In the Grip of Madness
Filed Under: Headline • Ideas and Consequences
Tags: Bailouts • handouts • inflation • intervention • Social Security • socialized medicine
“Thank God we had the federal government last week to bail out the private sector!” That is what a rather statist friend of mine declared a year ago as the economy tanked, almost gleeful that the financial crisis seemed to be proving how much we all need a massive federal establishment to both regulate and rescue us.
Never mind the federal government’s own indispensable role as an enabler in the crisis, from its reckless monetary policy to its jawboning banks into making dubious mortgage loans. Never mind the long-term danger of its assumption of colossal new obligations and the moral hazard in the message its intervention sends. My response to my friend was of a more narrow focus. “Thank God we have the private sector to bail out the federal government not just last week, but every week!” I exclaimed.
Think about it. Taxes on the private sector pay a majority of the federal government’s bills. For most of the rest, the government borrows by selling its debt obligations, mostly to private-sector entities–including banks, insurance companies, and individuals.
The federal government is the world’s biggest taxer and the world’s biggest debtor. If those of us in the private sector didn’t pay our taxes or didn’t buy Washington’s paper, the feds would have gone belly-up decades ago. We’ve rescued Washington to the tune of tens of trillions of dollars over the years. A big difference between Washington’s bailing out the private sector and the private sector’s bailing out Washington is that the private sector has to work, invest, employ people, and produce goods to come up with the cash. It can’t create it out of thin air like Ben Bernanke can.
Our friends in Washington have blessed us with future burdens almost too astronomical to comprehend. In the name of taking care of us in our old age, we are saddled with no less than $6 trillion in Social Security payouts over the next 75 years–for which there are no presently earmarked funding streams. According to Brian Riedl of the Heritage Foundation, the unfunded obligations for the new federal prescription drug program, enacted under President Bush, total another $8 trillion.
On and on it goes. The private sector has an awful lot of bailing out to do in the coming decades. I shudder to think how deeply we taxpayers will have to dig in the not-too-distant future to pay the bills of our benevolent, compassionate, and forward-thinking government.
Since Barack Obama took office in January 2009, the federal government has spent a full billion dollars every single hour. Before his term is half over, federal spending will have doubled in just a decade. The deficit in one year’s budget is now as large as the entire budget in George W. Bush’s first year as president, 2001–and I thought not very long ago that the spending spree he and the Republicans gave us would be tough to beat! The flood of red ink is now adding to the national debt to the tune of about $4 billion every day. At well over $11 trillion, that debt amounts to $37,000 for every living American.
Too Big to Succeed?
We’re told by the wise planners in Washington that certain private firms are “too big to fail.” So we’re handing big chunks of them over to the government.
The question we all should be asking ourselves is this: Are we trusting our economy and our lives to a government that is too big to succeed?
Once upon a time in America, most citizens expected government to keep the peace and otherwise leave them alone. We built a vibrant, self-reliant, entrepreneurial culture with strong families and solid values. We respected property and largely kept the spirit of the Eighth and Tenth Commandments against coveting and stealing. We understood that government didn’t have anything to give anybody except what it first took from somebody and that a government big enough to give us everything we want would be big enough to take away everything we’ve got. We practiced fiscal discipline in our personal lives and expected nothing less from the people in the government we elected, or we threw them out.
But somewhere along the way we lost our moral compass. And just like the Roman Republic that rose on integrity and collapsed in turpitude, we thought the “bread and circuses” the government could provide us would buy us comfort and security.
We gave the government the responsibility to educate our children, though government can never be counted on to teach well the main ingredients of a free society–liberty and character–or just about anything else, for that matter. We asked the government to give us health care, wel fare, pensions, college education, and farm subsidies, and now our politicians are bankrupting the country to pay the bills. This welfare state of ours has become one big circle of 305 million people, each with his hand in the next fellow’s pocket.
This is a government whose reach even before the financial crisis scarcely left an aspect of American life untouched, from the cradle to the grave and the volume of our toilet-bowl water in between. As a portion of our personal income, its tax and regulatory burden consumes at least five times what it did just a century ago. But to the majority on the Potomac, government is nowhere yet big enough. This is madness writ large.
Stick to the Knitting
Remember In Search of Excellence, the 1982 best-selling management book by Tom Peters and Robert Waterman? One of its salient points is that an organization gets off track when it no longer “sticks to the knitting.” When it allows its mission to blur and stretch far beyond its founding design, when it becomes distracted by endless and dubious new responsibilities, its core competency evaporates. It will fail to do what it is supposed to do, because it’s doing too much of what it’s not supposed to do.
It may come as a surprise to those who see aspirin made in Washington as the cure for every ailment, but the federal government is not God. It can’t even be a good Santa Claus. It’s no Mother Teresa either, because on those occasions when it does some good it usually costs an arm and a leg and sends a big part of the bill to generations yet unborn. The fact is, the bigger government gets, the more it starts to look like Moe, Larry, and Curly.
Accentuating the madness of the present day, the cover of Newsweek declared last March, “We are all socialists now.” Pardon me, but I’m not about to sign on to a proven flop.
Comment by Jerol on 26 August 2009:
Your opinion that big government is a tyrant and big business is the knight in shinning armor is short on a lot of historical facts. I have not seen the discipline you suggest exercised willingly by business. Government may not be the solution to all problems but it is the only champion for the people that stands between freedom and slavery.
Comment by Lawrence W. Reed on 26 August 2009:
Jerol,
You create straw men right from the start, most notably the claim that I said “big business is the knight in shining armor.” You cooked that up on your own. I never said such a thing and have often been critical of big business, especially those that use their political connections to get something from government they can’t secure voluntarily in a free and competitive marketplace. Nor am I an anarchist. I’m a limited government advocate in the mold of America’s Anti-Federalist founding fathers. As to government being “the only champion for the people that stands between freedom and slavery,” I hardly know where to begin. No business is claiming 40% of my income. No business threatens to put me in jail if I don’t buy their product. Are you aware that the people of North Korea, Cuba, etc. are enslaved by governments, not businesses?
Comment by James Madison Fan on 26 August 2009:
Jerol,
While I agree that economic tyranny is no better than governmental Mr. Reed is correct when he points out that our government sometimes goes too far, Rep or Dem.
Quite often Washington forgets that the people they are supposedly trying to help are the people that are paying the bills in the first place.
For instance, rather than putting out these ridiculous checks and tax breaks in an effor to return money to people how about lowering the tax rate and not taking the money instead of returning it after the fact? Think about how much money that would save in the government printing millions of checks or having the IRS doulbe check refunds for fraud but that solution never occurs to them because they think it is their money and they want to appear benificent by returning it to us rather than simply letting us hold on to it.
We need to keep any eye on Washington as well as their corporate masters. Neither one can be trusted.
Comment by Ken on 26 August 2009:
Yes, but tell us aboutthe three stages of inflation?
Comment by Jeanne Kipp on 27 August 2009:
Bravo! Nice job of nailing the excesses of our government as well as the fundamental flaws. Among others, I loved the phrase, “a government too big to succeed.” The fact you cite that under President Obama the government has been spending one billion dollars per hour since January 2009 is astounding. But will the voters throw the bums out?
Comment by aware on 1 September 2009:
What Jerol and James Madison Fan may not understand is that big(really big)business is not possible without big government. They act like adversaries but they are in league with each other like Siamese twins.
Corporations cry crocodile tears over taxes and the cost of regulation while collecting that cost from their consumers and handing it over to the State, thereby fulfilling their true role as back door tax collectors for the State. And the State makes and keeps the cost of taxes and regulations high so that competition is hamstrung and underfunded, thereby fulfilling its true role as enforcer of virtual monopolies.
This is just one small pile of crap in a vast stinking cesspool that is what we now know as big government. The more you pull the curtain back, the more wretched and wicked the sight of the savior State. It will spend its way to collapse and catastrophe. Thats how all the promises and benevolence ends. Its just a question of time.
Comment by James Madison Fan on 1 September 2009:
Aware,
No problems. My core is that neither side of the isle has a monopoly on idiocy and both are prostitutes to Big Business. The only question is what color dress they are wearing, red or blue.
My problem with many supposedly “Libertarian” articles I read is that many are so focused on avoiding despotism that they never stop to consider economic tyranny. I find it ridiculous to be so worried about oppression by the government that we play into the hands of their ethical twins in the private sector.
A slave is a slave regardless of who controls the yoke.
Comment by aware on 2 September 2009:
James Madison Fan….in a true freemarket, not twisted and impeded by State regulators with biased policies, no business has the power to compel you to do business with them. You can simply vote with your feet and money and go to their competition or just choose not to buy at all. Business can entice but it has no power to compel.
But through the State, business can get laws put in place that do compel. The State is the enforcer. It has the monopoly of violence and all the tools it needs to see to it that its decrees are followed. Bob Higgs\’ article elsewhere on this site says this better than I can. Put simply, business may make guns but it is the State that wields the guns with decisive effect. And if it needs to it can make the guns too.
As far as government tyranny being the focus of those concerned, libertarian and otherwise(me). The State is the center of the web. Since only it has the power to do as it pleases. When it does wrong there will be no authority to come along to arrest and punish. If the rule of law has not been too perverted, it may admit wrongdoing and pay some form of restitution(collected from the very ones it wronged). It may even, in some cases, send some low-level apparatchik to jail, but the systemic nature of the abuse is never called into question and all gets back to normal as soon as the public\’s attention moves on.
Business tyranny, such as there is, is but a symptom of the disease of State tyranny. Self reliant citizens may be a threat to the businessman\’s pocketbook, but they are a threat to the very existence of the State. The State is trying very hard to replace the love of money as the root of all evil. And doing a damn good job of it.
Comment by James Madison Fan on 2 September 2009:
Aware,
I do not think that draconian Capitalism circa the Industrial Revolution is preferable. Child labor was rampant. Men could not vote with their feet because most employers offered the same wages via collusion and there was also the practice of black listing. Work days were 16 hours. No over time. Wages were nil. The upper 1% of the nation owned 95% of the capital. This went on for more than a century. The rancid conditions for workers in the 1800\’s coming into the 1900\’s is what turned people against Capitalism and motivated Marx in the first place.
That\’s also why the US economy took off once the anti-trust laws, overtime laws, and labor unions finally put an end to the Robber Barons. That system was no better than Russia under Stalinism. All work and no play makes Jack a bad worker not to mention a terrible consumer. Once people got a taste of the riches their labor created the economy exploded. That\’s why the US was able to out produce the rest of the world combined in World War II. “A rising tide raises all ships.”
We are a consumer nation because the average worker can afford to be a true consumer rather than someone that lives hand to mouth watching from the sidelines as the rich alone consume. This expanded the economy from a handful of uber rich spending money on monuments to their own greed to “Joe Sixpack” buying a car, fridge, washer and dryer, and sundry so he can do something besides work.
The moderation and elimination of the more predatory aspects of Capitalism is the best thing that could have happened to our economy, our freedoms, and the country as a whole. I think Smith would agree since he warned about the effects of excessive greed in a Capitalistic economy (i.e. oligopolies and monopolies). This is why we enjoy one of the highest, if not the highest, standards of living. I see nothing positive in revisiting the “good old days” of rabid Capitalism when it is every bit as much a threat to our freedoms as rabid government interventionism. Both must be put down without equivocation or we are simply exchanging a governmental lord for a corporate master.
Comment by aware on 3 September 2009:
JMF, you say this as if everyone, without exception, was condemned to this existence. And what the hell is “draconian Capitalism”? What you are describing is industrialization, which is a whole different critter than capitalism. If you think these conditions are indicative of capitalism then why is it that things were as bad and even worse in Stalinist Russia fifty years later when they began to industrialize? Last time I looked there weren’t any capitalists involved in communist systems.
Most of the conditions you describe were a result of ignorance rather than wickedness. It is too easy and wholly dishonest to pass moral judgment on the past with the advantage of hindsight, though this seems to be a popular exercise among the morally bankrupt of today. Always easier to see the sins of others than ourselves, isn’t it?
Do you really believe that the businesses wanted to intentionally work their employees to early graves? Then who would build their products and how would they make profits then? I’m reminded of what a member of the band Judas Priest said when they were cleared of wrongdoing in a case where they were charged with inducing the suicide of one of their fans. He said why would we want our fans to kill themselves so then there would be no one to buy our records.
If you would look at how Henry Ford improved conditions for his employees in the early 20th century you will have to modify your narrow reading of history. It was he that gave us the 40 hour week without any regulations from the State. Only 20 years later did this become the law of the land.
History is an account of human affairs and as such it does not fit a nice, tidy narrative we would like it to. Instead it is messy with many exceptions and contradictions. That is why it must be STUDIED not just read through like a nighttime story. And it is written by men with biases, which ends up adding another layer of confusion, willful or otherwise.
In short, the conditions you describe existed because the lawmakers allowed them. Only when it became politically advantageous did the State change their tune and begin to outlaw the worst of the abuses. The State could have changed the situation at any time it chose, so why didn’t it?
Comment by James Madison Fan on 3 September 2009:
Aware,
To clarify, even though early Capitalism was quite brutal for the majority of people, it was preferable to the Feudal system that it replaced in most ways since it allowed the development and expansion of a middle class that did not exist or had limited existence previously. However this is only relative.
The thing that made the poverty obvious compared to feudalism is that the industrial condensed the poverty in urban and suburban areas as opposed to spreading it out across the countryside in rural areas.
While the squalor did not affect 100% of the population it did affect the majority and the conditions were appalling resulting in laws designed to reduce or eradicate the most egregious of these issues such as setting the minimum age of employment at 9, limiting work hours for kids under the age of 18 to a meager 12 hours per day, and requiring businesses to provide access to clean water and toilets. As reasonable as these laws might appear they were still met with protests from the poor as well as the rich.
I am not a fan of cradle to grave welfare or a minimum wage but I do not see anything wrong with forcing businesses to share the wealth with the employees that make it possible.
While the origins of Capitalism and Industrialization can be traced back centuries before the Industrial Revolution, Smith wrote “Wealth of Nations” in 1776 in a strange coincidence that firmly connected the birth of the US, the spread of Capitalism, and the growth of industrialization.
Draconian means cruel or severe thus “Draconian Capitalism” would be Capitalism where a true laissez faire system is allowed to rule sans social programs and laws to keep the darker aspects of Capitalism in check.
The reason things were worse under Stalinism than under Capitalism is that while the Capitalists were bad, Joey was worse. Slavery is relative. Looking back to Rome some slaves of the very rich were treated extremely well living better lives than most free men, the average slave was treated like a horse given adequate food, clothing, and shelter to live reasonable lives, some were rented out or prostituted, and some were beaten to death in less than a year working in quarries All masters are not equal.
The conditions I describe were the result of greed rather than a moral condemnation. If you found the conditions I described reprehensible that is your own conclusion and I agree with your assessment.
Businesses typically do not set out to kill people but many do not care as long it does not cost them money. Modern examples include “Love Canal” and the Chromium contamination in Hinkley (Erin Brockovich) not to mention Big Tobacco which is killing thousands on a daily basis.
Capitalist canon: “Greed runs the market.” This was especially true when the Age of Enlightenment was in its infancy and human life (especially that of the poor) did not hold the same value it does today. Fans pay the Band. Less fans means less money. Businesses pay employees. Less pay means more money. If employee dies replace employee.
I do not have to “modify my narrow reading of history” when Ford Motor Company was not established until 1903 which is at the end of the period I am talking about and in the middle of the Labor Movement run by leaders such as E. Debs. While Ford was against labor unions he was a proponent of “Welfare Capitalism” so he was not typical of the period. Ford was an exception even in his time much less 50 to 100 years earlier.
I do not care about “nice, tidy narratives” I simply provide the facts and use these to draw conclusions. The State tried to implement laws to change the system and met with heavy resistance, including from the poor in many cases. What should the state have done? Implement laws unilaterally? Isn’t that the definition of the word tyranny?
Regardless of what you call (Draconian) Capitalism during the Industrial Revolution it was an oppressive system that resulted in economic tyranny. Revisiting that period in world history is no more desirable than revisiting Stalinist Russia, Maoist China, Fascist Germany, or the US under Good King George. Pretending that “more Capitalism” is a panacea in every situation is every bit as absurd as pretending that “more Government” is always the solution.
Comment by aware on 3 September 2009:
JMF, I am certainly not defending the excesses of this or any other period we could pick. And we could continue on this line in considerable depth, but the the point of contention is, I think, which is the more clear and present threat to liberty….big government or big business.
I maintain that the State is, and always has been that threat. Even big business does not wield near the power that the State can, and does. This is one of the reasons that big business(corporate interests) needs the State(big government) to even exist, it can’t defend itself. It is the State that has armies, police forces, jails, and other forms of rule-enforcing, retribution-dealing instruments to physically implement its decrees.
And as we see now, eventually there is no decree beyond consideration, constitutional or otherwise. Our current system(somewhere between republic[fading fast] and a democracy[looming large]) exercises more control, over more aspects of individual lives than the worst autocrat king in their time.
And the obvious trend is to even more control. Notice that it was the State that moved in and took over those big businesses deemed “too big to fail” not the other way around. In fact you can’t even imagine it happening the other way around because it is not possible. There was no resistance by the businessmen because what could they do? What can anyone do against the State?
What the corporate interests want is all the wealth but they don’t have the power to just take it. What the State wants is all the power but it doesn’t have the wealth to support the apparatus to take and hold it. By working together they both get what they want but the State is the enforcer with the gun in its bloody hand. As an aside, this systematic corruption can’t possibly be mistaken for a true freemarket, or even capitalism( no the terms are NOT interchangeable).
Because the State has a virtual monopoly on violence it is to be feared as nothing else of this world. Against this business threatens me with hellish working conditions I could walk out on anytime, or try to entice me to buy substandard junk I can say no to(even make my own widgets), or… what could compare to the muzzle of a gun?
Comment by James Madison Fan on 4 September 2009:
Agreed.
About the only thing I can take issue with is that the car businessmen went to Washington and asked to be saved same as Iacocca did in 79. That took a full yard of nerve. I bought a Dodge Van in 02. Never again.
When I was a kid the stuff coming from Japan was junk that was sold in bins like the stuff coming from China today. Now Sony runs the electronics market and two of the \\"Big Three\\" can\\\’t put together a product anyone wants to buy. Here\\\’s an idea. How about going back to basics and making a decent product, surrounding it with excellent customer service, and standing behind it. An entire room full of MBA’s can’t figure that out? Our universities must really suck.
Comment by aware on 4 September 2009:
AMEN!…..and its a damn crying shame too. The State\’s fingerprints are all over the blunt instrument in those 2 crimes too. As well as this system of partial corporatism that works to the benefit of the State and its favored clients. This perversion(the morphing of government into the State) is designed to accomplish exactly this result. Never better than now in fact.
In the last year a record amount of wealth was suddenly concentrated in the hands of the few and a lot of power was suddenly concentrated in the hands of the State. The State used that power to transfer that wealth, and still is, even more!
But the wickedness doesn\’t stop there, then these Masters of the Universe and their all able State convince the very people that were just fleeced, regular folks who cannot believe this kind of monstrous stupidity and evil of their dear leaders, that they were saved from the total collapse of Western civilization by the wise and prudent actions of their superior leaders, who know better whats good for you. Even worse, they are remarkably successful at this deception!(remarkable from a philosophical and analytical point of view, not from a looking around at what passes for a citizen point of view).
Proving that, in modern politics you don\’t have to fool all of the people, all of the time. Just most of the people, some of the time will get you the keys to the city.
Comment by James Madison Fan on 4 September 2009:
Addendum:
Since I can’t add to my previous post I wanted to add that as with Jerol the problem I have Mr. Reed’s stance is that it appears to be on the same course as Randian Objectivism which holds Capitalism as economic font from which freedom flows. This may be true to a certain extent but there is a point where philosophy and reality diverge and she wandered over this division with regularity. History proves that Capitalism can be abused just as easily as any other political, social, or economic model so it is no more rational to deify Capitalism than it is to deify government.
Some of the tenants of Objectivism I can agree with such as holding reason, fact, and logic as a core for any decision but Ms. Rand’s attempts to remove conscience and obligation from the societal matrix is not a positive since it is this desire to help each other that allows humans to build on the work of others making life better for future generations. Self interest only goes so far because we only live so long. There comes a point where we are working for the good of our children and grand children and the future of the society and culture they will live in rather than ourselves. That is the reason Man has risen to our current level of development. Men helping Men become something better than a single Man could ever achieve on his own regardless of if this is killing a mammoth or sending a Man to the Moon.
Comment by James Madison Fan on 4 September 2009:
“In the last year a record amount of wealth was suddenly concentrated in the hands of the few…”
Exactly. The rich currently own more of the nation as a percentage than at any time since the Robber Barons. What many people consider the “golden age” of America and the middle class (40’s, 50’s, into the 60’s) was when the percentage of real wealth owned by the rich was decreasing and the spending power and thus the political power of the average worker was at it’s strongest. The politicians owe too much to big business and too little to the average American.
Comment by aware on 6 September 2009:
JMF, you are missing the point. How was this transfer achieved? The \"rich\" did not come and take this directly. And many who were rich find they no longer are as a result. If this was just a plot by the rich to be richer then they all would benefit, but this is not the case as only some have benefited.
It is not a case of the rich getting richer, rather it is the favored rich that receive the plunder. Not because they are rich but because they are favored. This is perfectly summed up in the \"too big to fail\" nonsense that really means \"too favored to fail\". Some investment banks, in spite of the fact that they were as big or bigger even than others, did fail. So it must be something other than bigness. They also were rich so it must be more than just being rich that gets you the payoff.
The key is to be favored. It is not the market that is the decider of the favored status. In fact, the verdict of the market was pointedly overturned by the fact of the bailouts themselves. These were arbitrary decisions made by the only entity that has the power to see that they are enforced, the State.
So the very thing that you insist will protect us from the greedy businessman, and his desire to have all the money, is in fact what enabled this to happen! To be favored by the State is to be favored indeed. Did the law even get considered in all this? Or the Constitution? Or the clear will of \"the people\"? Can the businessmen do this with impunity? They go to prison routinely(Madoff) for not considering the law. What could do this without fear of retribution? Only one thing operates in the rarefied status of being able to enforce or not, or if necessary, completely rewrite the laws when they encumber what it wants to do.
This again shows that while the State pretends to be the upholder of civilization and human society, it is actually anti-social and lawless. It is expert at standing up straw men and scape goats to distract attention from its lawless deeds. It has millions of its minions throughout society to see that its decisions are enforced and its farce is believed. It is a parasite that pretends to be the host! Its games will lead to destruction on an unimaginable scale before we\’re through, even for the favored few.
Comment by Alex on 6 September 2009:
JMF
It is clear that your underlying desire is to protect people from being exploited. It think that we all share the same desire. The question is how does that come about? You say that it happens by the State using its power to protect the lowly worker from the raging self interested capitalist. I disagree.
Here is a terrific article entitled “How Sweatshops Help the Poor”.
http://www.lewrockwell.com/dilorenzo/dilorenzo113.html
It shows that while it may appear to us that those wages they work for are insufficient, to the people with the jobs those wages are a godsend.
During the industrial revolution a lot of people were working much longer hours on farms and were much hungrier than the people working in the factories. You cannot compare the life of a factory worker back then to the life a GM employee today. You have to compare what they had without the factories. The fact that so many came from so far to work in those “horrendous” conditions you speak of must tell you something. Those “horrendous” conditions were better than what they had before and they were darn grateful to work there. Otherwise, the industrial revolution would have failed miserably as all the workers would have decided that working on farms or begging was better for them.
As Thomas DiLorenzo explains, while it may look awful to us that sweatshop worker in Honduras today work for only $13.00 a day, the average person there lives on $2.00 a day. To them that thirteen bucks is a boom. You can force the factory there to pay them more, but all that will happen is the factory will leave (see Toyota closing California factory due to protective taxes and wage requirements) and the people will go back to the two bucks a day.
So, does it really “help” these people to protect them from the exploited thirteen dollar a day wage?
To quote Jacob Hornberger:
“When considering the 1800s, it’s important to compare that century not with the 20th century but rather with the centuries that preceded it. During the preceding eras, life and living standards were horrible. The average life span was in the early 20s, which is one reason that many people got married in their early teens. It is impossible to describe adequately how nasty life was in terms of living standards, especially considering the quality of the food, clothing, water, sewage facilities, medicine, and transportation. The child mortality rate was so high that most couples would have many children, knowing that only a few would make it to adulthood.
Along came the American people and established the most unusual society in history: No income taxation, Social Security, Medicare, Medicaid, economic regulations, immigration controls, or welfare. For the first time in history, people were free to open up businesses without government permission or interference. They were free to keep everything they earned and to decide what to do with it. Charity was entirely voluntary.
The result? The most prosperous – and the most charitable – society in history, despite what liberals claim. Parents didn’t send their children into the factories because they hated them but rather because this was the only way to save them. The Industrial Revolution, while harsh, gave parents the chance to save children who otherwise would likely have met an early death.
Families gradually began accumulating the capital savings that provided them with increasing financial stability. Thus, it wasn’t laws that took children out of the factories but rather the increased financial ability of families to keep children – and later wives – out of the factories.
Moreover, it was the enormous pool of productive capital – savings – that financed the production of better machinery and tools, which made workers more productive, which in turn raised real wage rates. It was capital – not government – that was the foundation of the soaring standard of living of the American people in the late 1800s and into the 1900s.”
http://www.lewrockwell.com/hornberger/hornberger94.html
For further reading: http://www.lewrockwell.com/mcmaken/mcmaken111.html
I would also look into the works of Murray Rothbard to counter all of the typical propaganda against capitalism during the industrial revolution.
Comment by James Madison Fan on 8 September 2009:
Alex,
Mr. DiLorenzo’s article is interesting but it would not take much effort to put together a similar article about how Triangle Trade and slavery helped the Africans:
“The kind hearted servitude entrepreneurs rescued aboriginal Africans saving them from their hunter-gatherer tribes where they faced daily peril from wild animals, lived in mud huts, practiced primitive rituals, and worshipped heathen gods. After liberating these poor unfortunates from this subsistence living these selfless men took their charges across the ocean providing this noble and costly service for free to these oppressed natives. These ships of opportunity stopped off at various colonies where, for a nominal donation, they released these primitive Africans into the care of wise plantation owners that taught the unfortunates English as well as job skills in the agricultural industry while also providing food, water, and a place to live for life.”
Using Mr. DiLorenzo’s brand of “logic” I can offer that slavery was actually a good thing for the slaves as well as the owner and the Abolitionist Movement was every bit as misguided as the Labor Movement. Sounds like apologist rhetoric to me but I am happy to explore the issue if you think it has merit.
I would offer that DiLorenzo is being intentionally myopic focusing exclusively on what he sees as the benefits. He sets up the false tautology of: “The people are making better than the average wage in their country ergo they are not being exploited.” This is fallacious because it assumes that a higher than average wage in one market is not exploitive in another. It also assumes most, if not all, business offer non exploitive wages rather than a select few.
Hornberger talks about the Industrial Revolution being better than Feudalism then exclusively attributing everything positive from that period to Capitalism without so much as mentioning the true source of these advances: The Age of Enlightenment.
The transition from Sectarianism to Secularism was the key which unlocked everything from the power of Steam to Vaccination to Capitalism to Equality as defined in the US Constitution. Capitalism is an economic engine. Nothing more. The true revolution was in how people viewed the world finally connecting cause with effect rather than relying on or blaming God or gods for every little thing from conception to weather to mice to moldy bread. This was the age of Astronomy, Geology, Paleontology, Archeology, Chemistry, Medicine, and Physics and the end of Catholics burning scientists like cord wood when data contradicted dogma.
What Hornberger fails to understand or intentionally hides is that child mortality rates dropped because of the implementation of inoculation and other medical advances, not due to some magic inherent in purist Capitalistic doctrine. This is true for most of the other advances as well. Capitalism gave men the means to profit off of many of these inventions but Capitalism was as much an invention of the period as the Steam Engine or the Cotton Gin.
What bothers me most about Hornberger’s assessment is he pretends like the standard of living from the beginning of the Industrial Revolution to the end was going up due to the efforts of Industrialists / Capitalists rather than in spite of them. There is a reason that Dickens invented the archetype Scrooge. There is a reason Marx and others took up pen and railed against Capitalism. There were a few that tried to help their workers (like Ford) but the majority were heavy handed thugs. Labor unions were a part of Capitalism from the start, at least a century before Marx, Socialism, and Communism but due to the efforts of writers like DiLorenzo and Hornberger you cannot mention the concept of the Labor Movement without being dismissed as a Liberal, Socialist, or Anti-Capitalist. I am none of the above.
It is ridiculous to offer in one breath that it is in the Capitalists duty to get the most money from his business without also realizing it is the Worker’s duty to get the most money from his position. But the Workers are greedy. Of course they are greedy. That is what Capitalism is all about. In what class did these guys read that Workers are supposed to be less greedy than the giants of industry? My point being that you do not need to be a Marxist or Socialist or Communist to want better wages for the Worker. You can be 100% Capitalist and support Worker’s Rights and the Labor Movement and all this stuff about being an ignorant liberal pinko commie whatever is complete c-rap put together by people that want to keep your money.
In short, what Hornberg does not grasp in his “$10,000 for my dying mother” scenario is that it is not “theft” when you worked for it.
DiLorenzo and Hornberger want to lull us into thinking that oppression under Capitalism is “voluntary” so we should not find it repugnant. As proof of this I would ask you to consider that while you, Aware, and I can agree that standing up for your rights against a tyrannical government is legitimate or even heroic, when I start talking about standing up to tyrannical Capitalism I get directed to authors like Hornberger that writes off anyone that disagrees with him as “ignorant liberal.” If that is not propagandistic ad hominem I do not know what is.
In the world DiLorenzo and Hornberger offer opposing government tyranny = hero but opposing corporate tyranny = pinko. In my world tyranny is tyranny and I will not bend knee to anyone regardless of if he is threatening my liberty with a gun or a pay check.
Comment by Pravin on 15 September 2009:
JMF,
You are mischaracterizing DiLorenzo.
Clearly ’slave trade’ was not voluntary.So that line of argument of benevolent slave masters was illegal.Also,slavery was a matter of state laws. You cant blame selfish capitalists for misusing the power of the state.The problem ,at its root is the state in the case of slavery.
Another example of so called sweatshops -computer engineers in India .often doing low end code work,it is derisively refered to as coolie labour.They have to work longer hours than their western counterparts and dont go skiing on weekends unlike those in the west. This seemingly exploitative arbitrage ,however,is a great change from being employed in India’s state owned cos where the job is secure but the payer is even more exploitative.The fact remains that the options in India are far worse than working in IT outsourcing where wages are far above normal Indian wages,even though it is 1/20th of what a median s/w engineer in the US might get. My point is, it is NOT exploitative to the average Indian -infact ,the avg s/w engineer is supposed to be a good ‘catch’ in the marriage-market.
So your concept of ‘exploitative’ wage is a non-starter.
As to why Dickens liked to create a Micawber,ofcourse, leading ‘intellectuals’ of our time too derisively look down upon IT outsourcers -coolie labour peddlers ,labour-arbitragers/body shoppers being the unkind terms used.Ofcourse some of them take advantage of stupid H1B laws which bind the employees to the employer,but again,it is the state-created-law that is at fault.I dont expect people to not take advantage of legislations that allow such exploitation.
Also,you mischaracterize Dilorenzo as saying that it was the capitalists’ good intentions that improved things.Ofcourse not.It is the selfish behaviour of capitalists that slowly created the savings and capital and general improvement in productivity.No altruistic nonsense there.
There is tyranny from the business community ONLY when it is supported by its henchman -the state.On its own ,capitalism,which is voluntary exchange of goods and services can never be exploitative.
And there is no need to term anyone ‘capitalist’ if you find it derogatory.The fact remains that everyone who is not living in subsistence-mode is a capitalist.Some sell their labour services.Some sell other stuff.
Summary: There IS no exploitation under capitalism.Businessmen over the years have ALWAYS taken state help to create true tyranny.Dont blame capitalism for that.Human beings respond to incentives.If the state created laws incentivize stealth and tyranny then that shall happen
Comment by James Madison Fan on 15 September 2009:
Pravin,
My point about the slave trade is that you can paint a happy face on just about any atrocity there is if you focus exclusively on the positive.
Are slave wages in the third world bad for everyone? No. The Corporation gets cheap labor and the Indians, Guatemalans, etc. get a better life than they would if they did not work in the sweatshop. In this regard DiLorenzo and you are correct however this leads us to my point.
Was the slave trade bad for everyone? No. The land owners got cheap labor, the traders got money, and most slaves got a better life than they would have if they had remained in Africa. In fact, the descendants of former slaves still reap the benefits of living in the US rather than on a continent where poverty, disease, famine, drought, intolerance, and war are a part of daily life.
From an economic point of view Triangle Trade was Capitalism at its best. Profit was made at all three points. The only problem is the intangible moral issue of the slave leg of the triad.
Capitalism is about economics, not ethics so it does not recognize that slavery is inappropriate unless it is economically imprudent. The only way slavery becomes unpalatable is if you believe that “… all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.”
The Declaration of Independence is not about Capitalism. The Constitution is not about Capitalism. The Bill of Rights is not about Capitalism. Liberty is not about Capitalism. The Randian link between “freedom” and the “free market” is a fallacious philosophical construct based on the coincidence they share the word “free.”
Personal Liberty and the economic free market are completely different concepts and their relationship is not reciprocal. Personal Liberty may guarantee access to the free market but the free market does not guarantee Personal Liberty. Personal Liberty is an ethical construct. The free market is an economic one. As such when we talk about exploitation regardless of if it is actual slavery or slave wages we are discussing an ethical lapse rather than an economic one.
The problem I have is that most of these countries have a standard of living that makes Skid Row look lavish but DiLorenzo, Hornberger, and you want to allow our markets to seek equilibrium without control. There are over 1.2 billion people in India, most of which are impoverished, and 305 million people in the US. If our standards of living equalize the average US worker will be lucky if he can afford a visit to the dollar store much less a car or a home.
Most Libertarians complain about “redistributing wealth” but fail to see that what you are offering is exactly that on a Biblical scale. We are not giving up a few tax dollars to help the poor in some US ghetto or channeling it to some mega corporation via tax breaks, incentives, or some other mechanism, we are giving away our jobs to the poor in other countries so the rich do not have to pay a US workers a living wage.
When Seagate exports half-a-million jobs to India another half-a-million jobs go with it. This includes managerial positions that supervise these positions; service jobs such as the burger joints, coffee houses, hair stylists, store clerks, cashiers, meter readers, mail men, trash collectors, police, and fire; as well as trade jobs such as contractors, roofers, plumbers, and electricians that build the housing, store fronts, roads, and buildings. They are not just exporting jobs; they are exporting a portion of the market as well as the infrastructure that supports it.
In addition to this domestic companies have to compete with Seagate’s underpaid foreign employees. This means they have to lower wages and benefits for US employees, outsource, or go out of business. So not only do we loose the half-million Seagate jobs, we also undermine or completely loose the US based companies and jobs as well.
This is the ultimate in corporate welfare combined with the ultimate in foreign aid where we give away the one thing that allows us to own our own property and maintain the freedom we hold so dear – our standard of living.
Comment by James Madison Fan on 15 September 2009:
My o finger got frisky. It should be lose not loose. Damn typos to Hell and damn this FEE for not letting authors edit their posts. :-p
Comment by Clay Barham on 16 September 2009:
There is a new book describing the Democratic Party’s libertarian roots and how they switched from Jefferson and Jackson to Rousseau and Marx in the 20th century. You’ll find it on Amazon Books under Clay Barham or on the website http://www.claysamerica.com. I have LEONARD READ to thank for whatever I do right and write. He was my political philosophy mentor over forty years ago. Hope my stuff proves worthy of him.
Clay Barham
Comment by Lawrence W. Reed on 16 September 2009:
Clay,
As soon as I saw your note this evening, I ordered your book on Amazon. It so happens I am finishing up an article this week on the Locofocos. I’m looking forward to seeing what you have to say about them!
Larry