About This Blog

Ludwig von Mises (1881-1973) was the greatest economist of my time. His greatest works can be accessed here at no charge.

Mises believed that property, freedom and peace are and should be the hallmarks of a satisfying and prosperous society. I agree. Mises proved beyond a shadow of a doubt that the prospect for general and individual prosperity is maximized, indeed, is only possible, if the principle of private property reigns supreme. What's yours is yours. What's mine is mine. When the line between yours and mine is smudged, the door to conflict opens. Without freedom (individual liberty of action) the principle of private property is neutered and the free market, which is the child of property and freedom and the mother of prosperity and satisfaction, cannot exist. Peace is the goal of a prosperous and satisfying society of free individuals, not peace which is purchased by submission to the enemies of property and freedom, but peace which results from the unyielding defense of these principles against all who challenge them.

In this blog I measure American society against the metrics of property, freedom and peace.

Friday, January 24, 2014

From The Ridiculous To The Sublime

A few days ago an article by Robert Reich caught my eye: "David Brooks is dead wrong about inequality." Reich is a former US Secretary of Labor who often advocates progressive policies like income equality. In his article Reich writes:
First, when almost all the gains from growth go to the top, as they have for the last thirty years, the middle class doesn’t have the purchasing power necessary for buoyant growth.
I don't know what "buoyant growth" is or how it is measured. I don't think Reich knows either. It certainly is not a working concept of economics. Reich's article is a meaningless collection of assertions and undefined terms. It is pure demagoguery preached to the choir. One of the choir members named "Steve Lives" commented as follows on Reich's piece:

In the system of money management that we call Capitalism, it only makes sense for the capitalists to automate as much as possible, to increase profit. Unfortunately, this doesn't work out too well for the rest of us. We can go on as we are today, stumbling from economic collapse to economic collapse, suffering the fall out from such an ideology, or we can just accept that the knowledge and technology of humanity today can provide for all of us if we redesign our society with intelligence and forethought. Of course this would mean the end of the current work ethic, the end of currency (if we wanted to), current politics would become obsolete, and if implemented world wide, no more wars. Pretty hard to imagine huh? But it is possible, and wouldn't be that hard to do. [emphasis mine]
Yes, the Nirvana Mr. Lives describes is "hard to imagine." As I marveled at Mr. Lives' naivete, I wondered how people come by such bizarre opinions. Then Mr. Lives filled me in. He recommended readers visit the website of something called: "The Venus Project." So I visited the site and couldn't believe my eyes. The site immediately reminded me of Jim Jones and his "People's Temple" religious movement.

The Venus Project is run by a couple of characters named Jacque Fresco and Roxanne Meadows who advocate something called a "resource-based economy" in which there is no money, no law and no government. The economy would be run efficiently and dispassionately by computers. All goods and services would be free. The latest technology and strategically placed "sensors" would determine the nature and quantity of what needs to be produced by robots. Individuals in a "resource-based economy" would not work, they would simply do as they please and, at the same time, enjoy the benefits of products and services they need.

I'm not kidding. Check out the site's rather extensive FAQ page. It's truly ridiculous.

Needless to say, after visiting the site and reading the mush produced by individuals like Robert Reich, Steve Lives, Jacque Fresco and Rosanne Meadows I became depressed thinking about America's future.

Then today I came across this article by Austrian economist George Reisman: "The Very Deserving Super Rich." In his article Reisman elegantly explains the logic of the free market and defends successful, wealthy free market entrepreneurs as true "benefactors of mankind." Moreover, Reisman writes, those "who have earned their fortunes by means of such positive productive contributions fully deserve them."

So there you have it, from the ridiculous to the sublime. Two views of the capitalist economic system which are polar opposites. Two policy roads which lead directly to two drastically different, future Americas. How can individuals think so differently about capitalism? Reisman chalks it up to ignorance:
The enemies of such economic inequality are ignorant of economics. They know nothing about profits, innovation, or capital. They do not realize that in entailing the confiscation of high profits and aborting the earning of fortunes, their policies would stifle economic progress.

The enemies of such economic inequality believe that wealth is a pile of consumers’ goods that somehow is just here and can be taken for granted. They believe that the capitalists, whom they depict as fat men, allegedly have too much of this pile. Some of it, they claim, must be given to the starving masses. On this basis, they are led to advocate a policy of seizing capital in order to consume it— a policy of eating the seed corn and being impoverished.

In their ignorance, the enemies of the free-market’s economic inequality are fueled by envy and resentment, biting the hands that feed them.
I tend to agree with him. Mr. Lives certainly is ignorant of economics, as is the staff of The Venus Project. But Robert Reich is no uneducated fool. He's studied economics, as I have, and has arrived at opposite conclusions about how the economy works. How can that be explained?

Reisman provides the answer at the beginning of his article where he exempts some wealthy capitalists from his defense:
I exclude fortunes built on a foundation of government subsidies, or government regulations harming competitors, and those built merely on a foundation of inflation and credit expansion. In today’s “mixed economy,” many great fortunes have mixed foundations. In such cases, my discussion applies only to the free market element in the mixture.
Reisman refuses to defend capitalists who earned their fortunes by becoming cronies of governmental authority. Reisman trusts the free market, by means of competition and bankruptcy, to neutralize the fortunes of fraudulent, dishonest and manipulative capitalists .

On the other hand, Robert Reich and those who buy into the policies advocated by The Venus Project distrust the free market. They trust some incarnation of authority to keep capitalists honest. There lies the difference and the rub.

Both Reisman and Reich understand that some human beings are prone to take the dishonest, fraudulent route to wealth and comfort. Reisman thinks such dishonest human beings are just as likely to become governmental authorities as they are capitalists. So he distrusts government and advises against government intervention in the market.

Reich believes that those in government are somehow immune to fraud and dishonesty or, if they are not immune, he believes they will be kept honest by "the people" through democratic institutions or through direct and intense community scrutiny of government. Therefore, he advises government intervention in the marketplace at every turn.

Having been in business and having successfully competed in the free market, I side with Reisman. As a small business owner I observed first hand how large businesses and corporations seek advantage and favors from their friends in government. I saw how government officials were easily and willingly manipulated. I saw how they sought power and used it to their advantage and to support their own personal agendas...most often to the detriment of consumers in the marketplace.

Perhaps Reich is an honest man and perhaps he acted honestly when he was a powerful government official. However, I think the vast majority of Americans have observed politicians long enough and well enough to know that if Reich was truly honest then he was an exception to the rule.

Isn't it a self-evident truth that putting our trust in a politician or a bureaucrat -- or even in the meaningless abstraction of "the people" -- is a sublimely ridiculous notion in America today?

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