Here’s a very good read on the virtues of capitalism in today’s Wall Street Journal from Charles Murray. A snippet:
From the dawn of history until the 18th century, every society in the world was impoverished, with only the thinnest film of wealth on top. Then came capitalism and the Industrial Revolution. Everywhere that capitalism subsequently took hold, national wealth began to increase and poverty began to fall. Everywhere that capitalism didn’t take hold, people remained impoverished. Everywhere that capitalism has been rejected since then, poverty has increased.
What happened to turn the mood of the country so far from our historic celebration of economic success?
Murray goes on to answer that question. First, he blames it on collusive capitalism — which he breaks into two parts: crony capitalism and government collusion.
He also assigns blame to those with earned success who are unwilling to defend themselves because they have a liberal mindset and seem embarrassed by their good fortune.
I’ll add to those thoughts.
People often mistake collusive capitalism for capitalism. They cannot separate the crony and collusive parts from capitalism itself. I think it would be clearer if we take the word capitalism out of the description and simply call it cronyism and collusion.
As Milton Friedman pointed out in this video, all societies have greed. Greed is not unique in capitalism. It is human nature. If all we had was capitalism and greed, we’d be okay. Capitalism directs greed into productive pursuits that benefit others. That results in earned success. As Murray points out, that is embodied by Steve Jobs, Thomas Edison and even Mitt Romney.
But greed also leads to cronyism and collusion. That is toxic. Rather than earned success, that leads to bending the rules (i.e. reducing the our freedoms) to gain unfair advantages. Those are embodied by the fat-cat, cigar-smoking, well-connected folks that feed our images of capitalism gone awry. This means that it was illegal for me to willingly assemble bikes for a local bike shop owner when I was a kid. I was underage and made less than minimum wage. The third parties who passed those laws might say that bike shop owner was evil, or that I was taking away job opportunities for others. But for those involved — myself, the bike shop owner and my parents — the arrangement worked out well.
But the key insight is that real capitalism is the best check against those rent-seekers, it’s not the cause. Neither is greed by itself. Cronyism and collusion are the causes.
Capitalism is the conjured, tabloid and propagandized evil. The way our society treats it reminds me of the fictional propaganda war waged against Harry Potter in the final book of J.K. Rowling’s popular series. The evil folks were in charge and spun everything they could to make Harry Potter look like the bad guy. They even had the media on their side, as the magic community newspaper, The Daily Prophet, wrote regular and unbalanced screeds against the evils of Potter. With J.K. Rowling’s brilliance, she made those screeds remarkably similar to the reporting we see here in the muggle world.