Economy & Budget

Book Review: How Capitalism Will Save Us

Free market capitalism is under fierce attack from a left-wing cabal of demagogues, pundits, social engineers and radical economists who are eager to blame our economic troubles on Wall Street powerbrokers, big business, greedy profit-takers and the rich whenever America tumbles into a severe rece ssion.

“Laissez-faire capitalism should be as dead as Soviet communism,” Arianna Huffington huffed in a leftist screed. “The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism,” The Washington Post happily declared

With the passing of Ronald Reagan and Jack Kemp, who were untiring champions of American free enterprise, it seems there are no major voices left to defend capitalism from the attacks being lobbed by devious political opportunists who found an angry audience ready to believe their troubles were caused by an under-regulated free market system ruled by rapacious corporate executives at the expense of ordinary Americans.

Barack Obama played all of these cards in his presidential campaign and convinced a majority of voters that profit-hungry robber barons were responsible for the worst recession since the Great Depression and he would correct that by imposing sweeping, European-style controls on the economy and raising taxes on the rich.

There were few political voices who could effectively refute Obama’s nonsensical attacks on the free market system. Sen. John McCain, who admitted his knowledge about economics was dim, seemed incapable of uttering an articulate reponse, and the far-left won the election on a wave of economic unrest, fear and anger.

Now comes free marketeer Steve Forbes, chairman, CEO and edittor-in-chief of Forbes magazine, and economics writer Elizabeth Ames into the breach with a powerful, much-needed defense of our capitalist system and maybe just in a nick of time.

How Capitalism Will Save Us is an unabashedly vigorous case for free enterprise, free markets and free trade, and the innovations, inventions and economic abundance it has produced — and a devastating critique of its enemies who who want to replace it with a government-run system that would impose a suffocating system of government rules, regulations, and taxes that will limit growth, kill jobs, restrict freedom and creativity, and make America a much poorer economy.

Their book is not only a powerful economic brief for capitalism and the benefits, enterprises, upward mobility, wealth and abundance that have flowed from a free economy, it is also a valuable reminder showing how state-run, over-regulated, over-taxed economies have always failed.

We have been through a rough time in the past two years of the Great Recession, but we need to remember what led to the boom times as well so we can unleash the pro-growth policies that have nurtured investment, growth and opportunity before, and can do so again.

“The turmoil of the past few years by no means mitigates the explosion of prosperity that has taken place since the early 1980s, when President Ronald Reagan enacted promarket reforms to free the economy from the Carter-Nixon stagnation of the 1970s,” they write.

“Those reforms — lowering tax rates and loosening regulations — unleashed job-creating capital. The result: a roaring economy that produced a flood of innovation — from personal computers and cellular phones to the Internet.”

Many of the conveniences we take for granted today, they point out — from automatic teller machines, DVD players, laptop computers and CAT- scans — all were the product of risk capital the fueled new business enterprises and innovations that have given us an abundance of products and services that have ultimately benefited everyone. “Not only ‘the rich’ but people of all incomes,” they remind us.

“No system has been as effective as capitalism in turning scarcity into abundance. Think of computers. Forty years ago, only business and governnment could afford the old massive mainframes…Today the Blackberry device in the palm of your hand has even more computing power than those old machines.” And computer devices like these, from multi-media cell phones to inexpensive laptops are within easy reach of ordinary Americans at virtually all income levels.

To be sure, in the boom and bust business cycles that have occurred throughout our economic history, we have endured periodic downturns of various lengths, often because of misguided government decisions and policies that triggered or prolonged them. 

But the authors also point out that “Despite all of the gloom and doom voiced by its critics, the free enterprise system is — and always has been — the best way to unleash the creativity, inventiveness, and energy of people and mobilize them to meet the wants and needs of others.”

But what I liked most about this book is its absorbing tutorial format that provides a comprehensive chapter by chapter arguments in response to each of the most common attacks on capitalism.

These chapters raise the most common attack lines against captialism — what they call “the Rap” — and then proceed to demolish them one by one. To wit:

“Is Capitalism Moral?” — There can be bad behavior in a capitalist system and there are laws to punish such people and actions. But “when viewed as a system, capitalism is more moral than any and all alternatives.”

But the authors ask, “If capitalism’s foremost historic contribution has been its moral influence, then why does capitalism appear to encourage white-collar crime?”

“In fact state-run  economies  encourage more corruption than does capitalism,” they respond. Many examples abound. Take Communist Cuba with its price controls and black markets which have turned “ordinary Cubans into petty criminals… Stealing from state workplaces or operating small, illegal businesses is so common that Cubans dismmiss it as an almost aceptable part of daily life.”

— Aren’t the Rich Getting Richer at Other People’s Expense? — That’s the rap, but the reality is that “Rich people make their fortunes by creating opportunity and wealth for others.” Walmart, Microsoft and McDonald’s have not only provided millions of jobs for their workers and families but generous retirement benefits for those who invested in their employer’s stock purchase plans and in many cases became millionaires.

—  Aren’t Free Trade and ‘Globilization’ Destroying American Jobs and the Economies of Other Nations? That’s the rap. The reality is that “Since World War II, a historic era of free trade has brought unprecedented prosperity and opportunity to millions of people around the world.”

The poorest countries in the world are those who erect high tariffs and other barriers to trade and foreign investment and the most prosperous nations are those who have opened their economies to trade and foreign investment. “Protectionism kills more jobs than it saves,” they write.
    
One by one, Forbes and Ames intellectually slay the demagogic myths and misunderstandings about capitalism and free markets by showing that:
    
— “Free markets are best at serving the needs and wants of people.”
–”Self-interest — not greed — compels people in free markets to meet the needs and    wants of others.”
— “Only a dynamic, entrepreneurial private sector is capable of producing the growth and prosperity that we take for granted in a free society.
Government command-and-control economies simply can’t do it.”
— “Profit is a vital barometer in a democratic capitalist economy and the key source of investment capital.”
— “The most effective regulation in the Real World establishes the ‘rules of the  road’ and does not attempt to micromanage markets.”
— “The best economic stimulus results when government unleashes the private sector by lowering tax rates and opening up markets. Government efforts to ‘stimulate’ or ‘fine-tune’ the economy — through spending or monetary policy — have never produced sustained long-term growth.”

This is a great book, filled with enduring truths about the power of a free society and a free economy to improve the lives of its citizens, and a stern warning of the dangers of putting government in charge of our economic system and deciding how a nation’s financial resources should be spent..

The bottom line, say Forbes and Ames, is “Trust we the people. We are the economy!”


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