COMPETING MODELS from Capitalism: The Deregulation of Pressure

 

“…it is easy and satisfying…to fall for tales of an oppressive and greedy ‘1 per cent’ of wealthy capitalists—the Occupy Wall Street Effect—rather than coming to grips with the counterintuitive fact that it is only in the process of the 1 per cent becoming rich that much of the economic good for the 99 per cent is generated.”  — Peter Foster, Why We Bite the Invisible Hand.

The left is back, and it’s the only path we have to get out of the spot to which the right has sunken us. Socialism builds and capitalism destroys. – Hugo Chavez

They talk about the failure of socialism but where is the success of capitalism in Africa, Asia and Latin America? — Fidel Castro

 

The recent change in wealth creation in China is remarkable and eye-opening. Up to twenty years ago, high net-worth individuals became rich by political connection, mostly in real estate; by buying up land at below market values and re-selling it at artificially inflated profit, friends of the state had the privilege of unnatural personal riches.  The economic miracle of the last decade or so has been made possible only by permitting entrepreneurs to play the market with capital. The “communist” state has managed to create an environment where individual flair flourishes, resulting in more than a million Chinese with net worth exceeding $10 million, and well over a thousand dollar billionaires. The principle of human equality upon which communism rests has been abandoned.

This was achieved in short order by liberating the populace from restrictive socialist constraints on ownership of property and the means of production, and allowing those with initiative to participate in a competitive marketplace for their own benefit. The Ali Baba explosion rewrote the rule book. It is a classic, textbook case study in the effectiveness of free market capitalism in liberating people from prior economic drudgery so that they can prosper by their own hand and energy.

The euphoria of liberation carries its own particular dangers, though, and we need to heed them. The inherent work ethic, creativeness, and competitive spirit of the population that had been cowed by the yoke of socialism apply commensurate pressure on the champagne cork as it pops. The result has been described, here and elsewhere, as a miracle. There is no such thing of course, but the changes wrought by market access in societies for whom it had previously been politically denied are certainly startling and comprehensive. The liberation of East Germany is a prime example. I predict that we’ll see the same sort of “miracle” in Cuba in due course, and also in Venezuela if they can overcome militarily enforced socialism.

The “yoke of capitalism” and “economic slavery” are buzz words of a socially oppressive system that has no moral defence, no rational argument against the success of market capitalism in invigorating depressed economies, and no workable means of giving the broad mass of people what they really want. The data from competing models in the real world give socialism no quarter. They show that the real beneficiaries of socialism are the rulers; the people they are supposed to serve are worse off than they might otherwise have been, and given the choice, would no doubt quickly opt out. It’s there on the news every day: Economic refugees don’t head for socialist states. They make a bee line for countries where they are free to use their initiative to make a living. Do the maths…

The human influence on the biosphere is a bipartisan battleground. We could characterise it as competition between free-market capitalism and big-government socialism. Those, like me, who have come here via the University of Socks would generalise it even further–it is the old fight between instinct and free will.

Trade involves the voluntary exchange of ownership of goods or services from one party to another, based upon perceived relative values. It consequently includes barter and haggling so that the transaction is mutually beneficial. An environment that facilitates trade is called a market.  Trading originally comprised the direct exchange of goods and services for other goods and services. The market evolved in time so one side of the barter started to involve precious metals, which gained symbolic as well as practical importance. Essentially, this was the origin of money as a convenient medium of exchange, and as a result, buying could be separated from selling, or earning. The invention of money greatly simplified and encouraged trade.

It derives directly from the specialisation of labour, where specific tasks in a production process are performed by workers who have acquired the particular discrete skills required to manufacture complex goods. Trade allows widely dispersed people and regions to co-operate in a mutually beneficial way, although the parties may not be related or even know each other. In fact, commerce can be traced to the very beginning of communication in prehistoric times.

It is a global phenomenon, known in economics as the “extended order.” Peaceful cooperation beyond the bounds of clan and kinship is the socio-political backbone of our planet. It allows individuals and nations unequal in resources and resourcefulness to maintain their independence. Despite the laws and military might dominating geopolitics, people, in their own right, can find common ground and personal satisfaction in the marketplace, no matter with whom they bargain. Opinions and ideologies are put aside when the wellbeing of one’s family is at stake. We’ll strike a bargain with black, blue, or green to let Johnnie and Jilly go to school with a full stomach and shoes on their feet. The free market is egalitarian to a degree that even the most liberal of us could only dream of, yet it is a prime manifestation of the virtue of selfishness.

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