Tuesday, April 19, 2011

Capitalism Is Rising, Not Falling

Is belief in capitalism on the wane? Many on the left wish this were the case and they point to a new poll to support their fantasy, but they’re wrong. . . as usual. If anything, capitalism is expanding by leaps and bounds.

This specific poll in question was conducted by GlobeScan and it asked respondents if they agree that capitalism is a superior economic system to the others available. The headline number trumpeted by the left is that support for capitalism is down in the US from 80% in 2002 to 59% in 2010. And the average across 25 countries polled was only 54%. Clearly the end is nigh, right? Well, no.

For starters, let me point out that getting 60% of the public to agree to anything is itself quite an accomplishment. Indeed, if Obama was re-elected by 60% to 40%, that would be an epic landslide. The human race just isn’t built for more “agreement” than that. In fact, the few times you will ever see anything exceed around 60% in polling can usually be explained by a defective methodology or temporary enthusiasm, like how everyone rallies around a war once it begins. So getting 60% of the American public to say they support capitalism is an excellent number. It also tracks with the American left being around 40% of the population -- leftists, by the way, claim to hate capitalism, but they love what it delivers, particularly cheap consumer goods, excellent services, and wealth. . . they just don’t like others having these things.

Moreover, after the financial crisis, you would think capitalism would be at its lowest point in terms of public support. The Democrats and their media allies have been pushing the idea for two years now that the financial collapse was the result of “unregulated” capitalism. Thus, they have systematically blamed “capitalism” for the massive unemployment that followed, the wiping out of ten years worth of stock market gains, the collapse of various governments, and the near-bankruptcy of several countries. Those are pretty serious consequences and if capitalism truly was to blame, then you would think that well-fewer than 60% of Americans would still support it. But that’s not the case. So apparently, despite the best efforts the MSM can come up with to slander capitalism, 59% of Americans continue to believe in it. That’s very encouraging. In fact, that’s probably the real story here.

The other real story here is the growth of the popularity of capitalism in other countries. In China, a supposedly communist country, and Brazil, another country with a leftist government, 68% consider capitalism the superior system. In India, a country done wrong by the British and which flirts with socialism and even communism in some of its states, 58% prefer capitalism. Even in Germany, which invented socialism and is the center of the soft-socialist world today, 69% prefer capitalism. These are not numbers one would expect. The fact the people of these countries prefer capitalism so overwhelmingly tells us something about the draw of capitalism and the inherent sense it makes.

But not everyone goes along for this ride. In Turkey, only 27% think capitalism is superior to other systems. Of course, Turkey is shifting from a secular-socialist government to an Islamic government. France also has problems with capitalism, with only 36% preferring capitalism. But then, France is France. Not coincidentally, both of those countries are in decline.

Contrary to the leftist spin on this poll, the real story here is that capitalism is alive and well despite the media assault following the financial crisis, and that it seems to have a bottom level of support around 60% in the US. Just as interestingly, capitalism seems to be spreading around the world and is taking hold in all of the young, dynamic economies on the planet. This is great news for the future, even if it means stiffer competition for our own companies.

I take it, you’re all fans of capitalism?

38 comments:

Tennessee Jed said...

The vice of capitalism is that it creates great wealth, but distributes it unevenly. Socialism creates great misery, but distributes it evenly to everybody.

The A.P. put out a b.s. story about taxes and the wealthy yesterday. For a much better read, I suggest "Return to Prosperity by Arthur Laffer, Ph.D., and Stephen Moore. As most Commentarians know, Laffer is the creator of the "Laffer Curve" promoting supply side economics. Even he realizes that tax cuts alone cannot overcome the profligate spending of our government.

Socialism rests on the false premise that "value" relates to effort of labor. That, of course, is it's biggest misconception. Still, "Bambi" ads appealing to people's guilt tends to work well for charitable groups and the DNP in good times. These are not good times right now. Obama, please be gone.

T_Rav said...

Yeah, I guess I would be a fan of capitalism...

I bet the reason Germany is at 68% is because of Europe's dependence on them to bail out half the continent, and suddenly the whole nation's on the wrong end of this "redistribution of wealth" thing. Although, I do have to ask: as far as the U.S. goes, how did we go from 80% in 2002 to 59% today? Because that still strikes me as a troubling trend.

Also, slightly OT, but apparently I was right in my prediction yesterday--TOTUS is spinning the S&P credit announcement as a "political decision" that shouldn't be taken too seriously by anyone. Who are you gonna believe, him or those lying numbers?

Tennessee Jed said...

I think it only fair to mention one area where I am in agreement with George W. Bush concerning capitalism. While I recognize the stock market is an unparalleled vehicle to raise venture capital, I have extremely mixed emotions. Having spent 30 some years with a Fortune 500 firm, I felt we constantly were under pressure to manage to expectations of stock analysts at the expense of critical "long view" thinking. Still beats "from each according to his ability to each according to his need" six ways to Sunday.

I also am a fan of globalization, and believe Smoot Hawley was a huge contrbuting factor the great depression.

LawHawkRFD said...

Andrew: The left has spent a century trying to paint capitalism as unrestrained economic Darwinism. In the theoretical world, that might be true. But in the real world, and in America particularly, the "social compact" prevents that from being true. Pure capitalism is no more likely to occur in a true republic than is pure socialism (their ideal).

In a free society, capitalism (like democracy) is the worst system, except for all the others. It rewards hard work and innovation, and punishes sloth. For good and ill, it is the form of government chosen which determines how well capitalism works. Too much government, and the free market is disrupted (housing market collapse, anyone?) or you get the modern phenomenon of crony capitalism (kleptocracy). Too little government produces anarchy.

Americans have shown that even in the midst of a major economic crisis, they instinctively understand that capitalism works best when the government interferes least. That 59% figure shows that even at our present juncture, Americans reject the idea of state control of the economy. We are also a resilient people who believe we may be down, but we're never out.

Tennessee is on-target about the long discredited Marxist labor theory of value. It was very much in the forefront of the unrest in Wisconsin, but is rapidly losing steam.

Ed said...

I love capitalism! Anyone who doesn't, simply does not love freedom.

AndrewPrice said...

Jed, I think that's a very accurate description of capitalism v. socialism. Socialism sounds great in theory -- "gee, everyone will work hard and we all share in what 'we' produce." The problem is that it doesn't grasp for a moment that people have different expectations, different goals, and different desires.

And when you take away the incentive for people to work, what you get are people not working anymore. Add in the incentive for people to take as much as possible and what you have is a system of unchecked greedy and no work ethic. That's a system that will always collapse.

Capitalism, by comparison, requires you to work for what you want, and that prevents both the free rider problem and it keeps gives people an incentive to work. In other words, greedy is harnessed because greedy can only be satisfied through work, not just by grabbing more of what other people want.

AndrewPrice said...

T_Rav, I think the Germans are capitalist because decades of socialism have taught them that folly of socialism -- though I think they are still soft socialists. But the financial crisis and bailing out southern Europe has definitely hardened their views in favor of capitalism.

In fact, interestingly, the left was expecting huge victories after the financial crisis, but they lost in election after election in Europe.

In terms of Obama, he's full of it. But that's how Democrats work. If the decision had been in his favor, then he would have hailed it as evidence that he's right. Since it went the other way, he'll deny it.


So what's with the half-hearted support of capitalism?

AndrewPrice said...

Jed, I actually do not equate the stock market with capitalism, not any more. At this point, the stock market has become mostly about speculation and trading. Most of the profits being made today are about microtrades and very little of it has to do with raising equity or disciplining managers -- especially with the power of poison pills and staggered boards, etc.

I also think, as you mention, that managers spend too much time worrying about the analyst community who are not efficient allocators of resources, they are essentially betters.

And to me the biggest evidence of a rift between the market and capitalism is that the market and our country's economic performance are not really linked anymore. And I think that's the case because they are measuring different things -- short term profit in the market, long term growth in the economy.

AndrewPrice said...

Lawhawk, I agree on all points. The Marxist theory of labor completely misunderstand the difference between work and value. I can work all day digging a huge hole, but it has no value unless someone wanted the hole in the first place. Marxists don't get that -- they think the fact that someone dug the hole gives it value.

I also agree about unfettered capitalism. There really is no such thing. For one thing, rule of law always restrains the worst elements by disallowing fraud and deceit. Secondly, once you get things like any sort of safety net, suddenly you no longer have the "out of control" capitalism that the left fears. Moreover, the people who tend to give the most to help other human beings are those same capitalists, it's never the socialists who give... even time.

I too think the 59% number at the worst possible moment capitalism has had since the Great Depression is a great, great thing and that's the real story -- not the fall from the artificially high 80%.

AndrewPrice said...

T_Rav, Sorry, I forgot to address your concern regarding the fall from 80%. First, keep in mind that the 80% was probably inflated by patriotic feelings following 9/11 and is before the left went really insane against Bush. What the fall to 59% represents is the floor (I would think) of support for capitalism in this country. That follows not only a decade of pure hate poured out at Bush and "capitalism" -- even though he was more the crony kind (just like Clinton and Obama), it follows a decade of crony capitalism where big corporations robbed the treasury falsely in the name of free markets, and it follows the worst economic collapse since the Great Depression. The fact it still pulls in 59% support following that is true incredible. What other philosophy could have withstood that kind of decade long assault and still be favored by 6 in 10 people?

AndrewPrice said...

Ed, Good for you! :-)

rlaWTX said...

William F. Buckley: “Every ten years I quote the same adage from the late Austrian analyst Willi Schlamm, and I hope that ten years from now someone will remember to quote it in my memory. It goes, ‘The trouble with socialism is socialism. The trouble with capitalism is capitalists.’”

the conversation made me think of this...

AndrewPrice said...

rlaWTX, That is a truly insightful quote and I think it's absolutely correct.

Socialism is a corrosive system that makes normal people lazy, greedy and puts them in direct competition with each other for scarce resources. It is the system itself that warps humanity.

Capitalism does none of those things, but it allows individuals to indulge in massive excess. They then make the whole system look bad by their behavior.

So that really is the true difference. With socialism, the system does the damage. In capitalism, a few individuals do the damage.

AndrewPrice said...

rlaWTX, By the way, I didn't mean to impugn everyone in West Virginia, there are some nice people there. But the society as a whole is a mess, and it's much worse than anywhere else I've seen in the US. That was my point.

patti said...

every system has it's bugs, but i'll take capitalism's every single day.

DUQ said...

Capitalism rocks! No other system known to man tries to match the public's wants and needs to the desire of producers to make money, and that's the only way the world works. The modern world is rich and it's all because of capitalism.

BevfromNYC said...

Perhaps the Germans like capitalism so much because half of the country lived under communist rule for almost 40 years and they can see the real downside to Marxism.

AndrewPrice said...

Patti, Same here. Capitalism has flaws, but it's generally very good at fixing those flaws -- except where the government starts stumbling in to "fix" problems. Socialism just festers.

AndrewPrice said...

DUQ, That's true. The modern world has become incredibly rich by historical standards and it has everything to do with capitalism -- socialism has no claim to have helped that in any way.

AndrewPrice said...

Bev, That could be. The difference between East and West was really stunning for anyone who saw it live. It really was like one half of the country was modern and free and the other half was still living in 1945 with bombed out buildings and guards everywhere.

Ed said...

Andrew, I think the marxists don't understand what creates value. Value isn't created by supply, it's created by demand. When they think that merely offering labor is good enough, they don't get that what really matters is offering labor that people DEMAND.

Tennessee Jed said...

Andrew - as you undoubtedly know, that description of capitalism is a bastardization of a famous comparison; I think one attributed to Churchill. Of course, he also is sometimes attributed to the one about a 21 yr. old not being liberal has no heart, and a 41 yr. old not being conservative has no brain. Regardless of who originated them, they tend to work quite nicely.

I don't think you can really divorce business and free market capitalism. It is simply an unequaled method to amass the capital needed to fund expansion, new ventures, etc. The more speculative the play, the greater the risk/reward. However, just because I respect what it can do doesn't diminish it's downsides.

AndrewPrice said...

Ed, That's true. it's the same fallacy made by the gold people -- they think a thing has inherent value, when in truth nothing has value unless other people demand it.

AndrewPrice said...

Jed, That's a good quote too about capitalism -- very appropriate and highly accurate.

In terms of divorcing business and capitalism, I don't have any problems with business and capitalism working together -- they go hand in hand. My problems tends to arise when they get away from the making money the "honest" way, i.e. earning it. For example, when they discover that they can use the government like a piggybank to get benefits. Or like Goldman is doing with microtrades, which have nothing to do with making the market work or allocating capital, but are about using technology (and access) to force themselves into the market as middle men. To me, those things just distort reality, and they are anti-capitalism.

Tennessee Jed said...

I think everybody probably realizes I meant Wall Street instead of capitalism, but I post this to avoid any confusion. Andrew, your response indicates you understood what I meant.

Euripides said...

Socialism is a seductive ideology. There is an appeal in the idea that everyone is taken care of. Yet as F.A. Hayek pointed out, any state that can create or impose socialist equality is a state that can become totalitarian.

I'll take my chances with the free market, thank you.

T_Rav said...

Andrew, I was being ironic with my opening sentence, which I would have expected you to pick up on. Subtlety, subtlety...

The Marxist theory of value everyone's been discussing (I've been studying for comprehensive exams most of the day so I haven't had time to comment. No, I do not want to hear about how Commentarama comes first and all that) is an incredibly boneheaded idea. I'm sure I don't have to spend much time elaborating, but think of a dentist. He isn't able to charge high prices because he spent a lot of money in dental school and therefore has to charge prices reflecting the cost of his studies and expenses; he can charge high prices because his patients have money to spend and value having good teeth. The theory isn't logical; it's based on medieval notions of a "just" price more than anything else (although even back then, the principle was observed more in the breach than in practice). And yet, that's kind of the cornerstone of Marxism, because without it, Marx's theory of exploitation doesn't work, so neither does his theory of history or the revolution of the proletariat. Nice to know the government subscribes to such a washed-out ideology, huh?

AndrewPrice said...

Jed, Yes, I got you! :-)

AndrewPrice said...

Euripides, I agree on all counts. There is indeed something seductive in a system that promises that everyone will be taken care of and that speaks of fairness, etc. But it's all talk and socialism can never live up to its promises.

Indeed, socialism is entirely unfair. It favors the non-productive over the productive and thus, it is destined to fall apart. It also is incapable of taking care of even the basic needs of its citizens -- look at any of the examples: Cuba, East Germany, etc. The only one to escape its fate and avoid collapse was China and that's because they went capitalist.

And, as you note, it tends to become totalitarian very quickly because that's the only way to stem the tide as its failures begin to take root. In other words, once people stop working because they've lost the profit motive, the only way to keep up production is to start punishing those who don't produce enough. That inevitably leads to government-sponsored slavery, which will always require a strong police state to enforce.

I'll take capitalism any day.

AndrewPrice said...

T_Rav, I'll skip the lecture on Commentarama coming first. . . for now. ;-)

Sorry on the subtlety, I'm having an unsubtle day.

It is truly comforting that our government believes in a theory that was discredited in the Middle Ages. Of course, that's not all that different than the government believing in flat earth theory, i.e. global warming, or in alchemy, i.e. massive deficit spending. We truly have an enlightened government! ;-)

T_Rav said...

Andrew, in fairness to socialism, it does deliver what it promises: equality. Everyone is equally deprived of all luxury goods, like oranges, or toasters. Well, except for the people running the government, that is; they do hang on to their Black Sea villas and such. But aside from that, everyone's equal.

AndrewPrice said...

T_Rav, Hence Orwell's perfect formulation: "All animals are equal, some are just more equal than others."

CrispyRice said...

Yay capitalism! :D

AndrewPrice said...

Crispy, :-)

Tennessee Jed said...

Checking back in late :D Before I call it a night, reading the comments reminded me of "Never Enough" by William Voegeli which I reviewed for Commenterama early this year. Don't know how many actually got an opportunity to read that book, but it is pretty much on point for this discussion within the framework of what can we capitalists/fiscally sane people expect in this country. I am so pleased we have changed the framework of the debate towards the need of cutting back on socialist entitlement programs. The changes made at the state level have been astounding. Federal is still a tough cookie.

At the risk of sounding like Michelle O., I am proud of what has been accomplished. Voegeli, I think, provides an interesting framework in terms of what we may realistically expect. Great post and great discussion. Night! (well morning here at the western fringe of the eastern time zone.)

AndrewPrice said...

Thanks Jed, and let me echo your sentiments about this being a great discussion. I too am happy that we seem to have changed the debate from what should the government do next to what do we stop the government from doing next. That's key to preserving freedom and thereby making us a richer, freer, happier people.

Produse Bio said...

I hate to break it to you but capitalism died when finances appeared. Money represents the value of a product or service, this is the corner stone of capitalism. But what finances did was to put a second price on money. So basically we live in an economy based on the price of of a price of a product. When money stopped reflecting value, it became some sort of a circular definition. In other words we pay a price based on what the price of that money is where we live, and not based on the value we want in exchange. We're living in a fake market, where money lost it's value and we're paying whatever someone wants us to pay.

AndrewPrice said...

Thanks for breaking that to me! LOL!

Of course, you are wrong. Finance fees are a small percentage of any price you pay -- the vast, vast majority are input costs like materials, labor, overhead, and then taxes make up most of the rest. These are nothing more than a middle charge charge like there used to be when the economy was based on small merchants.

That's not to say that much in the world of finance hasn't gone of the rails, but it's not very relevant to the economy as a whole except that our government allows these big players intermix with the treasury and gamble with trillions in assets.

In effect, we have a capitalist system except where big business and government have conspired to create a crony-socialist system.

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