Capitalism could be our friend
[Published in NBR Heads Up: Weekend Review Edition, Nov 18, 2017, under the title Capitalism is not the sane as less socialism]
In announcing NZ First’s decision to go into coalition with Labour, Winston Peters said
Far too many New Zealanders have come to view today’s capitalism not as their friend but as their foe and they are not all wrong. That is why we believe that capitalism must regain its responsible, its human face.
Later in the evening when asked about those comments, Ms Ardern said:
I would absolutely agree that it's not delivering for the people of New Zealand. We need to make sure that we're an active government working alongside people to ensure that they're having all of their needs met.
These comments invite consideration of what Peters and Ardern meant when they were talking about capitalism.
Peters’ statement leaves us unenlightened as to when capitalism had a responsible and human face, how that was manifested and more fundamentally exactly what is the capitalism he was speaking about.
It is implicit in Ardern’s comments that government activity will force some people to satisfy “[all the] needs” of others — that is, the active government will facilitate the taking by some of what they haven’t earned from those who have.
The essence of capitalism is captured by the quotation from the Introduction to Mises’ Economic Policy Thoughts for Today and Tomorrow in my article “Simple truths for politicians” (NBR, August 11, 2017):
The ideal economic policy, both for today and tomorrow, is very simple. Government should protect and defend against domestic and foreign aggression the lives and property of the persons under its jurisdiction, settle disputes that arise, and leave the people otherwise free to pursue their various goals and ends in life.
Leaving the people free to pursue their various goals and ends in life is the essence and purpose of capitalism.
Freedom to pursue goals and ends in life carries with it the responsibility not to use force or fraud to prevent others doing the same. It is a contradiction for one individual to assert freedom to pursue goals and ends in life but to use force or fraud to deny it to others. The legitimate purpose of government is to make sure that no one uses force or cheating to interfere with anyone else’s right to pursue their goals and ends in life.
The Introduction to Economic Policy Thoughts for Today and Tomorrow elaborated.
When government protects the rights of individuals to do as they wish, so long as they do not infringe on the equal freedom of others to do the same, they will do what comes naturally — work, cooperate, and trade with one another. They will then have the incentive to save, accumulate capital, innovate, experiment, take advantage of opportunities, and produce.
They are inhibited from doing those things when governments intervene. The underlying reason for the TPP illustrates the point.
In “Parker’s Pikkety free trade defence” (NBR, November 10, 2017) Rob Hosking drew attention to the contortions the new government was engaging in to justify the dramatic change in its TPP stance from vehement opposition to adopting it but with window dressing to suggest changes of significance. Parker tries to have it both ways when embracing the TPP because of its trade benefits whilst decrying the “excesses of global capitalism”.
What is generally overlooked is that the TPP is only a weak attempt to move towards a freedom to trade which was taken away by interventions by governments for political purposes over decades and centuries. If all people had been free to trade with each other without being impeded by barriers erected by governments seeking to curry favour within their territories, if “global capitalism” really existed, agreements such as the TPP would be unnecessary.
APEC governments, except Trump’s US, have realised that freedom in trade and investment fosters economic well-being, but they don’t want too much because that’s politically inconvenient. That’s why TPP is only a weak attempt with many exemptions and staged implementations.
The philosophy of freedom had taken root in the late 18th century, finding political expression amongst other places in the American Declaration of Independence. Although it is not certain that Karl Marx originated the term “capitalism” to describe these moves towards economic freedom, he certainly popularised it in the mid to late 19th century. As an enemy of economic freedom, he coined or adopted an expression to which he attached pejorative attributes. Subsequent enemies of freedom have followed in his footsteps.
By contrast with capitalism, the essence of socialism is the denial of freedom. Taken to its logical extreme, socialism constitutes a complete denial of freedom by government control of everything.
The contemporary paradigm is North Korea. Donald Trump aptly described that system on 8 November in an address to the South Korean National Assembly.
Kim Il Sung, who is revered like a god in North Korean propaganda, established the country in 1948 as a "socialist paradise" of free housing, health care, and education where people would want for nothing. Kim Jong Un claims his legitimacy to be the leader as the direct descendant of this quasi-deity. .
North Korea is a country ruled as a cult. At the center of this military cult is a deranged belief in the leader's destiny to rule as parent protector over a conquered Korean Peninsula and an enslaved Korean people.
He noted the slave-like conditions that North Korean workers endure, the malnutrition among children, the suppression of religion, and the forced-labour prison camps where North Koreans endure "torture, starvation, rape, and murder on a constant basis."
In such a system, individuals have no right to exist for their own sakes. Their own lives and the products of their own endeavours do not belong to them but to the government.
Whenever government goes beyond protecting and defending against domestic and foreign aggression the lives and property of the persons under its jurisdiction, and settling disputes that arise, and starts to prevent persons under its jurisdiction from pursuing their various goals and ends in life or to regulate the way in which they are permitted to go about it, there is a diminution in freedom.
Despite Peters, Ardern and Parker using capitalism as their excuse for policies of greater government intervention, there has never been a system where a government has limited its activities to protecting and defending against domestic and foreign aggression the lives and property of the persons under its jurisdiction, and settling disputes that arise. That’s the reason for the title of Ayn Rand’s Capitalism the Unknown Ideal.
Mises would describe capitalism as an imaginary construct against which to measure and evaluate the ways in which it is departed from.
Many socialist countries such as China and Vietnam are trying to have free markets to some extent at least – because free markets work and controlled economies don’t.Western democracies oscillate between less or more socialism with a tendency towards increasing government interventions.
There was less socialism, i.e. more freedom, during the 19th century but since then the tendency has been towards increasing government interventions.Although Peters and Ardern may be saying that they want to roll back capitalism, they can’t do that. It’s not possible to roll back something that doesn’t exist, but it is possible to diminish freedom by increased socialism.
Every additional government intervention diminishes our freedom to live our own lives and represents an advance of socialism.
When Jacinda Ardern says that her government is going to work alongside people to ensure that they're having all their needs met, what she means is that she wants to implement the Marxist adage: from each according to his ability, to each according to his needs. She does that by using force to extract from those who use their abilities to give to those she considers to be needy.
Just to be clear. Socialist intervention includes so-called ‘crony capitalism’ which is not capitalism at all but an example of socialist intervention.
The former ‘Minister of Corporate Welfare’, Steven Joyce, is as much a socialist as Ardern when he devises and implements policies to take from earners to give to favoured enterprises. The only real difference between the new government and the previous one is that the new one will advance socialism further. Exactly how far remains to be seen.