Which Way for Capitalism

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Where shall we go from here? There are two possible scenarios. The one is that we shall continue in the direction in which we have been going,with gradual increases in the scope of government and government control. If we do continue in that direction, two results are inevitable. One is financial crisis and the other is loss of freedom. Great Britain is a frightening example to contemplate. It moved in this direction earlier than we and has gone much farther. The effects are patent and clear. But at least when Britain moved in this direction and thus lost its power politically and internationally, the United States was there to take over the defense of the free world. But I ask you, if the United States follows the same course, who is going to take over from us? That’s one scenario, and I very much fear it’s the more likely one. The other scenario is that we shall, in fact, halt this trend that we shall call a halt to the apparently increasing growth of government, set a limit, and hold it back. There are many favorable signs from this point of view. I may say that the greatest reason for hope, in my opinion, is the inefficiency of government. Many people complain about government waste, but I welcome it. I welcome it for two reasons. In the first place, efficiency is not a disirable thing if somebody is doing a bad thing. A great teacher of mine, Harold Hotelling, a mathematical economist, once wrote an article on the teaching of statistics. He said, “Pedagogical ability is a vice rather than a virtue if it is devoted to teaching error.” That’s a fundamental principle. Government is doing things that we don’t want it to do; so the more money it wastes, the better. In the second place, waste brings home to the public at large the fact that government is not an efficient and effective instrument for achieving its objectives.

One of the great causes for hope is a growing disillusionment around the country with the idea that government is the all-wise, all-powerful big brother who can solve every problem that comes along, that if only you throw enough money at a problem it will be resolved. Several years ago John Kenneth Galbraith wrote an article in which he said that New York City had no problem that could not be solved by an increase in government spending in New York. Well, since that time, the budget in the city of New York has more than doubled and so have the problems of New York. The one is cause and the other effect. The government has spent more, but that meant that the people have less to spend. Since the government spends money less efficiently than individuals spend their own money, as government spending has gone up,the problems have gotten worse. My main point is that this inefficiency, this waste, brings home to the public at large the undesirability of governmental intervention. There are also many unfavorable signs. It’s far easier to enact laws than to repeal them. Every special interest, including you and me, has great resistance to giving up its special privileges. I remember when Gerald Ford became president and called a summit conference to do something about the problems of inflation. I sat at that summit conference and heard representatives of one group after another go to the podium—a representative of business, a representative of the farmers, a representative of labor, you name the group—they all went to the podium and they all said the same things: “Of course, we recognize that in order to stop inflation we must cut down government spending. And I tell you, the way to cut down government spending is to spend more on me.” That was the universal refrain.

Many people say that one of the causes or hope is the rising recognition by the business community that the growth of government is a threat to the free enterprise system. I wish I could believe that, but I do not. You must recognize the facts. Business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger. The two greatest enemies of free enterprise in the United States, in my opinion, have been, on the one hand, my fellow intellectuals and, on the other hand, the business corporations of this country. They are enemies for opposite reasons. Every one of my fellow intellectuals believes in freedom for himself. He wants free speech. He wants free research. I ask him, “Isn’t it a terrible waste that a dozen people are studying the same problem? Oughtn’t we to have a central planning committee to decide what research projects various individuals undertake?” He’ll look at me as if I’m crazy, and he’ll say, “What do you mean? Don’t you understand about the value of academic freedom and freedom of research? ” But when it comes to business he says,“Oh, that’s wasteful competition. That’s duplication over there! We must have a central planning board to make those things intelligent, sensible!”So every intellectual is in favor of freedom for himself and against freedom for anybody else. The businessman and the business enterprises are very different. Every businessman and every business enterprise is in favor of freedom for everybody else, but when it comes to himself, that’s a different question. We have to have that tariff to protect us against competition from abroad. We have to have that subsidy. Businessmen are in favor of freedom for everybody else but not themselves. There are many notable exceptions. There are many business leaders who have been extremely farsighted in their understanding of the problem and will come to the defense of a free enterprise system. But for the business community in general, the tendency is typified by U.S. Steel Company, which takes ads to extol the virtues of free enterprise but then pleads before Congress for an important quota on steel from Japan. The only result of that is for everybody who is fair-minded to say, “What a bunch of hypocrites!”

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  • Metazoan||

    But the thing that always amuses me about that argument is that the people who make it, and who accuse me or my colleagues of trying to turn the clock back to the 19th century, are themselves busily at work trying to turn it back to the 18th century.

    This reminds me of progderps talking about how futuristic their idiotic single-payer healthcare and government control are, when really those are all outdated ideas.

    On a related note, the number of people who say "society is so complex now that we need regulation" blows my mind. Wouldn't the complexity suggest the exact opposite?

  • sarcasmic||

    Like when Tony and his fellow derptards say that libertarians want to impose liberty on society.

  • anon||

    impose liberty

    I still laugh whenever I see this.

  • Pro Libertate||

    Gives a whole new meaning to "live free or die," doesn't it?

  • anon||

    I think of that picture with bombs dropping in the "obama" red/white/blue with the caption "We're going to free the fuck out of you."

  • Pro Libertate||

    Freedom from suffering. Freedom from pain. Freedom from the rat race. Freedom from care. Freedom from life.

  • sarcasmic||

    As long as you ask permission and do what you're told, you are in no way responsible for the consequences of your actions.
    Freedom is slavery.

  • ||

    And slavery is freedom.

  • Live Free or Diet||

    There is no way in which General Motors can get a dollar from you unless you agree to give it to them.

    ...unless GM gets in cahoots with the aforementioned United States Government...

  • ||

    "There is no way in which General Motors can get a dollar from you unless you agree to give it to them."

    He clearly lacked foresight on that one. There is always a way. You just need the threat of force.

  • ||

    There is no "future" for capitalism. "Capitalism", if taken as "free marketeerism", is the default state of humanity. Whether it's one kid trading their Oreos for some carrot sticks (I never understood the kids who would trade me cookies for vegetables, but it happened, and regularly), or someone buying weed from a dealer, or buying a used car from a private owner, that's the norm. What is abnormal is the layers of regulation and distortion caused by government.

    There will always be "capitalism" no matter what delusional shit is put in its way, because trading is basic human nature, and nothing can stop that.

  • anon||

    When you stop to think about it, trading foods at lunch time is a really great intro to economics. It teaches you subjective value on a really base level.

    No wonder the government wants to make sure kids don't bring their own lunches anymore.

  • anon||

    Apparently Milton Friedman was against alt-text. Can we possibly trust such a man?

  • Gozer the Gozerian||

    Milton was against centrally planned alt-text.

    Why do you want an alt-text Gosplan ?!?

  • ||

    It's impossible to read this without hearing Milton Friedman's voice in your head, I think. Also, fuck Ralph Nader.

  • DJK||

    Fuck Milton "tax withholding" Friedman.

  • EDG reppin' LBC||

    Fuck Michigan!

  • Loki||

    Legislatures cannot repeal the laws of arithmetic.

    That hasn't stopped them from trying.

    Does it really make any difference whether automobiles are made by General Motors, which is an enormous bureaucratic enterprise employing thousands of people, or by an agency of the United States Government, which is another bureaucratic enterprise?

    Kind of ironic that he used GM as his example. What a quaint, simpler time 1978 was.

  • Eric Bana||

    "General Motors can't send a policeman to your door." I remember hearing a white-haired university professor retort a similar statement with "Banks send policeman to evict people who don't pay their mortgages from their homes." Oy vey.

  • Gozer the Gozerian||

    Was that Chomsky or Zinn?

  • ||

    He keeps mentioning Chile as an example of a welfare state. Chile today is like #7 on the economic freedom list (ahead of the US).


    Anyone know the quick history? All I get is left wing propaganda on teh Google search.

  • Metazoan||

    Well, I think back in the 70s Chile was quite socialist (under Allende and all). And after Pinochet's coup, it wasn't initially much better (socialism for me but not for thee), until Pinochet, under the advice of the "Chicago boys" moved the country in a very free market direction, where it has largely stayed.

  • ||

    So how does one convince a population entrenched in socialism to move in a free market direction?

    Interesting. I need to research this some more.

  • Gozer the Gozerian||

    You mostly don't. Rather, the abject poverty of their condition contributes powerfully to the evolutionary process found in political economy, statecraft, etc.

    Think of the varied results in the former Eastern Bloc.

  • ||

    So you're sayin we need to hit rock bottom before the population is willing to reject "the common good"?

    Can't be done prior to total collapse?

  • Gozer the Gozerian||

    No. I am merely saying that, in most respects, "we" won't be making any significant contribution.

    Again, the Eastern Bloc is instructive: Results have varied widely, in terms of both political frameworks and results within those frameworks (although I think we would all agree that classical liberalism will serve everyone best in the long run).

  • timbo||

    Exactly Francisco,
    Perhaps we can escape this w/o complete collapse but we have to find a bottom, even for the most basic free market principles to resurface.
    It is too scary to have a decent underground economy in this country because not enough people reject government.

  • ||

    So you're sayin we need to hit rock bottom before the population is willing to reject "the common good"?

    It applies to the leaders and elites as well. I'd much rather be president of the United States, than the Supreme Leader of North Korea. It's much better to be a tax collector in a relatively free economy, than managing a bunch of factory drones and farm peasants in a pure dictatorship, with no property rights.

  • ||

    Having an authoritarian to more or less "impose" freedom on a quasi-socialist populace was kind of a component there as well. It's easier to move society in any given direction when it's "my way or the highway". Friedman was a pragmatist - he figured the ends justified the means.

  • NotAnotherSkippy||

    Deny them toilet paper?

  • ||

    But I ask you, if the United States follows the same course, who is going to take over from us?


    That'd be China. Whoda thunk?

  • ||

    I would consider that perhaps defending the world from itself is one of those "doing good with other people's money" things (unless it's funded on a purely voluntary basis).

  • ||

    Bear in mind the geopolitical environment of the time though. The Cold War was still going on and there was arguably an existential threat in the form of international communism.

  • timbo||

    China won't surpass the US any time soon. They are still a fucked up socialist mess. Their problem as well is that their middle class is on the rise and the peasants got a taste during the boom. They have many more uprisings and violent suppressions to go before they sleep. If anything, there is decent evidence that many facets of the global economy will continue to shift away from China as they continue their attempts at massive government controls.

  • timbo||

    I agree that capitalism is a natural default when everything comes out in the wash. So the real question is, how far do we have to fall to reach bottom. I am afraid the answer lies in getting more people to actually wake up. So far, we have a long way until the sheep start to wonder why everything is so shitty. When the thugs can't afford to watch football, then you will see some hard core violence and union destruction, then maybe the stupid masses might consider exploring why government sucks so bad.

  • DB Pharm.D||

    Did anyone else hear the whole thing in his voice while reading the article? Like he was nararating an episode of "Free to Choose".


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