Don't Kill Off the Economic Strength of the United States

[Updates below.]

Thomas Bray in The Detroit News has a nice op/ed on the current state of American capitalism as compared to the capitalism developing in other countries.

Rising competition stalks U.S. capitalism

A specter is stalking American capitalism: the rise of capitalism in other, far more populous, regions of the world.

Once upon a time - say, before the Berlin Wall fell in 1989 - it was assumed that the major challenge to American economic preeminence was the socialist/communist model. But that model has collapsed almost everywhere except on a few university campuses, where intellectuals - famously defined by the late Bishop Fulton J. Sheen as people who have been educated beyond the limits of their intelligence - still imagine themselves smarter than markets.

In place of the socialist model have come aggressive forms of capitalism in places like China, India and Eastern Europe. Such countries are still far poorer than the United States, but they are cutting taxes, deregulating industries and encouraging the kind of cowboy capitalism that powered the United States to world leadership in the late 19th and early 20th centuries.

Mr. Bray goes on to note changes in both John Kerry's and President Bush's stance towards free markets and the vast numbers of people scrambling for freedom in China, Eastern Europe, and India (thereby greatly expanding the potential and actual marketplaces for goods and services). He also mentions "the forces of reaction" and their aggression to free markets in the form of

...steep progressive taxes on the wealthy (the top 10 percent of U.S. income earners pay 52 percent of income taxes), high corporate taxes (the average U.S. corporation pays 40 percent of its profit in federal and state tax, compared with 33 percent in officially Communist China and 24 percent in Russia, according to the accounting firm of KPMG) and crushing regulatory and legal burdens.

He ends with a simple and obvious observation:

The challenge to America comes not from government-directed economies, whether of the socialist or the equally tattered Japanese model, but from countries that learned the capitalist lesson and now play by the same rules that made America No. 1. The U.S. response should not be to shut out the competition - an impossibility in any case - but to remember how it got to be No. 1 in the first place.

Copyright © 2004 The Detroit News.

The shortsightedness of so many politicians, media figures, and interest groups is shrouding this indisputable and straightforward concept. The reason why the United States of America became such an economic powerhouse isn't because we used the force of government to direct our energies. It's because we respected private property more, we tolerated freedom of speech more, and we hold less animosity towards profit. In short, we held individual freedom and personal responsibility in higher regard.

When other countries see the failure of the opposite approach and make gains in reversing their statism, it's only natural that America will face stronger competition. Going back on the principles that made us strong (and still make is strong, relatively), will not only make no real gains; it will make us weaker.

UPDATE(5/10/2004 8:10am)
Another good editorial, this time from the Las Vegas Review-Journal: Capitalism and the masses: Americans used to understand that the first was the best solution for the second

In San Francisco this week, Peruvian economist Hernando de Soto, who in 1980 founded the Lima-based Institute for Liberty and Democracy, accepted the second Milton Friedman Prize for Advancing Liberty.

The $500,000 award, named after Nobel Prize-winning economist Milton Friedman, is awarded by the Cato Institute, a Washington, D.C.-based think tank, to an individual judged to have made a significant contribution to advancing human freedom.

Author of books "The Other Path" and "The Mystery of Capital," de Soto encourages peasants working in marginal jobs to consider themselves part of the "formal" economy. He argues that poor people should use their property -- farms, jitneys, pushcart taco stands, scooters, chickens, huts -- to apply for loans and expand their businesses.

But his philosophy -- which encourages taxi drivers and street corner gum vendors to consider themselves capitalists -- has resulted in political attacks from Latin America's landed aristocracy, authoritarian regimes, labor unions and Peru's Maoist terrorist group, the Shining Path. He's survived at least three attempts on his life, and his office has been sprayed with bullets.

It is one of the more harsh and unpleasant ironies of life that, for the most part, those radicals who claim they revolt against the power structure and say they want "freedom" for the oppressed have nothing but the vilest hatred for and act violent towards those few people who actually advocate real freedom for individuals.

The Associated Press commented that de Soto "is a rarity among economists: a champion of both capitalism and the rights of the impoverished masses."

[...]

But over the centuries -- despite the failed attempts of Keynesians and other collectivists to hold otherwise -- economists from Adam Smith to Ludwig von Mises to Murray Rothbard to Hernando de Soto have observed that prosperity is most widespread when men and women are left at liberty to accrue wealth and trade their goods and labor freely.

The AP writer is a victim of a common misunderstanding -- that those who champion capitalism favor only the interests of "the greedy rich," while anyone who feels compassion and sympathy for the poor must surely understand the necessity of sending men with guns to the homes of the rich, there to seize some quantity of their stuff and redistribute it to the poor.

This stuff wasn't taught in high school. It was presented as a simple, zero-sum dicotomy: you were either for the good of all or for the wealthy. The common man versus the rich. Serious capitalist economists have long ended the intellectual vacuum such teachings left, but they are ignored for the most part these days. Socialism - forced collectivization - doesn't work.

The Communists tried it in Russia for three generations. It failed utterly. The only ones who didn't end up broke were the millions who ended up dead.

If it seems unusual to today's Americans to find a learned economist who understands this, then perhaps we need to ask why so many of America's economists (both in our political capitals and on our college campuses) still embrace a mid-20th century redistributive economic model that had already proved a dismal and deadly failure by the time of the deaths of its greatest champions: Lenin, Hitler, Stalin and Mao.

Copyright © Las Vegas Review-Journal, 1997 - 2003

Posted by Drizzten at May 09, 2004 02:25 PM