Tuesday, October 25, 2011

S-S-Something from the Comments: Occupy the 1%

This morning, I got a well-written comment from "Jackylhunter" on my recent post, "Dear, Occupy Wall Street. You are the "1%" too.". I didn't go into a ton of detail on that post, since it was really just highlighting a great info-graphic on Americans' comparative wealth versus the rest of the world. I didn't do much in the way of explaining the points I made in addition to that.

So... I left myself open to some obvious points, and commenter Jacky took the time to question a few things that are worth responding to directly. I'll just go through bit by bit here. First:
"You may want to check your definition of socialist state, or at least define what type of socialist model you are referring. Versus a totalitarian state. Which I feel is your real grievance."
The real grievance isn't at all exclusively about totalitarian socialism, but in fact, socialism as an idea - as a concept.

If this were actually true, it would just be one
more reason to ignore Jesus.
As I hope most people who know me understand, I try my best not to deal in strawmen or make bad-faith arguments, and after a decade or so of interacting directly with self-described socialists, debating, I feel confident that I do have a very firm grasp on their best arguments in favor of the system and their best definitions. According to socialists, the easiest definition of the term is that socialism is a system in which the "means of production" are collectively managed and operated, and resources are shared "equally".

There are innumerable reasons why this is a concept that is doomed to - and has a historical track record of - failure. The biggest, and most crucial, among them being that it is impossible for any individual or even any group to know what they need to know to effectively manage resources and allocate them to their most highly valued use.

You need prices generated by free people trading with each other to do that, because knowledge in society is dispersed, and value is subjective and based on every individual's wants, needs and constantly-evolving preferences... These are two important things that Marx & Engels, not to mention their hordes of modern-day disciples fail to understand.

Socialism is an intellectually bankrupt concept... a bad theory... and practically, much worse in reality. I don't just mean the handful of totalitarian socialist states that exist either, I mean all of it - including the infusion of faulty socialist assumptions into "mixed economies" as well.

It's not something to be "balanced" with capitalism, it's a drain on humanity that is propped up in each case by the productivity generated in more free market elements in those societies. Sweden - for instance - for all it's hype as a socialist country has largely free trade with all of its neighboring countries, and a robust, entrepreneurial private economy which is taxed heavily to support the welfare state. It's always the "capitalist" part of the economy dragging the socialist part along for the ride, not the other way around.
"BUT that doesn't mean that the minority within the first world should actively be allowed to continue to increase wealth at the detriment to the majority. It is ok to be rich and recognise [sic] this."
It's definitely ok to be rich by world standards and point out the inequalities that exist in your own country and others.

Except here's the thing... What Jackylhunter said simply isn't how economies work.

Economies aren't zero-sum. At least, not without government forcibly redistributing wealth that already exists to politically favored groups... which of course, the OWS crowd is largely calling to increase (to the extent that any of them are actively "calling" for anything specific).

On a basic level, if economies were actually zero-sum as your statement assumes (people get rich "at the detriment" of others), then we wouldn't have progressed beyond prehistoric standards of living.

50 years ago, Hong Kong was as poor as any place on the
planet. Today, they are among the richest with no
natural resources to speak of: Free markets win.
Wealth is created (not merely distributed) by utilizing resources that are less valued, and converting them into products & services that are more highly valued - through production. This takes thought, ingenuity, creativity, hard work and responsiveness to economic signals provided through trade. It's not magic. It's a repeatable, predictable process that relies on the dispersed knowledge and economic interaction of people who are free to pursue their own individual goals using their own unique skills & knowledge - and who have well-defined and respected property rights.

As nations get more economically free, they get more prosperous - not less, as would happen if in fact economies didn't grow.

As we've seen an increase in markets and freedom of ordinary people to trade with each other in places like China, India, Southeast Asia, Central America and even parts of Africa over the last several decades, poverty rates worldwide have dropped dramatically... to the point where they've almost been cut in half in the last 30 years. For that you can thank an INCREASE in free markets and capitalism.

Which brings me to my final major point... Jacky said:
"The occupy wall street protesters are raising an inherent problem with society, with capitalism."
They may believe that that's what they're doing, but they've missed the mark by a mile.

Capitalism is not the system that is being (or should be) rebuked by the current financial crisis. Socialism, and more specifically its cousin - Italian-style corporate "fascism" is.

Talk to any capitalist, free market economist, and they'd have told you - as I did (repeatedly) on this very blog - that the right thing to do over the years was not to guarantee loans, and bail out banks, but to let companies that took on inappropriate risks and over-leveraged themselves to take their losses and either go bankrupt of *CHANGE* the way they did business.

That's not what happened, however. What happened instead was that we had a Federal Reserve pumping the economy chock full of new money while politicians were constantly guaranteeing our giant corporations and financial firms against any risk.

In a capitalist economy - or rather in a free market - greed is counterbalanced by fear of loss. But that only works when you allow the firms to fail. As even George Stiglitz said recently, the banks were able to "socialize" their losses (never mind the fact that for all his outrage, he is on record supporting the bailouts, claiming we could pass it and then "change it later"... cause that always works, right?) and points out now that this isn't capitalism.

This guy...
That's not a feature of a capitalist economy, it's not a feature of free markets. It's a feature of exactly the opposite - state control over the economy, and collectivizing risk.

Every free market economist I know personally, or have ever talked to (and I work with dozens on a daily basis) predicted all of the consequences of the bailouts - most of the good ones pegged the housing bubble long before anyone else to boot. I'd put their record against the records of socialists & Keynesians any day of the week.

We - if I can now include myself among the ranks of "free marketers" - all understand that big corporations don't like competition or eating their duly-earned losses... and we all understand that  the more power the state has to manipulate the economy - the easier (not harder!) it is for those big companies to avoid responsibility for their actions. One of my favorite quotes of all time comes from that infamous economist Milton Friedman, who the left routinely accuses of being a corporate shill, but who - in 1978 - said:
Milton Friedman: "Business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger....Every businessman is in favor of freedom for everybody else, but when it comes to himself that's a different question. We have to have that tariff to protect us against competition from abroad. We have to have that special provision in the tax code. We have to have that subsidy."
I've referenced this quote numerous times on this blog and elsewhere.

We see it all over the world. There's even an entire school of economics (Public Choice) devoted to better understanding how the process works, and it's a school of thought dominated by largely free-market economists... Not because they don't understand that corporations and government have a symbiotic relationship but because they do understand it extremely well. And more importantly, unlike supporters of more powerful government, Public Choice economists accurately understand the cause of corporatism/"crony capitalism".

The Occupy Wall Street guys don't. So for the most part, they seem to be advocating policy changes or agitating for ideas that will do exactly the opposite of what they claim they want.

Thus... When Jacky challenges me as such...
"But do you care enough to Occupy Wall Street, and try instigate change peacefully?"
...I have no choice but to challenge the premise!

I definitely "care enough" to try to instigate change peacefully. That's why for the past several years I've completely refocused my career towards advocating for individual liberty and free markets. I won't be Occupying Wall Street (or DC, or anywhere else) because I don't believe that that movement itself is instigating change at all.

Wall Street sought bailouts to absolve themselves from their financial mistakes. They were only able to accomplish this through a friendly and powerful state. Many of the "Occupiers" I've spoken with and read about believe that - somehow, with absolutely no evidence to speak of - if only we establish an even more powerful government with more control over the economy, a less friendly environment to big corporations will spontaneously appear... At no time anywhere in history can I think of an example of a situation where substantially increasing the importance & incentive to take one action (i.e. manipulating the government) has caused less of that action to take place.

I'm not a fan of wishful thinking, so in spite of my long-standing outrage at bailouts, and corporatism... I will not be joining Occupy Wall Street at this point in time.

* * * * *

Addendum: I omitted a chunk of Jacky's comment, because the response to it wouldn't really be as directly related to OWS. It related to starving children in the third world and about America's health care system. On poverty world-wide, I think the above post should make it clear what I believe should be done about that. On the American health care system, the insinuation of Jacky's comment was that America has a "free market system" and that it is "a joke". But... Unfortunately, America has no free market in health care at all. Not even a tiny bit. Government controls everything from pricing and availability to the number of doctors allowed to practice and hospitals that are built.

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