initiate force, no matter how many people vote. Using the agency charged with protecting individual rights in order to violate those rights is a contradiction that wipes out the very essence of the concept of proper government. Once government is used to start violating rights, there is a natural progression of increasing violations, as is the case in western civilization today.

Capitalism, lacking a proper moral defense at its inception, has been in decline since the day it was first tried. Thus, we have the spectacle of the financial crisis being caused by decades of forcible government interventions culminating in a massive destruction of wealth, yet being blamed on too much freedom, in a sector more heavily regulated than any other - the financial sector. People have lost understanding and connection with the definition of rights, the meaning of freedom and the basic principles of economics. Government creates a monopoly on the money supply, manufactures inflation then blames freedom for the destructive consequences. Government enforces thousands of rules on banks, creates a monopoly on risk rating agencies and then blames freedom for the ridiculous risk ratings that were produced. Government forces banks to lend to people who are a poor credit risk and should not be borrowing, then blames freedom for the harm done to these people. Government inverts the yield curve, encouraging enormous short term borrowing in risky assets that inflates house prices and then blames freedom when havoc results.

I have personally spoken to and read a book by the former head of the BB&T Bank in the US. His bank remained profitable through the crisis because it focused on win-win lending, where a responsible lender contracts with a responsible borrower for mutual benefit. Though he did not want it, government rammed money down the throats of all the banks so that the public could not see which ones were weak and which were strong, hiding the damage government had done to the financial sector for decades, protecting their cronies and harming the more honest banks. Under capitalism the foolish banks would be out of business long ago and the most productive ones, as determined by the preferences of their customers, the public, would thrive. Government regulations encouraged deceit, recklessness and even criminal activity and when it went to hell the government bailed them out to hide their mistakes, thus doubling down once more on their ideology of forcible intervention in the economy.

Under capitalism there is no such thing as a government subsidy for business, nor for individuals; no such thing as cronyism since government has no power to hand out favours; no such thing as lobbyists since there is nothing to gain in a system where all rights are protected and government cannot use force against innocent citizens; no such thing as patronage since government has no goodies to give away; no such thing as dog-eat-dog since no one has the right to destroy anyone else's effort except through open and honest competition for customers.

This, and much more is what I mean when I say capitalism.
Comment: Where in this "social system" you describe is there a place for collective good? The capitalism you describe is fueled by personal fulfillment - and that's why it's so damn good. But we are social creatures - not just goods and services machines geared to exchange at optimal profitability.

We care about others in our societies. We help each other and support each other - often at a loss of time and energy, with no financial gain.

Many have said that business is about people. Where is this in your purist model?

Where is there room for those who care more about the collective good than personal financial advancement? By definition, society involves some measure of giving to the collective for the sake of personal satisfaction gained. It's a give and take.

We come together for security, community, commerce and capacity. We form states for personal gain (yeah capitalism) but this inherently involved sacrifice. In short, we must share - give back. I like to think that as Canadians, this is something we take pride in. Government is not forced tyranny. Taxation is neither slavery nor theft. We take much of our way of life from the bounty that Canadian society provides - safety, infrastructure, resources, amenities, health care, education, arts, etc. We give back (yes, painfully through robust taxes) in accordance with our capacity (more or less). It's all good.
My reply: That's an important question. To answer, we have to begin with a look at the basis of a social system. A society is not a system that stands by itself, but rather is a number of individuals living in an area, organizing themselves with a set of principles to guide their actions. For an individual, the guiding principle, if he is to survive, must first be to establish his own life and happiness as his standard of value and take all the actions needed to preserve and promote his life. An individual quickly recognizes that living in a society instead of on his own is a tremendous value, since it allows for a division of labour and exchange of values for mutual benefit.
For an individual to live his life he must be free to act on his reasoning, even if it turns out to harm himself, and in return he must be willing to recognize that everyone else in society has the same rights. In order for a society to protect the rights of all, a government is necessary, to which the retaliatory use of force is delegated (police, courts, prisons, military) and which serves as an objective arbiter of civil disputes (civil law and courts).

Business is absolutely about people - people who produce values trying to do so in a way that maximizes the value for their customers while creating value for themselves in exchange. An economic exchange only occurs when both parties agree that each will be better off after the exchange than before, thus a win-win is the normal expectation for all trade.

In a free society where rights are protected, every individual is free to create as much value for others as he is capable of doing. If he chooses to exchange his production at a low price and makes little profit, he will have little to use in the production of future value. If he produces at a loss, he will gradually destroy the value he has and also his ability to create future values. If he produces at a large profit he will have a lot of value with which to save and invest, thus increasing his ability to produce values in the future. It is this latter which is the path to a society of growing wealth, meaning more health, more choice, more education, more medical care, more literature, more travel, more charity and whatever else individual may choose as their values. In this sense, society advances only if the values created are greater than those consumed.

In a free society an individual is free to give away as much of what he has produced as he wishes, and there is no moral foundation for forcing him to give away more (or less) than he chooses. In practice, people of high productive ability living in freedom are very benevolent and usually use a part of their accumulated wealth to endow causes they are passionate about, from education to research, from the arts to entrepreneurship. It is only when people have their rights fully protected and are able to truly make choices that they full benevolence is enabled, otherwise they are acting under coercion and properly resent those doing the coercing.

In a rights-respecting society there is no need for sacrifice, which means the surrender of a high value for a lower value, or for no value. Just as it is not moral for me to sacrifice you for my wishes, so it is immoral for you to require me to sacrifice myself for your wishes. A proper society is not one of sacrifices at all, but one of voluntary cooperation.

Regarding giving back, in a society that protects rights people recognize that there is nothing to give back since nothing has been taken. Since free trade is a win-win exchange where both benefit, a man who accumulated wealth by creating value for a large number of fellow citizens has not left them worse off, but better than they would be without him. He may choose to give money away, but in no sense it there any moral obligation for him to "give back". Such a term may properly be applied only when a violation of rights has occurred, such as when a character like Robin Hood takes money from tax collectors and gives it back to those from whom it was taken under threat of violence.

Government in itself it not tyranny and taxation itself is not theft, but rather their methods may make them tyranny or theft. A government that violates the rights of the very citizens it is morally obliged to protect, when it goes far enough, is properly labeled a tyranny. Taxation that is exacted through the threat of seizure and imprisonment (force) is theft, whereas taxation through voluntary contribution to a government in exchange for access to civil court protections is fully moral. Rational people know that there are a few roles that only an objective government can perform, and would be willing contributors if their rights were otherwise protected. Consider this as similar to the military: only a military comprised of volunteers, not conscripts, is morally based. If a government believes that a particular military action is necessary to protect the nation yet it cannot raise enough volunteers, then clearly the citizens do not support the action. This same principle of non-coercion may be applied across the board to governmental actions.

Thus, we do not TAKE our way of life from Canada because Canada is nothing but a group of individuals acting together for mutual benefit, just like a corporation, a cooperative or another form of organizing large numbers efficiently. It is not possible for the people of a nation to take more than they produce, so the fundamental here is production, not consumption. A rights-protecting society in essence says "take as much as you want, and pay for it." It is the latter part that many people ignore or even wish to destroy - the part that requires that you PAY for your own way in life, and instead want to use government force to make others pay for their wishes and whims. This ideology leads to a society of mutual aggression and eventually the destruction of society - a la China, USSR, Vietnam, Germany, North Korea, Cuba, Venezuela, etc. Its dominant themes are aggression, force, compulsion, sacrifice, distrust, protectionism, regression, mean-spiritedness, pessimism, posturing, manipulation, cronyism, pain and fear. A society based on the protection of rights, meaning capitalism, is one of cooperation, benevolence, progress, happiness, freedom, confidence, respect, security and optimism. This is the type of society for which I advocate.

As a footnote, when did you adopt Marxism (from each...)? I recall a social studies course or two in CEGEP as being loaded with Marxist/collectivism/altruistic philosophy.

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