I recently had the chance to pick up “Capitalism, The Unknown Ideal” by Ayn Rand. I admit it is quite an audacious and confusing title. The Unknown Ideal? Don’t we live in a capitalist country? Doesn’t the Republican Party constantly advocate capitalism? Surely capitalism cannot be an unknown ideal, right?
One of the main things I have learned in my years following politics is: America is not a capitalist country, most Republicans are not advocates of capitalism, and many Americans hold misconceptions about capitalism. So I agree with Ms. Rand, capitalism is indeed the unknown ideal.
What don’t people understand about capitalism? It seems like capitalism is being blamed for so many things lately. It’s easy to hate capitalism, we are being told by so many that capitalism is to blame for most of our recent troubles. But the more I have studied, the more I have learned that capitalism is misunderstood, and certainly not to blame.
Here are some common fallacies about capitalism that I have come across. Entire books can be written about most of these fallacies, however, I will provide a brief summary.
Capitalism=Materialism
About a year ago I met an interesting young hippy girl. I learned that she was very active in free speech, and was posting her own stickers around town. One of them, she proudly told me, said “Merry Capitalist Christmas”. I was curious, “what do you have against capitalism?” I asked. She went on to explain that this greedy nation had forgotten the real spirit of Christmas, and that Americans now focus more on their material items. I had still yet to see how capitalism came into this. What she didn’t understand was that she was complaining about materialism, not capitalism. Capitalism is almost just another word for freedom, and with freedom you can choose to be greedy or charitable, materialistic or not. By talking with her more I later learned what she really hated was what some people were choosing to do with their freedom, not freedom itself. She didn’t want to take away peoples’ freedom. After all, isn’t it hippy cliché to love freedom? What is freer than capitalism? Maybe that is why many of Ayn Rand’s followers are called “Right Winged Hippy’s”. Or as I like to say rather, hippy’s who truly understand capitalism.
Capitalism=Depressions
You hear it all of the time. FDR’s new deal got us out of the depression, and capitalism is the cause of our current economic downturn. One of my favorite questions to ask people who really think these things are true is: Have you ever heard of the great recession of 1920? Of course you haven’t, but it existed. Why wasn’t it a major issue? Mostly because it was accepted and understood then that healthy economies sometimes have a bit of a hic-up. It is a good thing sometimes to have a recession. For example, sometimes when we go to the bank we notice that we may have an over drafted account. What do we do? We think ‘Oh no, I had better budget, and I had better start prioritizing what I should spend money on, maybe I shouldn’t have spent so much money on such and such’. And pretty soon, we implement a plan, and start to get our wealth back up to normal. This is very similar to what a more capitalist economy did during the recession of 1920. Soon the nation was back to speed, and saw its best yet economic decade. Now let’s imagine that we decided instead to not make any changes and just pay our over draft with a credit card. Would that fix the problem? Or would it be just be postponing it and making it worse? Unfortunately, America is now doing that with the BushBama stimulus plans.
One of the best ways to articulate that capitalism is not to blame for our current recession is to mention, once again, that American is not a capitalist nation. Capitalism means free markets; free markets cannot exist as long as the Federal Reserve Exists. Basically what the Federal Reserve did was give investors a false bank statement, one that didn’t let them know that they have over drafted, so they didn’t adjust their budget or production properly. Usually investors know when it is not a good time to invest because the bank will have high interest rates. But what the Federal Reserve does is force those interest rates down, when they should actually be high, by giving banks money.
So we see that it is actually government intervention, not a lack of government regulation, which is responsible for making such a terrible recession.
More to come in Part 2
Sweet blog! Love the premise. I have a few questions. Could you go into more detail about the 1920 depression? Were the circumstances comparable to the Great Depression?
ReplyDeleteAlso, could you go into what you mean by capitalism almost equals freedom? It'd be helpful if you clarified what you mean by capitalism too, ie if capitalism isn't materialism, what is it?
Very interesting perspective. I must say I'm usually one who see's the negative in capitalism. Not that I don't notice the advantages of a capitalist economy or society.
ReplyDeleteI enjoyed this line, "Capitalism is almost just another word for freedom, and with freedom you can choose to be greedy or charitable, materialistic or not."
I think it is a good argument for capitalism. It almost seems to be saying that the accountability for the failure of capitalism is not in the nature of the ideal itself, but in the people who incorrectly advocate it.
If I've understood this correctly, allow me to say that it also seems to be at the root of the problem with capitalism. It relies heavily on trusting that individuals will do the right thing if given total freedom. If you happen to be privileged enough to control some of the scarce resources of the planet, lets hope that with the profits you make and the success you obtain, you'll remember those less fortunate. Which I suppose is part of the reason why social responsibility exists. But the very fact that social responsibility is needed, shows that capitalism, if left unchecked can lead to highly unethical practices at the expense of society.
Despite my views, I would like to hear more of your perspectives on capitalism. I value what you have to say, and from my experience with you, I think you can be quite insightful.