The End Of American Capitalism?

By Anthony Faiola – (Washington Post) |The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism.

Since the 1930s, U.S. banks were the flagships of American economic might, and emulation by other nations of the fiercely free-market financial system in the United States was expected and encouraged. But the market turmoil that is draining the nation’s wealth and has upended Wall Street now threatens to put the banks at the heart of the U.S. financial system at least partly in the hands of the government.

The Bush administration is considering a partial nationalization of some banks, buying up a portion of their shares to shore them up and restore confidence as part of the $700 billion government bailout. The notion of government ownership in the financial sector, even as a minority stakeholder, goes against what market purists say they see as the foundation of the American system.

Yet the administration may feel it has no choice. Credit, the lifeblood of capitalism, ceased to flow. An economy based on the free market cannot function that way.

The government’s about-face goes beyond the banking industry. It is reasserting itself in the lives of citizens in ways that were unthinkable in the era of market-knows-best thinking. With the recent takeovers of major lenders Fannie Mae and Freddie Mac and the bailout of AIG, the U.S. government is now effectively responsible for providing home mortgages and life insurance to tens of millions of Americans. Many economists are asking whether it remains a free market if the government is so deeply enmeshed in the financial system.

Given that the United States has held itself up as a global economic model, the change could shift the balance of how governments around the globe conduct free enterprise. Over the past three decades, the United States led the crusade to persuade much of the world, especially developing countries, to lift the heavy hand of government from finance and industry.

But the hands-off brand of capitalism in the United States is now being blamed for the easy credit that sickened the housing market and allowed a freewheeling Wall Street to create a pool of toxic investments that has infected the global financial system. Heavy intervention by the government, critics say, is further robbing Washington of the moral authority to spread the gospel of laissez-faire capitalism.

The government could launch a targeted program in which it takes>>>>Read the Full Article

The Moral Confusion of Wal-Mart Haters

MAPLETON, UT | 16 May 2008 | It’s not that uncommon for people to resent big business – and the degree of their resentment is usually in proportion to the size and success of the object of their hate. In response to an article on the Huffington Post, I would like to examine the claims of one particular writer, who is not alone in his delusion – such is the tone of criticism heard in many venues against the successful businessman. This writer’s wrath was kindled as he observed efforts to entice people to spend their “economic stimulus tax rebates” at Wal-Mart. In explaining why he thinks such action won’t truly stimulate the economy, he reveals a deeper misunderstanding of moral economics:

With its low price focus, Wal-Mart may appear to help the U.S. economy. But, the reality is that with its poor wages and benefits, massive China sourcing and tax avoidance, Wal-Mart makes its workers and the communities where it operates poorer.

How is it possible for a company that hands out millions of paychecks every year to be “making its workers and the communities where it operates poorer”? No matter how small the paycheck and benefits are, can you actually become poorer by getting paid? Would even a 10-cent paycheck not make you 10 cents richer than you were before? If you could magically wave your hand and make the Wal-Mart disappear from your neighborhood, would people suddenly start becoming wealthier? Maybe the writer believes that unemployment benefits and other government programs are the key to wealth.

Think about what even a small raise for Wal-Mart’s 1 million+ workers would mean nationally, or what it would mean to your city or town if everyone at your local Wal-Mart got a raise.

What a great idea! Here, the writer, from the perspective of someone outside the relationship between Wal-Mart and its workers, proposes changing the terms of employment for the good of the community. He doesn’t bother to ask how to accomplish it, nor does he consider any consequences other than the presumed benefit to the people as a whole. In this mentality, it is assumed that the costs of such an idea will simply be borne by the wealthy, who have enough already and can afford to give more to everyone else. Presuming a beneficial outcome for “the people” is supposedly justification enough. Readers of Atlas Shrugged will immediately recognize this philosophy, and the consequences of imposing it on the producers of value by force.

As our nation’s largest employer and most financially-successful company, Wal-Mart is a singular American institution. It occupies a unique position in our world by virtue of its size, reach and responsibility for the livelihoods of millions of workers and the needs of billions of consumers. And with such overwhelming influence comes certain moral responsibilities. It is the acceptance or rejection of those responsibilities that determines greatness.

There is both praise and damnation in this statement, acknowledging Wal-Mart’s success while simultaneously using that status as tool of condemnation. These words embody the very morality of the modern socialist mentality. It is a sentiment that views profit as guilt, a burden to be relieved by giving it to others. It is the claim that the degree of one’s success is the degree of one’s indebtedness to others – that it is an indication not of the value one has created, but of a debt owed to society by virtue of its ability to do so. Here, greatness is measured by obedience to “certain moral responsibilities”, which are unnamed, undefinable, and subject to no standard other than the self-loathing of the moocher. No recognition is made of the effort required to succeed, only demands made of the fruits of those efforts – as if such fruits were simply a matter of luck and required better allocation.

Ironically, if a person were to win the lottery, few would claim that the prize should be redistributed to all those who weren’t lucky enough to win (despite the fact that those winnings were created from the pockets of all those who participated freely). But when the prize is earned through value creation and free exchange (from the pockets of the customers of Wal-Mart), many call for the profits to be more “fairly spread”. Such a mentality rewards gambling and penalizes effort, and breeds the idea that the lottery is a fair game where no one wins at the expense of others, while mercantile exchange is a dirty business.

Wal-Mart has rejected those responsibilities and because of that choice, the money spent there does nothing of what it could to strengthen our economy. Higher salaries, quality affordable healthcare and paying what they owe like any good American, are just three things Wal-Mart can do tomorrow that will make them a company worthy of our money.

By ignoring the debate about whether government handouts (taken from the taxpayers or from the printing presses) are even capable of “strengthening our economy”, and proclaiming the presumed evils of Wal-Mart, this writer has successfully avoided any meaningful discourse on how to effectively stimulate any economy. In the process, he has revealed his true agenda: to discourage people from shopping at Wal-Mart due to their failure to adhere to the moral standards of the moochers and looters.

Conclusion:

At the core of this argument is the presumption that if everyone who worked for and shopped at Wal-Mart knew (as the writer claims) the “hidden costs” of doing business with Wal-Mart, they would cease to do so on moral grounds. The fact that millions of people choose freely to accept wages and purchase goods from Wal-Mart is the greatest evidence of the morality of its business, and a far greater indicator than the complaints of this writer. As is usually the case in the socialist mindset, the writer presumes to know better than millions of free individuals how best to use their resources (even their own labor) – and given the power (of government), would likely use force against the villain he condemns, claiming to do so “for the good of the people”. And like every other well-meaning tyrant in history, would ignore the evidence and the freedom of the actions of “the people” for their own sakes.

If Wal-Mart – or any company – is not in the business of creating value for its employees and its customers, it will not be in business very long. Thus Wal-Mart’s success is evidence of the value it has created (Principle 6: Profit is the Tool of Validation). As long as its business does not rely on force or deception in its transactions, whether for wage labor or for cheap laundry soap, there can be no greater statement of the value it provides to each individual and thus, to our economy as a whole, than this confession by the writer:

“…our nation’s largest employer and most financially-successful company”

Action Steps:

• Examine your relationship with the people and companies you do business with – are your dealings with them voluntary, and free of force or deception?
• Write a letter to the editor in your local newspaper in support of those businesses (big or small) that are successful as a result of the value they create for you.
• Research what laws are being proposed in your community (from the city council to the state legislature) that seek to control prices, wages, or other terms of free exchange. Contact your representative and express your opinion.

MRFC Principles: 6 (5,7,8,9)

References:

Why Wal-Mart Does Not Strengthen Our Economy – by David Nassar
http://www.huffingtonpost.com/david-nassar/why-wal-mart-does-not-str_b_99463.html

Can the Kibbutz survive without Capitalism?

MAPLETON, UT | 17 April 2008 | In the kibbutzim of Israel, as in communal societies around the world, an entire generation attempted to live by the ideology of collectivism. Years later, all such social experiments have ended with one choice: adopt capitalist principles or cease to exist. The consequences of collectivism have resulted in two critical failures – economic bankruptcy, with communities unable to sustain themselves, and moral bankruptcy, with new generations rebelling against the oppression of communal sacrifice for parasitic consumption. The result has been deserted colonies, lacking resources, and devoid of the renewal of youth who abandoned them for the promise of individual freedom abroad.

Readers of Atlas Shrugged by Ayn Rand will remember the account of the 20th Century Motor Company, whose heirs decided to turn the company and its employees into a communal “family”. Rand describes a Marxist society that few today would consider plausible – yet the socialist kibbutzim are the literal ideological descendants of the axiom, “From each according to his ability, to each according to his needs.” To learn the economic history and hear the personal tales from the kibbutzim is to witness Rand’s fictional community come to life (with the exception that many modern kibbutzim have chosen reform).

Kibbutz Yasur, founded in 1949, serves as an example. Though it began with high ideals, textile and toy factories, they were unprofitable, and soon closed, leaving many without a means to provide for their future. Homes eventually sat empty, as children left town and no new members joined the community. Today, those homes are nearly filled, and old farmland is being sold for new real estate development.

“The new kibbutz is not perfect, but economically things are improving,” said Mr. Kilon, who manages Yasur and another kibbutz nearby (many kibbutzim are now run by professional managers rather than by popular vote). “The incentive to work has gone up, and after changes in the management, we are standing on our feet.”

Boaz Varol was born on a kibbutz in the far north, but he left at 18. “My parents worked all their lives, carrying at least 10 parasites on their backs,” he said. “If they’d worked that hard in the city for as many years, I’d have had quite an inheritance coming to me by now.”

Key Points:

• In the year 2000, more than half of Israel’s 257 collective farms were bankrupt.
  In the past, kibbutz members were rewarded equally, whether they milked cows or managed a large industry.
• On the new kibbutz, members earn salaries or receive end-of-month allowances reflecting the income they bring in.
• About half the kibbutzim have moved into real estate, selling plots for luxury neighborhoods in place of the fields and orchards outside their gates.
• House buyers generally do not join the kibbutz, but pay for services like child care.
  While the major assets of the kibbutzim are still collectively owned, the communities are now largely run by professional managers rather than by popular vote.

Conclusion:

What has emerged in the social consciousness of the kibbutzim is a newfound appreciation for the principles of prosperity – if not a total embrace. After decades of reaping the starving harvest of collectivism, the kibbutzim, in an attempt at self-preservation, have re-introduced the concepts of private property and wages based on productivity. The results have spoken for themselves.

The kibbutzim have traded pure socialist collectivism not for capitalism, but for a modern mixed economy, where individuals are free to work for themselves, generating private profits that are then taxed in order to fund communal socialist programs. Many assets are still owned communally, though housing is often owned privately. Such a policy is usually termed “privatization”, though leaders prefer to call it “renewal”. Allowing people to own property, produce value and be compensated for it has resulted in a surge in productivity and profit among the kibbutz members. Finally, the prosperity promised by marxist illusions is beginning to appear where free exchange is honored.

Such a society, however, is still not a free society, but a parasitic one. The socialist strategy over the past century has evolved pragmatically from one of total collective control (which, as the kibbutzim demonstrate, has always resulted in economic failure) to a parasitic co-existence with the private producers of value. Such an arrangement has allowed the socialists to remain on life-support, sustaining their moral bankruptcy as long as they allow just enough freedom for their capitalist hosts to produce the profits they are unable to produce for themselves.

The modern residents of the Kibbutzim are enjoying some of the benefits of capitalism, and their prosperity has attracted the attention of outsiders, resulting in increased demand and waiting lists for membership. While the changes have increased incentives to work and reduced the parasitic tendencies of the past, it remains to be seen whether the people will fully embrace the ideology at the core of their newfound prosperity. Their future depends on it.

Action Steps:

1. Read Atlas Shrugged – specifically the account of the train tramp who revealed to Dagny the story of the 20th Century Motor Company after its founder had died.
2. Examine your role in your community – what determines your individual prosperity? What determines your community’s prosperity?
3. What can you do to associate with others and develop local communities based on the principles of capitalism and freedom?

MRFC Principles: (2,3,5,6,7,8,10,11,12,13)

References:

The Kibbutz Sheds Socialism and Gains Popularity
http://www.nytimes.com/2007/08/27/world/middleeast/27kibbutz.html?_r=1&pagewanted=all

Supreme Court to Review Broadcast Profanity Rules

HIGHLAND, UT | 27 March 2008 | Arguments about the proper role of government regarding the First Amendment have recently flared as the Federal Communications Commission (FCC) changed its rules about “fleeting expletives.” The basic argument in this story is whether government has the power to regulate and fine networks when expletives are used during live broadcasts.

Key Points:

• The FCC has recently changed its policy making it a violation for broadcasters to allow “fleeting expletives” to be aired. Previously, such fleeting expressions were allowed under certain circumstances.
• A federal appeals court said the new policy was invalid and could violate the First Amendment. The first Amendment states, “Congress shall make no law…abridging the freedom of speech, or of the press.…” The federal appeals court is in essence saying the FCC ruling is an act of Congress abridging the freedom of speech.
• The Founders’ intent with this prohibition against the federal government was intended to protect those who chose to speak out against the government and was not intended to protect profanity or other vices.
• William Blackstone, predecessor of the Founders and British proponent of man’s rights, stated in 1758, “Every freeman has an undoubted right to lay what sentiments he pleases before the public….But if he publishes what is improper, mischievous, or illegal, he must take the consequences of his temerity.” Profanity is, in effect, improper and mischievous in a moral society.
• The FCC’s appeal is that the court has left the FCC accountable for “the coarsening of the airwaves” with no authority to address the situation.
• The involved networks say the old policy of allowing “fleeting expletives”, in place for 30 years, worked well and should not be suddenly changed.
• The Supreme Court will hear the case this fall.

Conclusion:

The debate over rights guaranteed by the First Amendment are important to a thinking and vigilant individual. One of the gems of the United States Constitution, the right of an individual to express himself should be protected for the individual. Clearly understanding this principle is the duty of each citizen. Also, understanding the government’s proper role in this matter is a critical element. Our Founding Fathers believed and taught that the Constitution was built upon the foundation of morality. John Adams said, “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” Further, Benjamin Franklin noted, “Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters.” Does the government have the right to regulate the use of certain words over the airwaves of the country? A moral society chooses to regulate itself through independent constraint and general respect for one’s neighbors.

Action Steps:

1. Review the First Amendment to the U.S. Constitution.
2. Read Principle 216 of W. Cleon Skousen’s Making of America.
3. Consider the statements by John Adams and Benjamin Franklin quoted above. Discuss in a family council meeting how to remain free under the Constitution by living virtuous lives.
4. Read the 30-year old ruling between FCC vs. Pacifica Foundation.

MRFC Principles: (3, 4, 11, 12)

Resources

Mark Sherman, AP. “Court Will Examine Profanity Rules,” March 17, 2008

The Constitution of the United States of America, Amendment 1

Skousen, W. Cleon. The Making of America. National Center for Constitutional Studies (NCCS), Washington, D.C. 1985. p. 688-9

Skousen, W. Cleon. The 5,000 Year Leap: 28 Great Ideas that Changed the World. NCCS, Washington, D.C. 1981. p. 49, 56

Credible Worries: Fed Causing Next Depression

ALPINE, UT | 14 March 2008 | Everyone like to talk about the economy these days but very few people have the gravitas and credibility to send out warnings to the general public like those now rolling out almost daily. While wanna be experts and pundits through out casual references and sensational warnings about America’s current economic woes seldom have institutional voices been so dramatic in their assessments. That is until recently when Telegraph writer Abrose Evans-Pritchard has published a series of startling stories about the criticism and warnings now coming from inside “the close-knit world of central banking.” In a stunning interview with 92 year old Anna Schwartz the Telegraph probes the shocking revelation by a revered figure at the Fed that Read more