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Showing posts with label capitalism. Show all posts
Showing posts with label capitalism. Show all posts

Wednesday 16 August 2023

A level Economics: Conservatives are attacking Capitalism

The Economist writes about four new books that show how the reactionary right and Luddite left have converged

A man hitting a punching bag in the shape of a top hat
image: francesco ciccolella

2. Tyranny, Inc: How Private Power Crushed American Liberty—And What to Do About It By Sohrab Ahmari. Forum Books; 288 pages; $28

3. Regime Change: Towards a Postliberal Future. By Patrick Deneen. Sentinel; 288 pages; $30. Forum; £22

4. Decades of Decadence: How Our Spoiled Elites Blew America’s Inheritance of Liberty, Security and Prosperity. By Marco Rubio. Broadside Books; 256 pages; $32 and £20


Two decades ago Johan Norberg, a Swedish liberal, wrote a bracing polemic called “In Defence of Global Capitalism”. Leftists hated it and sniffed that he was “on the ‘crazy right’”. Now, when he makes exactly the same arguments, people on the right accuse him of being “woke left”. “I’m not the one who’s changed,” he writes.

The angriest critiques of global capitalism come increasingly from the populist right. This is true in several Western countries, but especially so in America. Republicans used to extol the benefits of free trade and free markets. Now, following Donald Trump’s lead, Republican candidates demand higher barriers, especially to goods from China, and berate corporations for their “wokeness” in supporting greenery and diversity. Four new books illuminate this shift, which fans of economic liberty find alarming.

Their critiques target two villains: corporations and liberalism. Sohrab Ahmari, a socially conservative Iranian-American journalist, is part of the anti-corporate crowd. In “Tyranny, Inc”, he claims that we live in “a system that allows the asset-owning few to subject the asset-less many to pervasive coercion—coercion that, unlike governmental actions, can’t be challenged in court or at the ballot box.”

Many of his complaints sound lefty. Amazon uses intrusive cameras to monitor its warehouse workers; other firms snoop on their minions’ private emails and web browsing. Employers set unpredictable working hours, which staff cannot easily refuse because they need to put food on the table. Life for the bottom 50% in America is precarious, stressful and unjust.

Other complaints reflect Mr Ahmari’s social conservatism. He disapproves of unpredictable working hours partly because of their effect on family life. He rages that woke corporations such as Disney and American Express “train” workers to accept controversial progressive ideas on race and gender.

He is a deft storyteller. A favourite trick is to describe some terrible injustice as if it occurred in a dictatorship like China or Iran and then to reveal—hey, presto!—that it happened in America. He highlights genuine injustices, such as the way some firms abuse gag clauses, non-compete agreements and the arbitration process.

His analysis, however, is flawed. Private firms in America have far less power over workers than he claims. When they behave abusively, they are often challenged in court. More importantly, with unemployment at 3.5%, disgruntled employees can credibly threaten to quit.

To tame corporate tyranny, Mr Ahmari would supercharge the state. It should encourage unionisation in every sector, play “a far more active role in co-ordinating economic activity” and require financial speculators who buy a company and want to change things to submit to the veto of “workers, local communities and other stakeholders”.

This is a recipe for slower growth and less innovation. Indeed, it is often hard to distinguish Mr Ahmari’s economic proposals from those of Elizabeth Warren or Bernie Sanders on the Democratic left. Yet he thinks his mix of social conservatism and economic populism is the future of the Republican Party, helping it win elections long after Donald Trump has retired or gone to jail. He may be right. This was the calculation made by jd Vance, who first rose to prominence as the author of “Hillbilly Elegy”, which explained the plight of America’s forgotten white working-class, before he ran in Ohio for a Senate seat—and won.

In “Regime Change: Towards a Postliberal Future”, Patrick Deneen, a professor of political science at the University of Notre Dame, gives voice to a gloomy, reactionary strain of thinking. On the first page he laments America’s blighted cities, family breakdown, inequality and “psychic despair”, noting “a growing chorus of voices [reflecting] on the likelihood and even desirability of civil war”.

For all this, he blames liberalism: both the classical sort, which seeks material progress through creative destruction, and the progressive sort that aims to upend family and tradition. To turn back the clock, he would have the state support bigger traditional families (as it does in Hungary) and manufacturing (as it does under Joe Biden). He would restrict immigration, which he says elite liberals support in order to undercut the wages of the native-born and supply themselves with cheap servants.

None of this will work. Plenty of evidence suggests that immigration has little effect on native wages (so curbing it will not raise them); that industrial policy is generally wasteful; that pro-family policies have little effect on fertility; and that Hungary is a kleptocracy.

“Conservative” parties in the West have championed free markets at least since the days of Ronald Reagan and Margaret Thatcher. But free markets are profoundly unconservative. They bring rapid change, usually making people better off, but also disrupting old ways of doing things. Serious conservatives aim to minimise this disruption without impeding growth too much. Demagogues, however, pretend there is no trade-off: that you can have all the benefits of progress without changing the way you live.

For an idea of how ideas like Mr Ahmari’s and Mr Deneen’s might sound when stripped of nuance for the campaign trail, try “Decades of Decadence”. When Marco Rubio first ran for the United States Senate in 2010, he talked about how wonderful it was that he, the son of penniless Cuban immigrants, could aspire to high office in America. Now, still aspiring to even higher office from within a much-changed Republican Party (despite losing to Donald Trump in the Republican primary in 2016), he has embraced his erstwhile rival’s nativist clichés.

He decries America’s “open southern border” and yearns for the good old days when “we took it for granted that most of the things we bought…were made right here at home by our fellow Americans.” He blames China’s entry to the World Trade Organisation for the fact that “Too many Americans who want to live normal decent lives are unable to do so.” To those who say that imports from China might improve American lives, he retorts that such people think of Americans not as “workers, fathers and citizens” but as “consumers…nothing more”.

“The Capitalist Manifesto” by Mr Norberg of the Cato Institute, a think-tank, offers a joyful counterblast to Mr Rubio’s Trumpy stridence. The three decades after 1990, when globalisation took off, have seen greater improvements in human living conditions than the previous three millennia, he shows. Poverty is down, lifespans are longer and technology that only the Pentagon could afford in 1990 is now on every smartphone. “I am not saying that the era has been unequivocally good, only that it has been better than any other era humanity has experienced,” comments Mr Norberg.

When imitation isn’t flattery


Both the new right and the old (and new) left share a zero-sum view of economics, imagining that one person’s gain must be another’s loss. The old left hated free trade and free markets because they supposedly let rich countries exploit poor ones. Now that many of those poor countries have debunked this argument by prospering, the new right complains that free trade and free markets let China exploit the West.

Mr Norberg shows that all of their proposed solutions have been tried before, with dismal results. One study of 50 countries with populist leaders found that 15 years after they take control, their economies are a tenth smaller than those of comparable countries.

In a book packed with vivid examples, one of the most compelling concerns covid-19. Pandemic lockdowns, though widely opposed by the new right, actually achieved many of their stated aims. Borders were closed, migration halted, supply chains disrupted. Global poverty soared—and life became miserable in rich countries, too. Mr Norberg concludes: “It is difficult to imagine a stronger and more tragic proof that progress depends on open societies and economies.” If only his was the last word.

Friday 23 June 2023

Fallacies of Capitalism 14: Capitalism is Synonymous with Democracy

The "capitalism is synonymous with democracy" fallacy assumes a direct and harmonious relationship between capitalism, an economic system based on private ownership and market competition, and democracy, a political system characterised by representative government and citizen participation. However, this fallacy overlooks the potential conflicts that can arise between economic interests and democratic decision-making processes in several ways:

  1. Power imbalances: Capitalism can lead to the concentration of economic power in the hands of a few wealthy individuals or corporations. These entities may exert disproportionate influence over political processes, such as lobbying or campaign financing, which can undermine the principles of equal representation and fair democratic decision-making. The resulting power imbalances can distort policy outcomes and compromise the interests of the broader population.

  2. Influence of money in politics: Capitalist systems often allow for the infusion of large sums of money into political campaigns and lobbying efforts. This financial influence can create an uneven playing field, where economic elites can exert significant control over political agendas and policy outcomes. Democratic decision-making should ideally be based on the will of the people, but when economic interests heavily influence political processes, the voices and concerns of marginalised or less affluent citizens may be marginalised or ignored.

  3. Regulatory capture: In capitalist systems, regulatory agencies are responsible for overseeing various sectors and industries to ensure fair competition and protect public interests. However, there is a risk of regulatory capture, whereby the regulated industries exert significant influence over the regulators. This can result in policies that favour the interests of powerful economic actors rather than promoting the broader welfare or democratic principles. Regulatory capture undermines the accountability and responsiveness of democratic institutions.

  4. Inequality and political participation: Capitalism can exacerbate economic inequalities, which, in turn, can influence political participation. When wealth and income disparities are significant, certain groups may have greater resources and access to political power, while others may face barriers to participation. This can undermine the democratic ideal of equal political voice and representation, as marginalised groups or those with limited economic resources may be less able to engage meaningfully in democratic processes.

  5. Conflicts of interest: Capitalist economies rely on profit-maximising behaviour, which may run counter to certain democratic goals. For instance, economic actors may prioritise short-term profits over long-term societal or environmental well-being. Democratic decision-making often requires considering broader societal interests, including sustainability, social justice, and the needs of future generations. Conflicts can arise when economic interests clash with democratic principles, potentially undermining the pursuit of collective well-being and the long-term interests of society.

Recognising the potential conflicts between economic interests and democratic decision-making processes is essential for maintaining a healthy balance between capitalism and democracy. It underscores the importance of robust institutions, transparency, campaign finance reform, and mechanisms to mitigate undue influence and power imbalances. By addressing these conflicts, societies can strive for a more equitable and inclusive democratic system that ensures broad representation and safeguards against the dominance of narrow economic interests.

There is nothing Constant in Common Sense - After Feudalism & Slavery, Minority Capitalism may be on its Last Legs


 

Friday 16 June 2023

Free Market Ideology and Alternate Economic Systems

How does an ideological commitment to free market principles influence the consideration of alternative economic systems?

An ideological commitment to free market principles can significantly influence how alternative economic systems are considered. Here's a simple explanation using examples and quotes:

  1. Emphasis on Market Efficiency: Ideological commitment to free market principles prioritizes market efficiency as a key driver of economic success. This perspective holds that the decentralized decision-making of individuals and businesses, guided by market forces, leads to efficient allocation of resources and optimal outcomes.

Example: "Advocates of free market principles argue that allowing market forces to determine prices, wages, and production levels leads to efficient resource allocation. They believe that alternative economic systems, such as central planning, may suffer from inefficiencies due to the lack of market signals."

  1. Skepticism of State Intervention: A commitment to free market principles often fosters skepticism toward extensive state intervention in the economy. It emphasizes the belief that government interference can hinder market efficiency, impede individual freedom, and lead to unintended consequences.

Example: "Those who strongly support free markets view excessive government regulations and interventions as burdensome. They argue that alternative economic systems relying heavily on central planning may stifle innovation, discourage entrepreneurship, and limit individual choices."

Quotation: "The problem with socialism is that you eventually run out of other people's money." - Margaret Thatcher

This quote, attributed to former British Prime Minister Margaret Thatcher, reflects the skepticism toward alternative economic systems that rely heavily on state intervention. It implies that such systems may struggle to sustain themselves without adequate resources generated by market-oriented economies.

  1. Focus on Individual Liberty and Choice: Ideological commitment to free market principles often places a strong emphasis on individual liberty, economic freedom, and the right to private property. It asserts that free markets provide individuals with the freedom to make their own economic decisions and engage in voluntary exchanges.

Example: "Supporters of free market principles argue that alternative economic systems, which involve greater government control, can infringe upon individual liberties and limit economic choices. They believe that market-oriented systems provide individuals with the opportunity to pursue their own goals and fulfill their economic aspirations."

An ideological commitment to free market principles can strongly influence the consideration of alternative economic systems, shaping the evaluation in several ways. However, it's essential to recognize both the strengths and weaknesses of this perspective:

Strengths:

  1. Market Efficiency: The emphasis on market efficiency highlights the potential benefits of allowing market forces to guide resource allocation. Free market principles can incentivize competition, innovation, and productivity, leading to economic growth.

  2. Individual Freedom: A commitment to free markets emphasizes individual liberty and economic freedom. It recognizes the importance of individual choices and the potential for entrepreneurship and self-determination.

  3. Innovation and Adaptability: Free market systems often exhibit a high degree of innovation and adaptability, responding quickly to changing consumer demands and technological advancements.

Weaknesses:

  1. Market Failures: An exclusive focus on free markets may overlook market failures, such as externalities, monopolies, or inadequate provision of public goods. These market failures can have adverse consequences and require government intervention to address.

  2. Income Inequality: Unrestricted free markets can contribute to income inequality, as wealth accumulation is not distributed evenly. This disparity may result in social and economic divisions that require policy interventions to ensure fairness.

  3. Systemic Risks: Unregulated markets can also be susceptible to systemic risks, such as financial crises or market instability. Some level of government oversight may be necessary to mitigate these risks and protect the broader economy.

Evaluation:

While an ideological commitment to free market principles brings several strengths, such as market efficiency and individual freedom, it's important to approach alternative economic systems with an open mind. Evaluating alternative systems should consider a range of factors, including economic efficiency, equity, stability, and the provision of public goods.

Quotation: "A system of free enterprise capitalism hinges on two main assumptions: rational individuals and efficient markets. Neither assumption is entirely realistic." - Alan S. Blinder

This quote highlights the importance of acknowledging the limitations of any economic system, including free markets. It suggests that a balanced evaluation should consider both the strengths and weaknesses of various economic models.

To ensure an effective evaluation, it is crucial to strike a balance between market mechanisms and appropriate government interventions. Recognizing the potential advantages of free markets while addressing their limitations through regulation and social safety nets can help achieve a more equitable and sustainable economic system.

Ultimately, a comprehensive evaluation should take into account the diverse needs and goals of society, balancing economic efficiency, social welfare, and the pursuit of individual freedoms within a broader framework of societal well-being.

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Ideological biases can indeed undermine the examination of empirical evidence and case studies that challenge the supremacy of the market system. Here's an exploration using examples, quotes, and simple language:

  1. Confirmation Bias: Ideological biases can lead individuals to seek and interpret evidence in a way that confirms their preexisting beliefs. This confirmation bias may prevent them from critically examining empirical evidence or case studies that challenge the supremacy of the market system.

Example: A staunch advocate of free markets may dismiss empirical studies highlighting market failures or negative consequences of unregulated capitalism, instead favoring evidence that supports their ideological position.

  1. Dismissal of Alternative Models: Ideological biases can create a tendency to dismiss or downplay empirical evidence and case studies that demonstrate the effectiveness of alternative economic models. This can hinder a comprehensive examination of diverse approaches.

Example: A fervent supporter of market supremacy may reject case studies that showcase successful mixed economies or government interventions in achieving positive outcomes, undermining the examination of alternative models.

Quotation: "It is difficult to get a man to understand something when his salary depends on his not understanding it." - Upton Sinclair

This quote by Upton Sinclair highlights how personal interests and ideological biases can hinder individuals from objectively examining evidence that challenges their beliefs. In the context of economics, those whose livelihood or influence depends on the market system's supremacy may be more resistant to considering alternative models.

  1. Cherry-picking Data: Ideological biases can lead to selective use of data, focusing only on information that supports the market system while ignoring or dismissing contradictory evidence. This cherry-picking approach undermines a balanced examination of empirical evidence.

Example: An ideologically biased individual may highlight economic success stories under free market systems while disregarding instances of market failures or negative social consequences associated with unregulated capitalism.

It's important to note that overcoming ideological biases and fostering a more open examination of empirical evidence and case studies is crucial for a robust and informed economic discourse. By considering a wide range of evidence, including studies and examples that challenge prevailing beliefs, we can gain a more nuanced understanding of economic systems and their real-world impacts.

The goal should be to approach empirical evidence and case studies with intellectual honesty and a willingness to critically evaluate findings, regardless of whether they align with our ideological biases. Only through this objective examination can we foster a more comprehensive understanding of economic systems and strive towards the development of effective and equitable economic policies.

Are Inheritance Laws Good for Capitalism?

The evaluation of inheritance laws and their impact on capitalism can be subjective, and opinions on this matter can vary:

  1. Supportive of Capitalism:

a) Encouragement of Wealth Accumulation: Inheritance laws can motivate individuals to accumulate wealth and engage in entrepreneurial activities, which are essential for capitalist economies to thrive.

Example: "Inheritance laws incentivize individuals to work hard and invest their time and resources to build wealth, knowing that they can pass it on to future generations."

b) Preserving Family Businesses: Inheritance laws can help maintain and preserve family-owned businesses, which often play a significant role in the capitalist system.

Example: "Inheritance laws allow successful family businesses to continue operating across generations, contributing to economic growth and employment opportunities."

  1. Challenging for Capitalism:

a) Wealth Concentration and Inequality: Inheritance laws may perpetuate wealth concentration within a few families, potentially leading to income inequality and reduced economic mobility.

Example: "Inheritance laws that allow massive wealth transfers can create a system where the rich become richer, leaving fewer opportunities for others to accumulate wealth."

b) Market Distortions: Inheritance laws can distort market dynamics by providing individuals with resources without necessarily requiring them to contribute actively to the economy. This can hinder the meritocratic principles of capitalism.

Example: "Inheritance laws can result in some individuals having significant advantages in terms of wealth and resources, irrespective of their efforts or abilities."

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford

This quote indirectly touches upon the potential negative consequences of wealth concentration, which can be influenced by inheritance laws. Concentration of wealth and power can lead to societal unrest and disrupt the capitalist system itself.

Overall, the evaluation of inheritance laws in relation to capitalism depends on weighing the advantages of wealth accumulation and business preservation against the challenges of wealth concentration and market distortions. It is important to strike a balance that promotes economic growth, social mobility, and fair opportunities for all individuals within a capitalist framework.