Tuesday, January 30, 2007

Perspectives on Capitalism

Laissez Faire capitalism is actually Laissez Faire Trade and it is an ideal form of capitalism much as Communism is an ideal form of government or economics. When viewed in their pure form both are superior. There is no doubt that Communism is not only a pure form of Christianity but it is superior to virtually every other form of government, although Communism is probably more a philosophy of economics than government. In its pure form Communism would require very little government and would be closer to anarchy than democracy. Unfortunately in practice Communism has failed in every instance it has been tried because it cannot accommodate human nature. The result is rather than elevating mankind to a superior level it reduces everyone to the lowest level of the basest member and Laissez Faire Capitalism has the same problems.

In theory Laissez Faire Capitalism would bring prosperity to the world. It would be a place without unemployment where everyone was a productive member of society and the wealth would be shared by everyone on the basis of their contribution to the common good. In this theory there would be no government restrictions or controls over business or trade. Monopolies and cartels would be possible because these would increase productivity, efficiency, and generate more revenues to be shared by all either in the form of lower prices or dividends on their investments. Alas – in practice what we get is greed, higher prices, and reduced availability to the mass. There are two active cartels in the world today, OPEC and DeBeers, both keep tight control over product availability to maintain high prices, and these exist in economies that are controlled by governments, you can imagine the situation if there were no controls.

Communism failed because humans are frail creatures who succumb to greed, sloth, envy, and the other deadly sins. The same is true for Laissez Faire Capitalism. At the beginning of the Industrial Revolution trade and business was virtually unrestricted but instead of glorifying mankind it highlighted the worst characteristics of mankind. This was the period of the Robber Barons, the entrepreneurs who formed monopolies to restrict supply and thus raise prices. The drive to profit led to a destruction of the environment and the death of water ways, the extermination of species, child labor, unsafe working conditions, and corruption in government, slums, and disease. Eventually most of these actions came under government scrutiny and eventually laws were introduced to control or eliminate them – over the resistance of the entrepreneurs. The result is what we now have which is a form of controlled capitalism but a far cry from Laissez Faire Capitalism.

Perhaps the foremost proponent of Capitalism or one of the most influential, has been Ayn Rand and her various novels, which are actually expositions of her philosophy of self-determination. Essentially Rand’s position is that the government has no right to dictate or govern your actions as long as those actions don’t harm others. However her characters are flawed and their actions are sometimes illegal. Roark commits arson because his work has been compromised and he feels it within his right to destroy what he created regardless of who owns it or who paid for it. This is how she constructs the situation in which to mount her argument regarding self-determination, but this is a literary fiction and must be viewed through the lens of reality. In practice what she is saying is that anyone who has created or produced anything retains ownership rights eternally. This means that if you modify your automobile the manufacturer has the right to confiscate it and destroy it. If you add rooms or change the roof of your house the architect or builder has the right to prevent you. In essence Rand’s view is extreme and untenable because it violates the law at many levels, but her essential philosophy is that a person should stick to their principles regardless of the cost. Unfortunately, like communism her views are extreme and to a great extent unrealistic because they are untenable in the real world.

At a more fundamental level Rand makes a further point and that is that the strong cannot be forced to support the weak. If a person is a ne’er-do-well or an outright failure the government has no right to force an individual through taxation or other means to support or help that person. Each person should rise and fall based on their own actions and the strong should not be coerced into helping the weak. This is a common thread through all of her work and the foundation of many extreme right wing beliefs. This is the essential position taken by Bastiat in his 1830 paper “The Law”.

What is missing or at least what is minimized is the dichotomy of law versus morality. Essentially the position held by Rand is that the government has no right to coerce--through the law – an individual to support someone else who is less capable, less industrious, less intelligent, or simply lazy. In effect the collective authority has no right to enforce morality or obligate a person to a moral standard. This coercion is via taxation and social programs but in reading Rand’s novels she takes this coercion a step further and maintains that no one has the right to demand anything from an individual and that an individual retains his rights over everything he produces. Clearly this is an extreme position and falls outside of any form of capitalism or even reality. But this isn’t the most egregious flaw in Rand’s philosophy or in Laissez Faire Capitalism.

The flaw is the total lack of any morality or moral obligation on the part of the individual. The concept of Noblesse Oblige is ignored. While a person should establish and adhere to their own principles (within the law) they also must establish a moral code that acknowledges their obligation to society and to others. The strong and the powerful have a personal obligation to care for those under their control or influence. The crux of the argument is that the government or some central authority does not have the right to force the individual into fulfilling this moral obligation, but that same individual should have the moral fiber to voluntarily assume these responsibilities and in practice most do.

Theoretical positions must always viewed with some degree of skepticism because theories have the unfortunate history of failing in practice. More than one philosopher has postulated Utopia and every attempt to implement these philosophies has failed. This doesn’t mean these are bad philosophies it just means we should only take those portions that can realistically be applied and ignore the rest. Hence we have a capitalist society but not a laissez faire one.

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