Rebuttal to: The "Correction" of the Supposed "10 Economic Myths" about Capitalism

Introduction: 

The development of modern capitalism in "western" nations has been accompanied by damaging consequences for Africa, as it has elsewhere, paving way to such destructive phenomena like the explosive and conflict-prone balkanization of Africa, ripping the continent off sizable chunks of its able-bodied workforce through the promotion and practice of slavery,  not leaving out brain-drain, disintegration of preexisting socio-cultural institutions [e.g. school systems, architectural concepts, dress codes, writing systems, preexisting trade networks, local industry, and the like] that had long served the peoples of the continent and replacing them with "western" counterparts/variants, thereby inducing people of the continent to become dependent on European economies, draining natural resources and compelling many localities on the continent to become net exporters of capital rather than net consumers of capital, rewriting history to serve the oppressors, and so forth. Since capitalism has had disastrous effects on the continent, it is only fitting to set some things straight about this system of economy.

One good way to set the record straight about capitalism, is to address "rebuttals" to what defenders of capitalism deem to be "myths" about the so-called economic system. Following, is a classic example of how faithful supporters of capitalism defend the image of capitalism from supposed anti-capitalist "propaganda"...

Discussion: 

These ensuing excerpts (in blue) had been picked up from the blog of an unidentified author, who seemingly prefers to remain anonymous, and his arguments go along the following lines:

10 Economic Myths That Need To Be Corrected

December 20th, 2011

1. This is capitalism. We live in a capitalistic country. We can argue over the best label for the economic system in the United States of America, but there can be little argument that “capitalism” or “free market” are among the worst and most inaccurate labels for what we have in America today. With quantity and price controls rampant throughout multiple, major U.S. markets, regulations galore, and some of the highest corporate tax rates in the world, the United States is a heavily controlled, heavily regulated, and heavily taxed mixed market economy. Of the ten planks in the Communist Manifesto, seven have become policy in the United States, and the government is working on the remaining three! Can that be fairly characterized as capitalism? Take a look at this list of U.S. government agencies, notice just how unbelievably many of them there are, and observe just how many aspects of life in America they regulate. It’s a Soviet commissar’s dream, and any true capitalist’s nightmare!

Rather than busting myths, this author is actually reinforcing them. He ought to look up the basic philosophy of capitalism, which essentially amounts to putting the accumulation of private wealth before the basic social needs of the greater society.

Tax-break loop holes have been put in place, which only the wealthiest layers of society have been able to take advantage of. It has gotten to a point whereby the super-wealthy and big business go from paying little to no taxes at all. Case in point, GE practically paid no taxes quite recently, due to the taking advantage of tax-break loop holes, while many wage workers, bringing in income that is measly by far, paid their share. Even Warren Buffet had acknowledged that his secretary had proportionately paid more taxes than he had, because he was able to take advantage of tax-break loop holes that enabled him to keep much of his income to himself.

2. Deregulation in the 90s led to the recent economic crash. 

Okay, Clinton signed one law in the 1990s that lifted federal regulation of one aspect of financial markets, and critics of deregulation like to say “We deregulated financial markets in the 1990s,” as if we completely overhauled the entire federal regulatory system, but that’s a big stretch and very misleading. Booms and busts themselves are actually caused by government intervention into the economy. Libertarian economists who understand this (many of them belonging to the “Austrian School of Economics”) have been incredibly accurate predictors of economic booms and busts. They predicted the Great Depression, the stagflation of the 1970s (that their opponents had always claimed was impossible), and the most recent credit and housing collapse. Their predictive powers are the result of their accurate theories and understanding. Here, I’ll let “F.A. Hayek” rap it for you. 

3. We need more regulation to keep big corporations in line.

If that were true, why don’t more big corporations support deregulation? Instead they seem to support more big government. Go ahead, browse OpenSecrets.org for yourself and see which politicians get the most donations from big corporations. The fact is, regulations– like most laws in this country– are written by corporate lobbyists to give big corporations an advantage over small businesses that do not have the resources or money to comply with costly regulation, putting them out of business and handing over their market share to the big companies, all by way of government regulation. Critics of moneyed corporate interests contradictorily believe that these interests pull the strings of government and that more government regulation will reign in these interests. Which one is it? 

There is no evidence that big business support regulations.

Oil companies, for instance, sure heck do not support the government restricting the huge profit margins attained from rising gas prices, which have in turn helped drive up prices of goods that require transportation into the market or else quarters that require oil as fuel. Nor did/do the oil companies support safety-related government regulations of their practices of offshore deep-sea oil drilling (case point, the recent BP, aka British Petroleum, oil spill).

Big Banks did not object to deregulation that allowed them to diversify sources of their revenue, by restricting them from big mergers that involved other previously "separated" segments of the market. The aforementioned Clinton's "deregulation of 90s", which this author kind of just brushes aside as not considerable, had played a significant role in this, and thus, its subsequent implications.

Big business did not object to deregulation on speculation and predatory lending and mortgage practices, which have had their fair share of bringing about the recent financial collapse, culminating in the bail out of banks, not to leave out driving up prices of commodities and mass lay-offs.

Big business did not object to the dismantling of social instruments that traditionally put restrictions on obscene exploitation of wage workers and the accompanying attainment of revenue by big business; such as, union-busting, cuts in employee benefits and safety nets, wage-cuts, or environmental protection regulations.

Big business have had few regulations in shipping jobs oversees and evade taxes at home, while taking advantage of cheap labor abroad.

Big business did not object to lack of government oversight in CEO bonuses, after they had been bailed out with taxpayer money.

4. We need government stimulus to kickstart the economy.

It is easy to correct this myth with one simple analogy and a few historical examples. Besides, government spending is almost always, if not always less efficient than private spending, which results in a net economic loss, or at least less net economic gain than would be possible without the government spending.

The one simple analogy:

Imagine a swimming pool. You take a bucket to one side of the swimming pool and fill it up with water. Then you walk to the other side of the swimming pool and empty it there. How many times would you have to repeat this to raise the total level of the swimming pool? Answer: It is impossible to raise the level of the swimming pool by removing water from one end and pouring it into the other.

It is easy to make this analogy when big business is on the receiving end rather than workers. Neither the banks or the big car companies saw anything wrong with government spending, when taxpayers' money was being doled out to bail them out. 

The super-wealthy did not see anything wrong with extension of tax-breaks, which too takes away from the government budget. 

Nor did big business and the rich see anything wrong with diverting and wasting taxpayer money on fruitless wars, and unnecessary & constant buying of military hardware, some of which end up being scrapped anyway, while they claim there are no funds for social spending on victims of mass lay-offs and unemployment. 

The rich saw no problem with government stimulus on offshore drilling, or subsidization of aerospace and military industry.

The wealthy see no problem with the wasting of taxpayer money by do-nothing politicians, who call themselves congress or senators for example, including that which goes towards their travelling expenses and extravagant feasts that they hold during so-called "conferences".

They see no waste in spending taxpayer money on things like lightening trees and decorating streets during Christmas, but tell workers that they have no funds for schools or social safety nets like unemployment checks, which many especially rely on in times of mass unemployment.

5. The TARP Bailouts were necessary to prevent the economy from crashing.

When conservatives make this argument, ask them why they think free markets would have failed to do a better job of resolving this problem than government. Ask them why they support socialism and point out that the TARP bailouts socialized corporate losses by spreading them out to the rest of society. Also ask them why they support welfare and point out that the bailouts were an example of welfare, and that they incentivize more unproductive behavior the same way conservatives feel that welfare for the poor does.

When social democrats make this argument, ask them how they could support taking money from the working middle class and poor to give to rich, Wall Street banks. When they answer, as Obama did in one 2008 presidential debate, that it was necessary to keep businesses running so they could continue to employ the working middle class and poor, say: “So you’re arguing that if the government gives money to the wealthy, it will trickle down to the poor?? Now you sound like a right-wing Republican!” 

On this point, the author is reasonable, only to the extent that bail-outs have mainly been done to the benefit of big business. So, if there is any socialism here, it is the capitalist-"socialism" for big business...or big business social welfare.

6. Don’t free market supporters want to bring us back to the gold standard?

First of all, even if this were true, what would be so bad about that? Free market critics will act as if proponents are backward and unsophisticated for supporting a gold standard currency, but we should point out that fiat currency is nearly as ancient as currency itself, and that centralized governments have been inflating currency for centuries with the same result each time: monetary collapse, often followed by civil disorder. But secondly, this is a myth. Most free market proponents do not advocate some kind of government monopoly gold standard like we had over a century ago because it can be all too easily manipulated; they actually prefer what can be called a free market of currency that allows individuals to decide for themselves what currency is and how much they trust it.

The problem of gold-backing was bound up with how well the U.S. economy was doing. Apparently, the U.S. economy had been undergoing a slow downward spiral for some time, while dollar possessions overseas outstripped the U.S. gold reserves, leading to the demise of gold backing of U.S. currency under the Nixon administration. Still, U.S. is on the decline, and the latest financial collapse is an expression of this decline. Unified "free market" currency has not saved European countries from decline either.

7. We need to protect American businesses from foreign competition.

Because protectionist economic policies force American businesses and consumers to pay higher prices for certain things (like steel or sugar) than they would have to pay in a free market, most economists agree that such policies have the effect of a net economic harm to the domestic economy and are overtly anti-consumer. And it is actually protectionist policies that put Americans out of work by causing this net economic harm to the growth of the domestic economy.

Yet these are the same policies that the capitalist-driven markets of Europe and America have resorted to, so as to develop their industries to the point whereby they have grown to become global transnationals. They seek to deny so-called "developing" or "emerging economies" from doing the same, however; not untypical of them.

8. Capitalism exploits labor.

Actually, since the advent of more capitalist economies, the rate of return on capital (how much profit you can make by investing in capital) has remained steady, as has the rate of return on land (rents from real estate) when compared to the explosive growth in the rate of return on labor (hourly pay). Do workers in more capitalistic countries work harder than their counterparts in less capitalistic ones? They probably work less hard, for fewer hours, and in better conditions. So why are they paid more? Because capital has made each hour of their labor vastly more productive. Capital and capitalism have done more for the laborer than any other development in human history.

What is a "less capitalist" country, where labor is not exploited primarily in the attainment of profit of a company and thereof, the accumulation of wealth by those on the top of the corporate ladder?

Workers in the "west" may be relatively better paid than their counterparts in many so-called "developing economies" around the world, because they fought for it and made a few gains. It wasn't given to them on a silver platter, as our author here is suggesting. If capitalists had their way, wage workers will be paid the same amount as say, wage workers in China; why do you think they move companies to hubs of "cheap labor"?

Capitalism had replaced feudalism in Europe, which was a social order of hierarchy that worked to the advantage of the top rungs of society. Though capitalism is relatively progressive in treatment of laborers, it has essentially maintained that order of society. 

Members of hunter-gatherer communities have more egalitarian relationships with one another than those of a capitalist hierarchical society have with one another.

Capitalist-sympathizers like to brag about how "capitalism has done more for the laborer", presumably as a vehicle of technological innovation. However, what they miss, is that technological innovation of humanity has always primarily been driven by necessity before taking care of merely leisure considerations, and that the industrial revolution had effected to only make this prolific; some observers contend that this revolution preceded capitalism, as it is understood today. In this sense, capitalism therefore cannot be given credit for the proliferation of technological innovation in the modern era. 

In fact, contrary to serving as a vehicle of technological innovation, capitalism has at times served as a vehicle of counter-technological innovation. Take for example, the use of the internal combustion engine through to the present; the internal combustion engine had already been obsolete shortly after its introduction; electric-driven motor vehicles had already been invented and where around as early as the mid-19th century, while solar-operated vehicle technology had been around at least since the 50s. Capitalist priorities had also for another example, impeded the U.S. establishment from replenishing levies with more robust modern ones, while aging bridges, roads, electricity and pipe systems continue to be under the threat of collapsing in many parts of the country, as their elements near the end of their useful lives. 

9. We need government to provide things that free markets can’t.

Wrong. No we don’t. Not for lighthouses and national defense. Not for dikes. “Public goods” is simply a concept that has been used as the theoretical basis to justify a transfer of wealth from hard working, enterprising small businesses and laborers to moneyed special interests who can provide these so called public goods on the terms set in their super sweet, lobbyist-written government contracts.

As for “negative externalities,” the argument that negative externalities are examples of market failure does not necessarily prove the necessity for government intervention, and does nothing to address the possibility unavoidable reality of government failure. Just one example of government failure, for instance, is unintended consequences. There is a free market solution to negative externalities, however, which is using our system of civil law to enforce and protect private property rights.

"Free markets" have been shown to be incapable of dealing with the current economic crisis around the globe, as exemplified by that afflicting Europe and other so-called traditionally advantaged capitalist markets around the world. in recent times. What better quick example is there than that!

The problems already noted above, are the workings of the so-called "free capitalist market".

10. We need government to prevent monopolies from forming.

This is a final shot that critics of free markets will always throw out at you when they have nothing else to go on because they’re sure you’ll agree or have no answer. The very best answer to it I have ever encountered is in Ayn Rand’s book: Capitalism, The Unknown Ideal. In it, a very young Alan Greenspan (before he sold out) wrote an essay called “Anti-Trust” which demonstrates how theoretically and historically, it is actually only government intervention that can create a true, coercive monopoly, not the free interaction of individuals in an unregulated market. You can listen to the first half of this essay in audio format here. Those of you with no scruples about copyrights can read the entire essay here (but I highly recommend you buy the entire book– I daresay it’s one of the most important economic books ever written). Milton Friedman also makes his case here, listing multiple examples of monopolies created by government intervention.

He says Greenspan "sold out", who continues to be an unwavering champion of capitalism and free market, because even Greenspan could not shield himself from the objective reality unfolding before him; courtesy of an older, wiser and experienced Greenspan, who spoke based on what experience has taught him:

"I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such as if they were best capable of protecting their own shareholders"

...let alone the society at large. In other words, "free interaction of individuals in an unregulated market" is what has led us into the financial mess that we find ourselves today. "Free interaction of individuals in an unregulated market" was what cultivated these individuals to put their personal monetary gains ahead of needs of others and give inconsideration for the plight of others. It is what has led BP, for example, to give us one of the worst environmental catastrophes of recent times and leave the victims to pick up the pieces and fend for themselves. It is what has led to the institution of slavery as a cheap labor pool for fueling the economy. It is also what has led to the Enron debacle, the subprime mortgage crisis, and bankruptcy of banks and elements of the auto industry, among other examples.

Conclusion:

As these pro-capitalist "rebuttals" demonstrate, rather than busting myths, defenders of capitalism tend to replace the supposed myths with other myths; it just happens to be that they like the sound of those myths that they authored themselves!

*May be subject to modification or revision as additional information surfaces.

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*References: 

—10 Economic Myths That Need To Be Corrected,  December 20th, 2011, courtesy of Silver Circle Underground.

—Accompanying personal rebuttals, from December, 23rd, 2011.

—All other material, 2012.