Why Capitalism has Failed

It’s been long contended in this column that the true beneficiaries of Capitalism are consumers. While businesses in such a system are the best, strongest, most efficient and productive in the world, business people can and do function in other kinds of political environments, and they are seldom the first to step up to defend Capitalism.

Watch and listen closely to what’s being said and done.

As we watch Capitalism being flushed by this brave new world, where are many business people lining up? Defending the Capitalistic system? Or lining up for handouts? Do you hear them most often demanding their economic freedom, or the dire need for government to “do something,” preferably in the form of a check?

Remember this, as one listens to the gloating and glee of the politicians and bureaucrats who perceive the demise of Capitalism, and contend it’s long past due. Think about who is truly losing and who is winning, as you watch them rub their hands together in anticipation of the power and control they expect to come their way.

Be not fooled into thinking they don’t fully understand that Capitalism most empowers, the average everyday citizen. In the frustration of thwarted efforts to control the peons, who insist upon living every day of their lives with hardly a passing glance to Congress and “wiser people,” statists fully understand what economic freedom means for the masses. They understand it when they see people buying F-150 trucks rather than the “green’ vehicles being mandated by government.

They have always known that they can “do business” with the CEOs of corporations. Both sides have long touted that as the ideal. You have heard them. Public–private partnerships they are commonly referred to in glowing terms. By definition a public-private partnership is not Capitalism. And, public –private partnerships do not deliver the best deal to consumers.

Look now, at how magnanimously the statists are paying off their cronies and allies in the business world for their sell-out— for their past cooperation in undermining businesses which attempted to function in a more honest and equitable way. Such sell-outs and cooperation are vital to a political coup over Capitalism, which is what we are now witnessing and for which we are now paying. Look at the pay off — quite literally billions of dollars – far more than these failures at business management could ever have hoped to gain in a Capitalistic system.

None of this should be a surprise. Economist Joseph Schumpeter said over fifty years ago, that business people tend not to defend Capitalism. Business people tend to be very pragmatic, he said, and will conform to whatever political structure in which they find themselves.

I am reminded of the movie Schindler’s List. The drama of this true story lay in the fact that one businessman reached a point where his “ideology” – his conscience — would no longer allow him to do “business as usual” under the structure as established by the Third Reich. It is a glorious story about one man’s decency. As a businessman doing the right thing, he placed his life at risk and sacrificed his business.

His business was doing well, functioning not in the kind of political environment required of Capitalism, but in a coercive environment required for all other kinds of economic systems.

If businesspeople are willing to participate in back-room, closed-door, deal-making they can make a profit under a lot of different circumstances, all of which are far less demanding than Capitalism. It’s far more difficult to capture market share by persuading consumers than it is to persuade politicians. All systems, other than Capitalism, are dependent upon influencing politics.

Only Capitalism has built in mechanisms that encourages ethical conduct, and only Capitalism rewards ethical conduct. Perhaps a surprising statement to those who believe they are watching Capitalism at work in the manipulation of interest rates, the regulation of banks and auto manufacturers, the confiscation of taxpayer money which is then stuffed into the pockets of corporate CEOs.

We are, after all, being told on almost a daily basis that this is Capitalism. But all these things could not happen without the use of force by government to get unwilling participants to go along. (Bear in mind, that the ability to control a man’s business --his livelihood --is the ability to control his actions completely.) The minute government uses force for any purpose other than punishing fraud or theft, one is no longer involved in a Capitalistic system. Capitalism is not a top-down imposed system – it is what spontaneously happens when citizens are free to conduct exchanges of mutual benefit.

But therein lies the problem. No one could persuade the public that this is Capitalism at work if most people really understood what Capitalism is or how the market place functions. That this fiction stands for the most part unchallenged, brings us to the other significant point made by Schumpeter – that Capitalism will ultimately fail because its greatest beneficiaries are ignorant of it.

Why is that? In large part because we are failed by the public education system – a system that first and foremost serves government and is brethren to the beneficiaries of coercive systems.

Most people do not connect their affluence to the Capitalistic system. How that can be is mindboggling given the evidence before them. To stand on any street corner in any city in the country should give overwhelming evidence that this is a system-- as impaired as it has been-- that has worked far beyond the imagination of anyone who ever envisioned utopia. That Barney Frank or Nancy Pelosi or Alan Greenspan can stand and say that Capitalism has failed, when confronted with the reality of all they can see before them, is incomprehensible. But they not only say it, but at least half the people in the nation accept the pronouncement as a fact.

People are more concerned about their frustrations and insecurities of the system – which do exist – then they are aware of the long-term benefits of it. At the same time, amid their frustrations, people are assuaged by intellectuals who teach them to resent the system and who vilify its central figure – the businessman.

For the intellectuals the businessman represents the greatest of all injustices. Under Capitalism almost anyone can rise to the heights of great riches without having to bow to those so much smarter and so obviously their superiors, the intellectuals or the politically powerful. (Think, Bill Gates who never sat before a professor or asked permission of a politician.)

The system makes kings of paupers, who would otherwise know their place. The elite in the US can access little that isn’t equally as available to the most common of commoners, a situation which spawns a resentment that smolders deep within the souls of those who otherwise portend an affinity with, and concern for, the poor and disenfranchised.

Flat screen televisions are beyond anything ever experienced or imagined possible by the highest of the high of royalty of any country in any era in history. Flat screen televisions not only grace the multi-million -dollar homes of the most elite of this country, but can be found in the most shabby of homes on the wrong side of the tracks in the smallest town in America. This is what Capitalism has delivered, and this is what it cannot be forgiven.