Wake Up Call for Capitalism

Every once in a while, a story comes along which reminds even die-hard libertarians, conservatives, and capitalists that there are some legitimate roles for government, that protecting property rights and prosecuting fraud and violations of property rights is among those roles, and that capitalism does not mean the right to do absolutely anything in pursuit of a profit.

Joseph Tauke’s must-read article examining foreclosure fraud around the nation is just such a story: a shocking wake-up call, a look beyond just one or two worst-case anecdotes into the disgusting behavior of banks and mortgage profiteers involved in home foreclosures.

Let me go further: Those of us who are the strongest supporters of capitalism should not—must not—shrink from doing everything we can to protest, publicize, and penalize the behavior of banks and others as described in Tauke’s article.

Capitalists must lead the charge, in courts of law and the court of public opinion, to ensure that ours is a rule-based system and not the economic equivalent of anarchy.

Many are rightfully afraid that regulation will go too far, that politicians and bureaucrats will turn the chance to regulate into an opportunity to game the system for political gain or simply to over-regulate because they feel they know best. (After all, who but someone who thinks he’s smarter than the rest of us would even want to become a regulator?)

We should fight against such over-regulation when it’s proposed or enacted. But we shouldn’t reflexively fight against all regulation just for the sake of the fight.

Capitalism can only succeed within a framework of rules that respects property rights and due process, and which punishes theft and fraud. Allowing theft and fraud because of fear of over-regulation is immoral. Beyond that, it’s like pouring acid on the foundation of capitalism itself.

The type of systemic foreclosure fraud which we’re learning more and more about in recent weeks is like handing a powerful gun to opponents of capitalism. It gives them the ability to shoot at the heart of economic liberty by arguing that foreclosure fraud and similar behavior is the result of such liberty. And it’s a powerful argument that’s very hard for our side to defeat even though we know that true capitalism and true capitalists abhor such behavior.

That’s why true capitalists must do everything in our power to stop anti-capitalist (corrupt, fraudulent, anti-competitive) behavior by business, especially big business which has the resources to at least try to buy their way out of legal problems. Admittedly, most of us have very little power in this regard, but we should do what we can. If you work at a company that’s committing fraud, perhaps you have to take a real risk by trying to stop it and, if you can’t, to expose it. If you are a customer of a company that you learn is behaving badly, take your business elsewhere and encourage others to do so as well and perhaps get your story into the media, such as with a letter to the editor of your local newspaper. Shame is a powerful motivator for a company.

And if you’re at a cocktail party, especially with liberals, don’t try to defend a corporation’s bad behavior. Attack it aggressively; make sure your local liberals know that capitalism isn’t anarchy, that capitalists don’t condone fraud and theft. Just as a mugger’s gains don’t justify his action, corporate profit is not a measure of right and wrong. 

Capitalists are often perceived as unthinking defenders of business, especially big business. And too often that perception is justified with conservatives thinking they’re helping the cause of economic liberty by defending corporations just because they are corporations. But corporations are increasingly less capitalistic and more statist, almost fascist, in the sense of working with government to destroy competition and steer tax dollars their way.

Whether it’s the now-diminishing ranks of the U.S. Climate Action Partnership trying to profit off global warming fears by such things as forcing us to buy their horrible compact fluorescent light bulbs or Google pushing for “Net Neutrality” so they can effectively steal the investments made by Internet service providers, Americas biggest companies are turning away from free markets and trying to create rigged markets wherever possible.

There’s another point to be made here: The hand-in-glove involvement with big business and government gives business strong incentive to involve itself in electoral politics for reasons other than promoting their maximum ability to compete in a free market. Instead, they are incentivized to support the candidates most likely to help pass their favored anti-competitive or earmark-laden legislation. In other words, they start behaving like unions.

People complain daily about the corrosive influence of money in politics. While that fear is overstated and while almost every attempt to “do something about it” is an unconstitutional infringement on our most prized 1st Amendment right, it nevertheless does make sense to minimize the need for so much money to go into politics. And the way to do that is to get politicians out of picking winners and losers, either between industries (e.g. solar vs. oil) or within industries (e.g. UPS vs. FedEx). If you want to get money out of politics, get politics out of money.

I’m no wide-eyed idealist who thinks that exhortations or even shame will suddenly cause a tectonic shift in the continental plates of politics and business. After all, it’s not just the corporations but also the politicians who think the current situation benefits them; again, the analysis is disturbingly close to that for labor unions with the main difference being that corporations have an easier time buying Republicans and unions an easier time buying Democrats.

But all the buying of politicians and selling-out of competition and valid regulation comes at the expense of citizens, consumers, and shareholders. By refusing to regulate and criticize and punish businesses—through whatever legal means we have available as citizens, consumers, and shareholders—capitalists are giving Barack Obama and other haters of economic liberty the rope to hang us with.