Saturday, 2 September 2017
Ten common lies about about free markets, capitalism and liberal society
Every day - in the papers, on the telly and all over social media - a bunch of people tell a pack of lies about free markets, capitalism and the liberal enlightenment that made us all rich, is still helping make the poor less poor and the rich happier. The Clerisy, as Deirdre McCloskey calls them, having got themselves secure, often tax-funded positions spend their time sneering at the things that made their comfortable lives possible. Hipsterish, right-on web-design consultants and the like go on about the evils of capitalism while plying their lucrative businesses in that capitalist world.
This makes me angry. It's not the hypocrisy, we've all a tendency that way. It's not the smugness, annoying though it often is. And it's not that, as my Dad was wont to say, "they can afford to be socialists". No, it's the lies. Here are ten of them.
The First Lie - Free markets are a bad thing.
Please explain which part of the word 'free' is a bad thing? If you don't like free markets, what you want is markets that aren't free. Markets where only some privileged people can trade. Markets where someone else (usually the government) sets the price. Markets where their effectiveness is determined not by the actions of those in the market but by who is most effective at lobbying - for which read bribing, corrupting - government. If you fetter free markets (which given you always go on about the free market being "unfettered" is what you want) what you create are winners and losers, privileged and unprivileged, rather than having a system where people seek co-operation and mutual benefit. Freedom is a good thing. Free markets are a good thing. So stop lying about this and undermining the liberty of your neighbour.
The Second Lie - Capitalism is exploitative
We hear this all the time. Whether it's about the planet, the workers or some vague and general exploitation. Well it ain't so. Capitalism is a simple concept where things are owned by the people who stump up the resources for those things to be there. Not just cash but ideas, innovation, skills and enthusiasm. No-one's being exploited here and capitalism delivers returns to investors - in doing so it helps make those innovations succeed and those free markets make us all richer.
The Third Lie - We are rich through exploiting other humans
Quite the reverse. The thing that the liberal enlightenment did was demonstrate that the best way to get rich is to help make other folks' lives better. That was Adam Smith's great insight, not the 'invisible hand' but rather the realisation that personal self-interest operating in a free system leads to social betterment. When people point, quite rightly, to the horrors of colonialism and imperialism they are wrong to see in them the reason for our wealth. Some people made money screwing over Africans and Indians but this money was - even at the height of Lord Clive's egregious pillage of India - marginal to England's wealth and economic growth.
The Fourth Lie - Government creates wealth
We need government to protect the liberal society that allows free markets and capitalism to work. The ancient - and it is ancient - system of contracts, laws and administration that protects property was turned (mostly but not always) away from protecting the landed and towards supporting that free society and its mundane trading transactions. But government doesn't create wealth - we had hundreds of years of contract law, the Magna Carta and all that jazz without seeing the transformation wrought by capitalism and free markets. And we had plenty of government inventions during that time - from gunpowder to haute cuisine - without those inventions making the mass of people rich.
The Fifth Lie - Capitalism kills people
All the time you're talking about 'capitalism's death toll' without ever pointing to the bit when liberal society, free markets and capitalism killed these people. Indeed quite the opposite. All the advances in medicine, sanitation and safety made possible by being richer - that's the fruit of capitalism even if we choose to organise these things through government. Since the millennium a billion people have been lifted out of extreme poverty because of those free markets, free trade and capitalism. Capitalism saves lives.
The Sixth Lie - Capitalists are greedy
Again quite the opposite is true. Capitalism expects that, instead of swimming backstroke in his gold pile, Scrooge McDuck invests his cash. Some of this is invested in boring old working capital and some in high risk, exciting, sexy, hipster innovation. You and I prefer the safe stuff because we've not much to spare let alone risk but Scrooge McDuck can take bigger risks because losing a bit is less of a big deal. Those filthy rich plutocrats (the anonymous pinstriped banker ones are the worst) you rile against are stumping up the investment needed to deliver economic growth, health, wealth and happiness. Moreover they're putting off having something now (spending all that gold) to take a risk hoping that they'll get a bigger return in the future. Because of this all those exciting, innovative businesses happen. This is not greed.
The Seventh Lie - Small businesses aren't capitalists
Now this lie is more inferred that explicit. Bad capitalism is about faceless, distant businesses not our friend's web design business or the trendy coffee shop where you meet to discuss revolution and the evils of free markets. Sorry to disappoint but you're all capitalists and it's in all your interests for that capitalist system to operate as openly and freely as possible.
The Eighth Lie - Trade is something permitted by government
This lie sits behind all the talk of trade deals and the nonsense about a 'global race' so loved by politicians and pundits. Trade is quite simply the process of exchange in a free market (or even in a not-so-free market). We want government to back up our exchange by protecting property rights, preventing theft and ensuring we can enforce a contract. But we don't want the government to say who can and cannot trade or when and where they can trade. Trade is more often prevented by government than enabled. If we want more growth, more riches, the way to go is less prevention and more enablement.
The Ninth Lie - The rich are rich because others are poor
Free markets prevent this from happening. It used to be so before we woke up and realised that posh folk owning all the land and getting peasants to scrat in it wasn't the best way to a wealthy, healthy and successful society. We used to have a system - called it feudalism, oikocracy, whatever - that meant some folk were rich because others were poor. It had lasted from the first cities in the middle east through to the Dutch Republic. Then some places realised (partly government, partly people thinking about a better world) that the way to get rich was to try and make everybody better off. And it worked. We call this system liberal capitalism.
The Tenth Lie - Free marketeers don't care
How often to you say this? Every time something fails, most usually some or other government administrative system. This because of capitalism, we're told. Free markets did this. Because they don't care. If they cared nothing would ever fail. No-one would be poor. This is the biggest of these lies. Free marketers do care. That's why we're capitalists. We want everyone to be healthier, wealthier and happier. And because free markets work people in Britain are vastly healthier, wealthier and happier than our forebears.
By all means disagree. Feel free to stick with your faith that there is some sort of Utopia, some system - True Socialism maybe - that will give even more social benefit, wealth, health and happiness than free markets, capitalism and our liberal society. But stop lying about free markets, capitalism and that liberal society. Stop fibbing that it's anything other than the more successful, more effective and long-lasting means of bettering the lives of ordinary people.