A Fan of Freedom

I’ve had an interesting series of conversations recently with people that are coming down hard on capitalism. The argument was that this evil system of economics is directly responsible for the current global economic downturn.* There’s two things interesting about this argument. First, none of the people I spoke with seemed to understand what the word “capitalism” means. Second, it is the very features of our system that defy capitalism that led to this mild mess we’re in.

What is capitalism? Simple. It’s the economic freedom of all people. Seriously. Wiki it. And hurry, before somebody edits my entry.

All capitalism means is that the people own their own stuff. We can possess our own land, we can start our own business, we can determine the price of goods we create, and we can enter into binding contracts with one another. That’s it. This is a system that creates economic freedoms of potential (if not outcome). How can people be against freedom? Because they don’t like the choices other people make and would really like to have complete control over someone else.

Before we get into that, let’s talk about why the US economy goes through a constant cycle of boom-and-bust. It’ll also explain how very un-capitalistic our economy is at the core. That’s right, the most basic and fundamental elements of any capitalist economy do not exist in the United States. And that’s the value and valuation of currency.

A side-note on what money is, for those that seem to hate or distrust it. Money is a token used to represent work. It’s the stand-in, the go-between, for a cobbler and a butcher. One man trades shoes for another’s sausage. Even when they don’t need each other’s wares at the exact same time. Hating money is like hating trade between two free peoples, or hating the idea that a person’s work has any intrinsic value. I usually find that people who hate money are misplacing their hatred of greed (or expressing their own envy and materialism).

When the Federal Reserve tinkers with interest rates, they alter the valuation of money. They dictate what a dollar is worth, rather than allowing the markets to decide (read: “people” for “markets.” Same thing). When they want the economy to go into a boom phase, they lower interest rates. To zero, if need-be. What is the effect of this government interference in the market? People learn that they are fools to save. Money in the bank earns no interest. Besides, money is so cheap to borrow, you’re crazy not to grab as much as you can and gamble with it somewhere. If you can buy a tech stock, or flip a house, or move some Florida property and make an easy 15%, well you’re borrowing at 5%, so you might be insane if you don’t jump onboard.

By aiming for economic excess, politicians that know nothing of economics create a boom that will later correct itself. People applaud the booms as if they’re good things, but they are the problem. Downturns and recessions are the solution.

Here’s what would happen in a purely capitalist economy: A new investment fad pops up, the tulip-craze of the decade. Fiscal idiots (the first to react. Always) rush to their banks and borrow tons of cash to invest in this fad. The interest rate, which had been at a sensible 7%, begins to climb. Why? Because demand has gone up and supply has gone down. Money is being borrowed at a faster pace as these early-adopting bozos grab cash at seven and make fifteen on the second wave of suckers. But, as the rate climbs all the way up to 12% or 15%, the margin disappears on the wild investment. There’s no easy cash to be had. However, since rates went up, moderately minded fiscal rationalists flock to the bank to save away their cash. Now they are making an easy 5% or 7% on the backs of the gamblers.

With a floating interest rate, all booms would temper themselves before fiscal conservatives found themselves tempted to join. The saving rate would be much higher, and we would enjoy slow growth, rather than a boom and bust cycle. The Federal Reserve knows this and they attempt to perform the movements in rates themselves, but a quarter jump every three months, when what we might need is a five percent jump overnight, creates a problem. And, this highlights what anti-capitalists miss. We live in a MANAGED economy. A PLANNED economy. It is the un-capitalist features that get us in trouble.

“But what of the Bernie Madoffs and the Enrons?” you might ask. To which I say, “What do those people have to do with economic freedom?” That’s like saying human liberty sucks because some people commit murder and others steal. There is nothing capitalist about robbing people. That’s a violation of someone else’s economic liberty. Any trampling of someone’s liberty should be punished, just like any other violation of the law. This also goes for insider trading, collusion between government and business, subsidies, tariffs, inequities of taxation, etc… None of these are features of capitalism; they are the antithesis of it!

The current thinking on economic freedom seems to be this: Human liberty occasionally results in abuses of human liberty. Free people often use that freedom to trample the freedom of another free person. In order to make sure the latter has freedom from the former, we need to remove ALL human freedom. That is, in order to make sure nobody murders anyone ever again, we need to all be locked up in our individual cages. This is what’s best for mankind.

That’s the argument being made by otherwise intelligent people these days. The only way to have economic freedom is to remove it from everyone. Place it in the hands of a few, even though the power they already wield is the very thing that got us in this mess!

I have a better solution. Let’s fight to ensure that everyone has as much economic liberty as possible. Any violation of that liberty will be prosecuted with extreme justice. Let’s not bail out big banks, but leave them free to fail. Let’s not bail out the auto biz, but leave foreign car makers free to out-do us. Let’s not tax goods from other countries, but leave them free to prosper if they can out-compete us. Let’s stop paying farmers to not grow crops, let’s get rid of the tax incentives to have big houses and lots of babies, let’s let interest rates go up so we’ll learn to save, and let’s allow gas prices to soar so we’ll learn to walk.

And let’s stop being so envious. The very people who say, “Money can’t make you happy,” seem to be the ones miserable over other people’s wealth. Who cares if a board gives billions of dollars to a CEO? Let that guy ruin his life with cocaine and Ferraris wrapped around telephone poles. If those billions were generated by free people willingly purchasing billions of iPods, the board can do whatever they want with it. Stop being motivated by envy. Prosecute those stealing, whether it’s your cubicle-neighbor taking office supplies or Bernie Madoff building a pyramid. Learn to distinguish between freedom and tyranny instead of assuming it aligns with losses and profits.

Remember: Capitalism is synonymous with human liberty. Freedom for the little people. It’s something we could use more of, not less. Seriously, Wiki it. And hurry.

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*Okay, I typed “crisis,” and then deleted it and used “downturn” instead. It’s hard to be both a pessimist and a historian. Ten percent unemployment? That’s what many European economies have as a baseline in the best of times. And everywhere I go, people seem to be overweight and lugging shopping bags and babies. Sorry, but I use “downturn” loosely.

COMMENTS (50)

Good stuff. I’m going to link to this from my blog with some additional comments. Should be up later today. Thanks for your thoughts. lgp

Nice write up – can’t agree more.

As a proud card carrying member of the Libertarian Party you brought a tear to my eye. Well said.

Those economic “freedoms” would lead to even greater redistribution of wealth, making countless millions of people dirt poor. What’s worse is that the little positive effect from removing unintended or unavoidable effects of regulation will be far surpassed by the negative effects. The effective production requires effective planning. It is naive to expect the “invisible hand of market” to take care of balancing of all the requirements that go into supplying your favorite store with appropriate amount of something as complex as a modern computer or something as simple as a loaf of bread. So, in summary, by following suggested recipes not only the goods will be distributed even less fairly than they are today but also the total amount of goods will decrease.

The sad thing is that such basic economic concepts are widely missed by general public. I’ll refrain from speculating why that is so.

I think you and I would agree that there’s progress to be made. Where we probably differ is that I am stunned by all the progress that has already taken place. Look at any slice of time: 10,000 years ago, 5,000 years ago, 1,000, 100, 50, and people were worse off. The distribution of wealth is far better today than it was hundreds of years ago when kings owned everything and could take whatever they wanted. It’s better today when you consider that minorities and women have economic rights unheard of even 50 years ago. When we compare GDP and “households” we tend to ignore the fact that what’s considered a “household” has changed. Single women are now in that equation, as are minorities who couldn’t own much 100 years ago.

I hope things get better, but I also appreciate that they’ve never been this good. People who pine for a “richer middle class” from 50 years ago forget that this middle class was exclusionary, and therefore false. And the link between standards of living and economic freedom are too well documented to any longer doubt the causal relationship.

Besides, what’s the alternative? People can’t own things? They can’t enter into binding agreements with one another? Those are the two foundations of capitalism. Take either or both away and you have privation, starvation, environmental disasters, and violence.

As far as I can tell, anyway.

I might agree that distribution of wealth is fairer today in USA than it was 100 years ago. Not so sure about today vs. ten or twenty years ago. Also not sure about changes worldwide during any period of modern history. As a counterexample, Soviet Union had arguably fairer distribution albeit at the expense of badly inefficient production. And going far to the past, the Stone Age communities were surely more fair than what we have today with respect to the distribution of goods within the USA or worldwide.

Be that as it may, the issue of the _progress_ in how we share goods is really tangential to your original point of more economic freedom as a cure for capitalism’s ills (hopefully, I am not misstating your point too badly). What’s your argument for _more_ economic freedom? When you write “… Those are two foundations of capitalism. Take either or both away…”, you are making circular argument, like “capitalism is good because without more of it, things are not as good”.

The real question is what _would_ happen if you were to make economic system less regulated. I don’t want to sound like I know the final truth, but it does seem fairly obvious to me that everyone on average will be worse off and majority worldwide (particularly, USA and Europe) will be much worse off (economic regulation is intended to flatten the distribution curve and increase production , at least within a single country). If you disagree, I’ll be very interested to hear your arguments.

Lastly, how about a devil’s advocate question. What’s so bad about people not owning capital goods (=means of mass production)? Soviet economy failed, sure, but did it fail because of inherent problems somehow related to property ownership or because the mechanism responsible for planning was insufficient for the task? Computers and simulation software do get better exponentially. Perhaps by now or in a near future we would not have to rely on brownian (and inherently lossy) motion of open market. Personally, I certainly do not appreciate working on research projects that I know for certain being done in parallel by competing organizations. What a grandiose waste of time!

If you have an interest in continuing this discussion but do not want to flood the blog, you have my email. On unrelated subject, I am very impressed by your stories. Thanks very much for writing them!

Haha! I don’t mind flooding my blog. I love this sort of discussion.

The problem with people not owning capital goods is that they won’t be motivated to improve their lot in life. There are psychological factors that cannot be ignored. Expecting humans to be motivated, every day, year after year, by any force other than self-interest is a recipe for disaster. It always looks good on paper, and the truth is often distasteful, but operating on wishes and hopes led to 100 million people starving in Europe. It led to the first American settlements foundering. Game theory has quantified these results; there’s no longer any debate among sober behavioral scientists. And I’m often dismayed that the people who labor to create social and economic policy have not studied, even for a minute, the minds and behaviors of the people who will make up that system. They seem to think we’re all blank slates, and if the system is engineered correctly, the cogs will spin just so. That’s never been the case and never will be.

I’m not against economic regulation. I like rules. Don’t kill each other. That’s a good rule. That’s a rule that enforces liberty for all while taking away a liberty (murdering) from a few. I tried to make this explicit in my original post: Freedom doesn’t mean the freedom to trample on people; it means the freedom to not be trampled on.

For instance, I don’t think companies should be allowed to pollute. That’s environmental regulation. Why? Because they are damaging what does not belong to them. When pollution belches up into the sky, someone is taking away my freedom for clean air while they make a profit. Saying this is economic freedom is like saying that rape is “free sex.” Or robbery is “free money.”

A free economy requires rules. I’m not an anarchist. If you create a Ponzi scheme and cheat others, you should go to prison. If you commit insider trading, same thing.

Where the controlled economy we live in has failed us and created economic disparity (what little there is), has been in the least capitalist areas of the economy. A controlled interest rate means low borrowing cost for speculators to gamble and try to get rich quick. It means less revenue for savers. I’d rather see a borrowing rate that floated according to supply and demand. Take government meddling out of the most fundamental of our economic forces, I say. The boom and bust cycle this meddling engenders hurts the middle and lower class. The entire housing snafu was created by low interest rates. Same for the tech stock bubble. And every economic bubble before that.

Finally, I don’t measure economic progress by equality. It’s debatable whether stone-age people were more equitable in distribution of resources. Even in the cases where they were, is that really a good thing? Is being equally poor better than everyone being better off and some being MUCH better off? I feel like we let our envy cloud our judgment. I’m happier being poor in a wealthy society than being equal in a poor one. In the United States, our lowest quintile has it damn good. Better than many of the wealthiest from the past. Isn’t this progress? Or is it “keeping up with the Joneses” that should rule our tempers? Most people emotionally go with the latter, which is sad to me. It doesn’t bother me that some people have billions of dollars. What shines in my eye is how few people starve to death in the United States. How few children are forced to work. How many educational opportunities are there (even though many choose to ignore them). Comparisons between ourselves should count less than comparisons between our historical counterparts. In my opinion, at least.

When people work 40-hour weeks to make $30,000 a year, while someone else can work the same week and earn $30,000,000, wouldn’t you say that’s ‘de-motivating’ for the person earning 30K? I mean, you COULD claim that knowing they could earn 1,000 x more would be motivating, but not when the United States has the lowest social mobility in the whole western world (and least regulated economy. Go figure). If you’re down there, likely you’re staying down there.

So much for the American dream.

I support higher tax rates for higher earners. Over 5 or 10 million, I would love to see a return to a 70% tax rate. Over 50 million, I would go as high as 85%. Incentivize those people to pay higher wages or lower their prices rather than take the pay (or collect taxes on them).

OK, The problem is no one earning that kind of income receives it as “earned income” they usually receive it as “dividend income”, and that is taxed at a much lower rate. Dividend income tax rate will never change (only to a lower figure if the TOP has it their way).

Your view is either mistaken, or you are not explaining the whole thing to readers.

Advocating private Capitalism on one hand, then supporting big Corporations(the TOP) on the other hand(Zon buying GR). Which is it sir?

WOOL over peoples eye’s indeed.

I don’t see the conflict. Private capitalism isn’t allowed to grow? How is Amazon not largely the product of one man’s (Jeff Bezos’s) vision? How is he not allowed to purchase another man’s (and wife’s) creation? People shouldn’t be allowed to go into contract with one another? Government (or you) should be allowed to say when something has gotten “big enough”? How do you supposed this should work? Honestly asking.

Being motivated by self-interest does not correlate with owning capital goods. I agree that self-interest is a very important motivator but it does work just as well in other economic systems. I suspect it worked well even in Stone Age :)

Not being economist by training, I can’t even pretend to understand the complexity of regulating economy. Taking about current events, I can’t pass judgement on whether controlling interest rates in a specific way it is done for the past 5 or 10 years is more beneficial or more harmful. I do think that in the long run, such economic controls (money flow/supply, interest rates, equalizing taxes, subsidizing unprofitable endeavors) are absolutely necessary to prevent formation of impoverished working class and formation of the impoverished regions. Middle class proliferation is not a natural consequence of capitalism. Rather it is a product of non-economic regulations that you seem to dislike. So by letting them go, you’d create something far more unpleasant than some minor snafus of housing/tech stock bubbles. You’d impoverish middle class into proletariat. I did see that with my own eyes: hyperinflation, shutting down production not by measly few percent of GDP but by tens of percent, disappearance of basic products from the store shelves. All because some misguided people really bought the idea of completely free economy as a proper way of doing things.

I fully agree that economic health should not be judged solely by equality. Furthermore, there certainly should be inequality in wealth distribution. People differ in how gifted and driven and capable they are. No logical reason to equalize them. I also agree that I’d rather be 2X richer even if everyone else gets to be 3X richer. However, there is a saying which I think is very true: it is shameful to be rich when the whole society is doing badly and it is shameful to be poor when the whole society is doing well. It is not about envy, I personally could not care less how rich are the various “captains of industry”, CEOs, etc. However, having met some of them and having seen the fruits of their labor, I do think that, objectively, they are not being compensated appropriately for what they do. Heck, when I look at per household income in US, I can’t help thinking that I myself being paid too much. In my opinion, we all need to be more productive, making more and more of good stuff (including books, of course) and being compensated somewhat more equally.

Lastly, I also agree that “Comparisons between ourselves should count less than comparisons between our historical counterparts”. However, we seem to differ on interpretation of that statement. Just as you say, even poor people in USA enjoy relatively high standard of living relative to majority of human race. So “comparing between ourselves” (ourselves meaning contemporary people) should make everyone here happy if envy is a major driving force. In contrast, making historical comparisons is not as rosy for people in USA. I have a feeling that the absolute living standard has gone down in the past few decades despite all the shiny high tech toys that continuously appear. Furthermore, I personally expect the decline to accelerate in the near future due to emergence of new economies of China, India, etc. Hopefully nothing catastrophic, just slow decline and eventual “soft landing”.

Oh, I think the emergence of China and India will only make us wealthier. Economics is not a zero-sum game. The more people you have to trade with, the wealthier everyone becomes.

A professor of economics performs this exercise for his students each semester: He has them come in with a pocket full of doo-dads and knick-knacks. The kids put these out on their table and walk around, inspecting the items everyone else has. They are free to trade as often and as much as they like. Since the only trades that take place are those in which both sides feel that they are getting a good deal, everyone leaves the classroom “richer,” even though the same amount of “stuff” leaves as entered. Wealth is derived from the exchange of goods and services. Those no real need to “make” most things. They are just there for utility, to derive pleasure from, to make people happy.

I agree that we are mostly overpaid. My solution would be to have everyone work less and do with less money. Move to a 32-hour work-week. Three days off every week for everyone. Unemployment would go down, wages would go down, and we could just ask everyone to do with a little less. I think the increase in leisure time, family time, reduced driving, etc… would be a net gain for our economy.

Would you not agree that personal wealth is about possession of material goods and resources, including but of course not limited to money? If so, wealth is not created through the exchange of goods, it is only redistributed. I am not sure I understand the purpose of the exercise you mentioned; it does not seem as a good model of wealth creation. It follows that the emergence of China and India and other countries as equitable participants in sharing of the “pie” would substantially decrease average personal wealth of everyone in USA. It is simple really: the production of goods increases only slightly (those people already working hard and fairly efficiently) yet the distribution shifts a lot more – people paid material equivalent of say $10 a day would get order of magnitude more, hence leaving dramatically less “wealth” in the pool.

Your proposal to work less and do with less money is a nice dream, which I share. I really wish it were possible for everyone, even within one country. In fact, the increase in leisure/family time is a very good _measure_ of a social/economic progress. But it is not a _source_ of economic progress. For the whole country, decreasing total labor by 30% is done would be catastrophic. It is like a bottle of water that one tries to keep from freezing: if it hovers few degrees above freezing with certain amount of heat supplied, reducing the heat by relatively small amount would result in greatly disproportionate response – water freezes, bottle breaks. I think that US economy is just a few degrees from breaking, and the government is desperately trying to at least keep the status quo. The rising retirement age, decreasing (used) vacation time, increase in actual work time are all very troubling signs…

Denis: Thank you for your wise contributions here. I agree, and I think that you bring in good examples.

Thank you also for your tempered and thoughtful language. Online discussions often turn into polarized shouting fests where one side flings extremes at the other.

The not so hidden hand

Fuck wikipedia, read books on economics at least to degreee level, then speak:

Capitalism (theoretically) is the most efficient economic system.

It is the most efficient economic system by rewarding more to those more powerful/capable (ie those that can claw it from the system itself).

What capitalism is NOT: It isnt fair; And it isnt meant to be, even from a theoretical point of view.

It allows and encourages letting people die if they cant claw their basic needs from the system by themselves, and also allows and encourages the richness to concentrate on the already rich and powerful.

Whats more: things like justice, law enforcement, diplomacy, armies at the national level, universal education, universal healthcare, in in general minimum welfare standards for all wouldnt even exist in a pure capitalist system, even from the theoretical pov.

Now, public intervention and the public sector ARE needed even for capitalism to exist. The problem is when the public sector intervenes the capitalist system beyond a) what is needed to ensure it can continue to exist and b) provide the things that are good for a society as a whole that capitalism wouldnt (or wouldnt provide enough of); which, frankly, doesnt have much to do with what the public sector is actually doing right now, in your county and in mine…

“What capitalism is NOT: It isn’t fair”? So, in other words, capitalism isn’t NOT fair, ergo, it IS fair. Perhaps you ought to read books on English grammar to at least High School level prior to posting your thoughts and expletives on forums. Twat.

p.s. Apostrophes puh-leese!

The semi-colon allows an independent statement. It would be like saying, “One thing I don’t like: Chocolate ice cream without sprinkles.” There are two negatives: “don’t” and “without.” This doesn’t mean that I enjoy chocolate ice cream sans sprinkles. It means that I’m about to tell you something that capitalism isn’t, and then I proceed to tell you.

I like repetition in my sentences, sentences that allow me to add emphasis by re-telling some bit or bring some subject to the reader’s attention twice.

Mr Howey.

First, the comment wasn’t directed at you but rather to the foul-mouthed “Not so hidden hand”. I think your piece on Capitalism is extremely well articulated and I for one will certainly be shamelessly nicking your eloquent arguments for my own purposes.

Now to the question of semi-colons. Both you and the ‘apostrophe bereft’ previous poster have in fact used colons, not semi-colons. As I’m sure you know, a colon is used before an explanation that is preceded by a clause that can stand by itself. “Capitalism is NOT” does not stand on its own as an independent clause.

Citing your own example, one could also happily use both negatives in one sentence to say, “I don’t like ice cream without sprinkles”; the meaning is clear. Whereas, saying “Capitalism is not not fair” implies the opposite, that indeed it is fair.

I do agree that the use of repetition in sentences is a fine tool in a writer’s armoury, when used correctly, which you do. But we must agree to differ that “Hand” has used the device correctly.

On the subject of grammar, your frequent use of ‘drug’ as the past tense of ‘to drag’ in Molly Fyde has been a minor annoyance; it should be ‘dragged’: she dragged (not drug) the body out of the air lock, for example.

However, I stress the word ‘minor’: you are a fine author that has brought me many hours of joy for a ridiculously small sum of money and for that, I offer you my heartfelt thanks. You have an immensely successful career to look forward to.

Thanks, Fred! Funny, I assumed without looking that the comment was directed at my own crappy grammar. I make no excuses for my mistakes, just attempt to explain my reasoning behind them. :D

GREAT blog!

Thank you for finally making it very clear. Capitalism is not evil and promotes the individual. Great Blog

Interest opinion, but Karl Marx was and still is considered the best descriptor of capitalism. I will not try to redefine it. Anyone who is interested in this subject can and should read Marx and others. But referring to capitalism as freedom of ownership is like suggesting that the US invented democracy. Or is it that you also believe this second “fact” too (as suggested by so many politicians in your country)?

Ownership did not wait for capitalism or even modern economics to be. The history of colonialism (I do not dare going too far in the past since for some, there was no history before 1786) shall be a good illustration of this.

Cheers

E

This comment is slightly off topic from the discussion on capitalism, but I was impressed with the level of detail you provided on Silo 18’s economy in Wool. For several years it has been my belief that the United States has strategies and plans which are broader than our two party system and four year presidential election cycle would lead one to believe. It’s part of what I found so interesting about the fictional world of Wool.

Are we in a crisis or downturn? It does seem our capitalist-based society is stumbling and perhaps because it currently relies too much on debt. I think it’s fair to question the wisdom of allowing much of the United States manufacturing to be outsourced. I can think of two reasons this was attractive. It provided access to other country’s natural resources, including rare earth elements and it was supported by and supported the US dollar being the world’s reserve currency. Probably the single most important resource needed by the world and traded in US dollars is petroleum. As the easy-to-reach petroleum declines, I suspect alternate technologies such as the type of fusion first demonstrated by Martin Fleischmann in 1989 will be utilized. Only recently have I started seeing articles published again about Fleischmann’s form of fusion and how independent labs are having success documenting more heat is being produced than the energy input. I remember President George W. Bush during a State of the Union speech warning the Middle East we would soon begin using all technology at our disposal to end our dependance on oil. Such technology may not be as constrained by natural resources and may speed the end of the US dollar as the world reserve currency. While this would be a strong negative for the United States economy, benefits could include the return of manufacturing to American shores and inexpensive, non-polluting energy.

It’s not possible to say for certain if the U.S. plans far in the future, but given the political rhetoric we see today, I certainly hope so.

This is so refreshing to read. I’ve been trying to explain these same principles to many of my angry friends who are pro-government regulation and who are so anxious to give the government more power over everything and everyone. There seems to be a disconnect in the minds of many people between all the failed tyrannical regimes and what direction they want our country to go.

While we were pushing the government out of its tendency to tamper with the free market and mess it up, lets also end the war on drugs, childhood obesity, the war on terror, and all those other wars designed to limit liberty and extend the reach of our current nanny-state.

Oh my gosh, Hugh. In preparation for this Thursday, I looked for your website and going through it found this article which intrigued me. Bringing me from outer space down to earth… You said so well what I’ve tried hap hazardly to explain to some people I know, but it just can’t be stated easily, and I see why in your comprehensive article, which makes all the right points. Thanks for writing this. Now I know where to send people who need a coherent explanation of the best thing about our nation.

After reading your original post, I think that you are advocating deregulation which would lead to a more free market, which would lead to more cautious and safe investors, which finally trickles into a happier society. If that is right then I cannot agree with deregulation. This global “downturn” was a direct result of the removal of regulation, most notably the Glass-Steagal Act. It prevented domestic banks gambling with savers money in the same way that investment banks do. That allowed lenders to invent the sub-prime mortgage and to sell insurances on those mortgages. That bad debt simply escalated until it finally became unsustainable. If you deregulate the market you only allow those investors with the most influence and the least social conscience the opportunity to maximize their profit. And financial profit by its own definition fails to consider the hidden or immeasurable costs that are met by people and their environments. Also, if you see too many fat people with babies to call it a depression, then I would attribute that to fast food being the cheapest and there being little else to do when you’re out of work than procreate. I’m reading Wool with a different perspective now. Thanks for the post.

Thanks, Mike, for your clear and succinct rebuttal of Hugh’s post above. I agree that it is BECAUSE of recent deregulation that we are in the fix we are in.

I don’t think capitalism is evil at all — I think that pure capitalism is every bit as destructive as too much regulation. I would be interested in whether Hugh thinks that laws regarding civil rights and reproductive rights should be left entirely to a free market. And where he draws the line between what he considers a Ponzi scheme and insider trading versus “free” business relations. I don’t think those distinctions are so easily made. My Ponzi scheme might be your Amway distribution business or Mary Kay cosmetics line.

I don’t see scams as “free market.” Just as I don’t see “murder” and “theft” as the freedom of the killer or thief. If you are trampling the rights of another human being, even by deceiving them out of money, that’s not freedom.

This is the weird thing about Capitalism: We associate the non-capitalist abuses as inherent parts of capitalism. That’s like saying 9/11 is the result of too much freedom. If all people were locked up, 9/11 wouldn’t happen. That’s a poor argument.

We should have free markets and punish the hell out of those who steal, cheat, embezzle, mismanage, etc.

And of course I’m for human rights. Capitalism simply means the freedom to own goods and engage in free contracts. That’s it. It is to human liberty what democracy is to government. That doesn’t mean anything goes; it means the freedom of all is preserved. (And yes, that’s hard to achieve fairly. It’s an ideal).

Hi! As a highschool learning about economics and as an avid reader I’he seen way too many authors and celebs who are (ironically) anti-capitalist. It’s so great that an author like you understands capitalism and supports it. Thanks for this post!!
Ps– I can’t wait for 3rd shift, so please hurry!! ^_^

Thanks! I’m hurrying! :)

Hugh,

This is an interesting article but I disagree with one your arguments: The CEO who gets a ton of money as salary is actually robbing the company. I’m assuming that this is a publicly traded company and, as such, can issue dividends which benefit all stockholders, big and small.

What these bonuses and high salaries do is bleed the company of a great deal of profit before dividends are issued.

The higher-ups are taking exorbitant salaries, much more than they’re really worth (a look at the salaries of managers 30-50 years ago is proof enough of this). In this way, though they may hold a small share of total stock, they get a much bigger dividend, in the form of bonuses and salary and perks, even when their policies lead to financial ruin for the companies they run.

So, the higher-ups get rich while small shareholders get screwed.

I think you are confusing freedom with privilege.
As Bakunin put it: “The freedom of all is essential to my freedom.”

As for the “mixed economy” model which is currently practiced in much of the world – theres a reason for it: All out capitalism turns to disaster pretty fast. Chile tried something like it(on council from Friedman) a brief period, but had to turn back to “state-corporate capitalism”.

Personally I think that when(or if) humanity grows out of its teens and gets over this whole property thing, then things will finally settle, and we can go places – Star Trek style! :D

It’s a nice thought. We have to overcome millions of years of evolution, first, which I don’t see happening.

The alternatives to private ownership look lovely on paper. They have never worked. Nice to have hope, though! :)

Loved this blog….well said!!!

Awesome blog! I wish this style of thinking was more the norm, but people nowadays have their heads in the sand when it comes to our economy. END THE FED!!! (heh!)

Keep up all the good work. You’ve skyrocketed to the top of my list of favorite authors.

Lemme get this straight– you’re not only an amazing writer whose “Wool” stories have made me relapse back into Sci-Fi, hard (it’s like my heroin…), but also a Hayekian? Is this real-life? If not, don’t bother taking the visor away from my eyes. I’ll just lie on this hill side.

I sensed your Hayekian tendencies in reading Wool and thinking about how the Pact-makers and their IT-proxies “solved” the “knowledge problem” by eliminating BIG human liberty while leaving minor vestiges of freedom to placate the masses, but I did not realize you were a total philosophical Hayekian to boot! (And, at this point, I bet you’re feeling uncomfortable or annoyed with being labeled “Hayekian”. Sorry, bro– a duck is a duck).

Kudos to you, and keep up the great work! You’ll have me coming by your street corner in Amazon for more hits of your “smack” until I get through all of it.

Guilty. Mostly. I have a lot of respect for Keynes and his ideas as well. The two blokes were not as far apart as their followers are today. :)

There is one good thing about Marx: he was not a Keynesian. – Rothbard

: p

Hugh, finally read Wool Omnibus! Can’t believe I left it on my Kindle that long! Should have realized that the author would be do level headed. Couldn’t agree more- wish the Fed and our lying cheating pols would stop “managing our Legacy” cauz there will be nothing left if they keep it up!

Keep fighting the good fight!

Hugh said, “I’m not an anarchist.”

Oh well. Nobody’s perfect. ;)

Thanks for an amazing series! Just got turned on to Wool the other day, and I’ve devoured all of it! MOAR PLEASE!

Thanks,

Your latest anarchist fan. :)

I know I am so late to this party but:

**slow clap**

Awesome blog post,

Uh, a pro-capitalist scifi author. Hugh Howey is defending capitalism and essentially stating that capitalism would “work better if it were purer and had less mysterious institutions tweaking interest rates and bailing out bad guys”.

All the cutting edge research into modelling capitalism, all the recent computer simulations mapping the flow of money, point out that “profit” itself leads to massive poverty, inequality, bankrupcy and booms and bust. Magical pure capitalism, without banking cartels and Feds, leads to exactly the same thing as contemporary western capitalism. Indeed, these institutions merely formed by necessity to keep the whole evil game from collapsing; they spread the damage across countries, economies and markets to prevent systemic collapse.

Secondly, capitalism hinges on the private creation of money. This money enters the system by being created for profit as debt at interest by private (central) banking cartels. As all global debt thus always outpaces money available on the planet, capitalism must always be in a state of expansion, as it tries, with futility, to kill debt. This is impossible and leads to massive poverty (80 percent of the world is living on less than 10 dollars a day) even as it leads to massive production. Capitalism can only ever be a giantponzi scheme in which loans must be taken out to pay unpayable debts, leading only to more debt, and more production and more consumption to keep the ponzi from collapsing. This, of course, leads to environmental collapse and global heating. Whether money creation is privatised (as it is now) or state controlled, the outcome is the same.

Finally, money has value because it is scarce. Your dollar is worth somthing because someone doesnt have a dollar. As Thomas Edison recognised years ago, this is itself violence.

There’s a reason all the great SF writers mock libertarians, capitalism and nutty right wingers. It’s the global religion and deserves dethronement.

HughHowey said “The alternatives to private ownership look lovely on paper. They have never worked.”

Over 90 percent of the world has no “private ownership” of land, the rest are knee deep in morgages. Under capitalism (see the recent computer simulations of Peter Victor), all land and assets must eventually be owned by fewer and fewer.