"In the following pages I offer nothing more than simple facts, plain arguments, and common sense; and have no other preliminaries to settle with the reader, than that he will divest himself of prejudice and prepossession, and suffer his reason and his feelings to determine for themselves; that he will put on rather than off, the true character of a man, and generously enlarge his views beyond the present day." - Thomas Paine, Common Sense

Thursday, February 7, 2013

The United States Does Not Practice Capitalism

Most people have never heard of John Maynard Keynes. He was an economist whose theories started gaining popularity in the late 1930's. By now, almost every government in the world has adopted these "Keynesian" ideas to direct and manage their economies, including central banking and massive amounts of government spending.

Ben Bernanke (Chairman of the Federal Reserve), Mitt Romney, Barack Obama, and most Democrats and Republicans alike are all self-admitted Keynesians or support Keynesian policies. FDR pushed Keynesian economics with his "New Deal." Even Adolf Hitler practiced Keynesianism.

"Wait, did you just say Hitler?"

He's here to centrally plan your economy.

Yes, I did. You see, it seems that Keynes was a complete crackpot. In the forward to the German edition of his book The General Theory of Employment, Interest, and Money, Keynes wrote:

"The theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under the conditions of free competition and a large measure of laissez-faire."

What he's saying is that his ideas would actually work better in a place like Nazi Germany or Soviet Russia, where the government has no regard for the individual rights or freedoms of its people, rather than a free-market, capitalist society. Those governments could tell their people what to do, what to think, what to buy, and where to live, and you can't effectively run an economy from a central position if you give the people you're managing the freedom to do as they please all day.

There's no room for jumping and happiness in a government-run economy.

Take America, for example. Who could possibly take into account all the multitudes of different needs, desires, ambitions, transactions, and moment-to-moment changes in the minds of 315,000,000 individuals? You cannot logically argue that it's possible for an economy to be effectively managed by a central government with respect for its people's individual liberties (especially property rights).

So what, exactly, did Keynes preach? According to Keynes, unlimited borrowing and debt and gigantic deficits in the trillions of dollars don't matter. He sold his ideas as a solution to the Great Depression, when it was these same exact ideas that caused it. Keynes believed that an economy cannot grow without government intervention, and the ultimate solution to any struggling economy was government spending.

This is the economic theory behind the bank and auto bailouts (which didn't work), the Federal Reserve's seemingly permanent near-0% interest rates (which caused the Great Depression), and our exponentially increasing national debt. It's the equivalent of paying off one credit card with another, and that credit card with another, until you've run up so much debt that there's no way you or your kids could possibly pay it back in a lifetime; then you do it some more in the hopes of breaking even.

Don't get frustrated - get another credit card!

Does that sound ridiculous? It should, because it is. Keynes' theories are to blame for the "boom-bust" cycles that our economy is constantly going through, not capitalism.

What's even more ridiculous is the fact that Keynesianism has been veiled as a form of capitalism for the past century or so. The United States is not a truly capitalist society, however. Some would say it operates a mixed economy, but this seems to just be another phrase for what I believe to be Keynesianism's inevitable outcome: corporatism, or corporate socialism. Here's how Ron Paul defines a corporatist state:

"Corporatism is s system where businesses are nominally in private hands, but are in fact controlled by the government. In a corporatist state, government officials often act in collusion with their favorite business interests to design policies that give those interests a monopoly position, to the detriment of both competitors and consumers."

Basically, businesses get to keep their profits while offsetting their losses with taxpayer money. Compare this corporate socialism to true capitalism: a laissez-faire, free-market society, where the government does not intervene in the economy in any form (including taxes, inflation, regulations, price controls, welfare for individuals or gigantic corporations, etc.), short of enforcing valid contracts, protecting individual rights, and defending peaceful citizens. There is almost no resemblance whatsoever.

One major reason we couldn't possibly be called a capitalist society is the fact that the government effectively controls 50% of every transaction made; the Federal Reserve manages the supply and therefore value of our money. Another reason is the entire concept of a government-managed and directed economy is thoroughly anti-capitalist.

One main misunderstanding is the popular belief that just because someone is rich or greedy, they must be ardent capitalists. The opposite true. Many lobbyists campaign for more government intervention in their industry because they know how they can benefit from it. Once you give the government a role in the economy, you're effectively putting it up for auction to special interests. If the government remains hands-off, then there is nothing for those "greedy corporations" to gain by lobbying it.

United States government going once, going twice...

So next time someone tries to blame capitalism for our current economic crisis, remind them of all the corporate welfare and special benefits, the ever-expanding Federal budget deficit, and the fact that the government controls the value of our currency. Until people start to understand the Austrian school of (laissez-faire) economics and its accurate predictions of every single economic downturn in America over the past century, the economy will continue to get worse and worse.

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