What is capitalism?

There is an interesting thread at Powerline on the question What is socialism? The central aim of socialism has always been to rid ourselves of the capitalist system. And what, exactly, do these socialists wish to get rid of? Certainly not the phenomenal flow of goods and services that a capitalist economy provides. If socialists promise anything, they promise that there will be even more for everyone, so it’s not getting rid of the bounty that a properly managed economy brings that they seek.

What the actual aim of socialists has always been is to get rid of the capitalists. But why the wish to rid ourselves of the capitalists who open, own and run the businesses that create the goods and services we consume? Why the resentment against the very people who make this abundance possible? That is the issue, and it is at the heart of the divide between the socialists on the one side and those who support the market mechanism and free enterprise on the other.

Why do socialists see no role for the entrepreneurial class? This is a true puzzle since no socialist has any idea how to run an economy from which capitalists have been removed. No socialist economy, in which its capitalists have been discarded, has ever succeeded. Every such economy has been immediately plunged into poverty. Every economy without an entrepreneurial class of independent individuals to run its businesses, to produce and sell inputs to each other, and to sell consumer goods to everyone, has become impoverished. All this is known with a perfect certainty, yet socialism retains an allure that large proportions in every market economy are unable to resist. Against all the evidence of more than a century of socialist experimentation, there is still somehow the belief that you can replace capitalism with a socialist system and maintain living standards. Some people really do not learn from history.

As a first approximation, the problem that capitalism leads to is the wealth earned by those who have no obvious merit and desert to those who wish to see the market system replaced. Why can’t the government do exactly what the owner of a business does, and without having to receive such a large amount of money.

The owner of a business will typically make far less than any number of star athletes. But those athletes have a demonstrable skill that most people do not have, allowing them to excel at whatever particular sport they play. Everyone can see it, few others can do the same, so there is no resentment at the millions athletes are paid.

Same again for rock stars and actors. Everyone can see what they do, and admire their ability, fame and celebrity. The same in a way goes for doctors, who may be neither famous nor celebrated, but have a skill set everyone depends on and are willing to see rewarded for what they do.

Let us look even more closely at these categories. Whether one becomes a sports star or entertainer, there is an apprenticeship through which their in-born talents are developed. But whatever talent these people have cannot be distributed to others. A football player’s stock in trade is playing football. An actor’s skill is in acting. The skill that has made them wealthy and famous cannot be spread through the entire population. They are just what they are and are unique to the individual.

But those who own, run and manage businesses have no obvious talent visible to the vast bulk of the population who understand little of what is required to run a successful business. Few appreciate it. Many think they could have done the same had they made the effort. And anyway, why should someone own and control millions of dollars worth of assets, even if they did accumulate all of it themselves by building a profitable enterprise?

But there is even more to this resentment than just this. It is the “intellectual” classes – the media, public sector and academia – who are peopled by individuals who had done best in school, who had graduated at the top of their class. Here they are, the smartest people in the country, yet earn ordinary incomes. Meanwhile, these business morons, who couldn’t finish a sudoku, or have no idea who Foucault was or what he wrote, here they are earning large incomes running a factory making bricks or producing shoes.

Capitalism is an ingrained feature of a political system that prizes freedom, in which each of us makes decisions for ourselves about many things in our own lives, which includes how we will earn our incomes. Some individuals will decide to earn those incomes by running a business.

Socialism in contrast is a system where the people who got the highest marks at school think they will make those business decisions instead, even though they are often the first to be put up against the wall.

Capitalism is a system in which those who run businesses have to go through the same process in getting to the top as do athletes, by overcoming the enormous competition of others to achieve their goals by being the best at what they do.

Socialism is instead a system in which the non-talented, without any of the necessary gifts for management, get to run our economies because so many others resent the incomes received by the people who are able to run profitable businesses.

Capitalism is how an economy runs if no one is running it. People just get on and produce, sell and buy.

This is what socialism is: replacing the owners of businesses, either with managers employed by the state, or with government-appointed overseers who direct what the business should do.

In all of the different variants on a socialist system, there is a central plan that each of the state managers must follow. No one in an enterprise reacts to the market, that is, to the demands of people who wish to buy the product, or to changes in the structure of supply. They just follow the plan as best they can.

The people who formulate these plans have no means to make the system work, although they think they do. But by the time everyone, including themselves find out how useless they are at running an economy, they are entrenched behind a row of guns and cannot be removed.

Here is an observation from the Powerline comments thread that captures important parts of these issues.

In its most basic sense, “socialism” is CONTROL. Control of the economy, control of society, control of YOU. This is the basic nature of all modern “socialisms” – communism, fascism, progressivism, liberalism. Socialism is the enemy not of “capitalism” – that’s just a Marxist label – but of free markets, a free society, a free people. But it’s worse than just control; it’s invariably very poor control. It doesn’t work. Nobody’s smart enough to dictate every aspect of an efficient economy, and nobody’s honest enough to be trusted to even try. But, poor quality or not, the surveillance and control/police state are vital components of any socialist system; it can’t even theoretically work without control.

Socialists will be our ruin.

2019 Battle Lines: Capitalism and Growth (L-N) versus Socialism and Degrowth (ALP)

The story is from the US and about them but applies to us just as well: 2020 Battle Lines: Capitalism and Growth (R) versus Socialism and Degrowth (D). Here is much of the article but there is more at the link.

https://www.youtube.com/watch?v=RG9N4ZP5MQA

Alexandria Ocasio-Cortez is a character familiar to anyone who has spent substantial time on campuses in the past two decades

She’s a walking, talking social justice warrior soundbite machine, someone whose knowledge is a mile wide and an inch deep. Social media, where she excels, is perfect for shallow but woke wisdom.

At one level, she is the gift Donald Trump and Republicans could not have hoped for in their wildest dreams. Her wacky Green New Deal is so preposterous in many of its details and in its totality, it is a caricature. It’s a prime example of what I call Progressive or Parody?, where it’s “very hard to distinguish progressive political and social positions from parody.”

That four of the leading Democrat presidential candidates (Harris, Warren, Booker, Gillibrand) rushed to co-sponsor or endorse the Green New Deal will be a theme Republicans will drive home from today through Election Day 2020. That these four kneecapped themselves as General Election candidates is Ocasio-Cortez’s greatest accomplishment (for Republicans) so far.

At another level, though, Ocasio-Cortez should be taken seriously precisely because she is a character familiar to anyone who has spent time on campuses in the past two decades. She represents an ignorant ahistorical adoration for socialism that has captured a significant portion of the Democratic Party. Socialists like Ocasio-Cortez are the energy in the Democratic Party, which explains why presidential candidates immediately jumped on her bandwagon.

Capitalism versus Socialism is one battle line for 2020. Whether or not the ultimate Democrat nominee endorses the Green New Deal, the Green New Deal will be made to be the Democrat platform whether Democrats like it or not. Let’s have a vote on Capitalism versus Socialism.

At another level, it’s not just Capitalism versus Socialism. In listening to a 2015 audio of Mark Levin, I heard a term I had not heard before: Degrowth.

What is Degrowth? An academic association devoted to Degrowth describes it as follows:

Sustainable degrowth is a downscaling of production and consumption that increases human well-being and enhances ecological conditions and equity on the planet. It calls for a future where societies live within their ecological means, with open, localized economies and resources more equally distributed through new forms of democratic institutions. Such societies will no longer have to “grow or die.” Material accumulation will no longer hold a prime position in the population’s cultural imaginary. The primacy of efficiency will be substituted by a focus on sufficiency, and innovation will no longer focus on technology for technology’s sake but will concentrate on new social and technical arrangements that will enable us to live convivially and frugally. Degrowth does not only challenge the centrality of GDP as an overarching policy objective but proposes a framework for transformation to a lower and sustainable level of production and consumption, a shrinking of the economic system to leave more space for human cooperation and ecosystems.

Watch this video promoting degrowth, and it sounds a lot like the Green New Deal.

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And in Oz, these people have already blown up power stations and are dead set on a socialist-green agenda. There’s a lot of stupidity around. I just hope there isn’t that much, but we shall see soon enough.

Capitalism is the only economic system that works

Wandering through the city’s bookshops yesterday I came across this: Is Capitalism Obsolete? with the subtitle, “A Journey through Alternative Economic Systems”. I live in hope that there will be at least one volume somewhere that has no for an answer. Haven’t seen anything in years. The above is my picture of the back cover. If you read how they advertise the book, you will find the least unexpected turn in the history of modern publishing.

After communism collapsed in the former Soviet Union, capitalism seemed to many observers like the only game in town, and questioning it became taboo for academic economists. But the financial crisis, chronic unemployment, and the inexorable rise of inequality have resurrected the question of whether there is a feasible and desirable alternative to capitalism. Against this backdrop of growing disenchantment, Giacomo Corneo presents a refreshingly antidogmatic review of economic systems, taking as his launching point a fictional argument between a daughter indignant about economic injustice and her father, a professor of economics.

Is Capitalism Obsolete? begins when the daughter’s angry complaints prompt her father to reply that capitalism cannot responsibly be abolished without an alternative in mind. He invites her on a tour of tried and proposed economic systems in which production and consumption obey noncapitalistic rules. These range from Plato’s Republic to diverse modern models, including anarchic communism, central planning, and a stakeholder society. Some of these alternatives have considerable strengths. But daunting problems arise when the basic institutions of capitalism—markets and private property—are suppressed. Ultimately, the father argues, all serious counterproposals to capitalism fail to pass the test of economic feasibility. Then the story takes an unexpected turn. Father and daughter jointly come up with a proposal to gradually transform the current economic system so as to share prosperity and foster democratic participation.

Capitalism means a system of production in which the ownership of firms is in the hands of private individuals who use the capital they buy, rent or own, while directing the employees they hire, to produce goods and services in a lawful way to sell what they have produced to others in order to earn a profit for themselves. There are lots of variations on the theme but that is essentially it. Nothing else has ever worked, nothing else will ever work, however many fools and their fictional daughters there may be who think they have come up with something else.

Capitalism and ignorance

From Three wild speculations from amateur quantitative macrohistory but there is nothing wild about the diagram other than how ignorant most people are about what it shows.

In How big a deal was the Industrial Revolution?, I looked for measures (or proxy measures) of human well-being / empowerment for which we have “decent” scholarly estimates of the global average going back thousands of years. For reasons elaborated at some length in the full report, I ended up going with:

Physical health, as measured by life expectancy at birth.

Economic well-being, as measured by GDP per capita (PPP) and percent of people living in extreme poverty.

Energy capture, in kilocalories per person per day.

Technological empowerment, as measured by war-making capacity.

Political freedom to live the kind of life one wants to live, as measured by percent of people living in a democracy.

Two million years of “human” history where the only tools were made of stone, and then a bronze age, iron age, industrial revolution and now us.

We now have morons [who call themselves “progressives”!] trying to take us back in time to just where I don’t know, perhaps 1890, maybe 1920, but certainly to a time of greater poverty and fewer chances in life. The diagram is only for us because most of those trying to kill off our carbon-based energy sources would be too thick to understand any of it since the basis for their entire ideological view of the world is a hatred for the capitalist system that has transformed the human race.

Torah studies in China

Now here’s a story, from Michael Ledeen. It’s called The Chinese and the Jews. This is how it starts:

Over the past couple of decades the Chinese have become more interested in the Jews. Of late the Chinese regime has been bringing Jewish scholars and theologians to the People’s Republic to discuss Torah, Talmud, Mishnah and even some of the more mystical tracts.

Now why would that be? Again some answers:

Back when the country’s greatest modern man, Deng Xiaoping, converted the PRC economy to capitalism, Chinese “social scientists” went to work trying to figure out what makes capitalists tick. They were quickly baffled. They kept running into problems; that “knack” we’ve got somehow eluded their new system. After a while, they figured out that the capitalists’ success couldn’t be entirely explained by the nuts and bolts of the marketplace, or by institutions like private property, important though they were. Yes, it would have been easier just to read Michael Novak’s magnum opus, but they got to his end place: religion is an essential part of successful capitalism.

In their amazing way of organizing most anything, the Chinese launched churches, and of course millions upon millions of them attended Christian (mostly Catholic) services. To be sure, the Party kept a suspicious eye wide open, and some of the churches were deemed too dangerous, even in the cause of Communism. But on they went, convinced they were on the right path. If anyone doubted it, they had mountains of research and even Tocqueville to justify the turn to religion.

After a couple of decades of this, there were still problems, and their social scientists took another look. This time around, they found–surprise!–lots of Jews involved in capitalist enterprises, from banks to stock exchanges to corporations. Indeed, the Jews had a history of doing it. Maybe the Jews knew something the others didn’t? Well, look at Israel…or New York…

And so they’re talking to Jews, not about capitalism but about Judaism. State radio now broadcasts in Hebrew. The Jewish experts who are brought to China find themselves speaking Hebrew with their Chinese interlocutors. Chinese students can now learn Hebrew, and immerse themselves in Jewish studies.

The world can sometimes be hilarious.