Friday, April 13, 2007

John Tamny on Capitalism: Setting Some Liberal Myths Straight, Yet Again

Underselling Capitalism

By John E. Tamny : 13 Apr 2007

In a recent Los Angeles Times op-ed, "Overselling Capitalism," University of Maryland Professor Benjamin Barber wrote of the "crisis" in the capitalist mindset, where the "'Protestant ethos' of hard work and deferred gratification has been replaced by an infantilist ethos of easy credit and impulsive consumption that puts democracy and the market system at risk."

While doubtlessly well intentioned, the contradictions and falsehoods within were numerous.

Let's begin with the idea that hard work and deferred gratification are no longer part of the capitalist mindset. In the 2006 edition of the Forbes 400, most of the fortunes were entirely self-made. Unless it's suddenly become easy to steal or beg one's way to great fortune, it appears America's greatest capitalists have engaged in both hard work and deferred gratification.

Indeed, since wealth can only result from the combination of brains and capital, and as all capital is the result of prior savings, it would seem that the very business successes Barber decries sacrificed greatly in the near-term to achieve the distant object of becoming billionaires. His mention of easy credit and impulsive consumption is contradictory in that if easy credit is available, there must be a great deal of abstinence, too, such that credit is available for consumption.

Barber posits that capitalism "busies itself manufacturing needs for the wealthy while ignoring the wants of the truly needy." This might interest the middle-class patrons of Wal-Mart, who have access to top-quality goods at low prices thanks to the latter's messianic devotion to keeping costs down. Wal-Mart comes in twelfth of the fifty most valuable companies in the world according to Forbes, and within that fifty there's nary a mention of Gucci, Hermes or Armani.

To Barber capitalism "is stymied, courting long-term disaster" as it turns "reluctant consumers with few unsatisfied core needs into permanent shoppers" totally in thrall to producers who "take over their life worlds, encourage impulse buying, cultivate shopoholism and invent new needs." Barber's insights might interest Coca-Cola given its failure to trick consumers into buying "New" Coke, not to mention Blockbuster Video's inability to make movie fanatics pay late fees, or ESPN's inability to foist sports phones on its dedicated viewership.

Barber speaks of an ethos favoring "laxity and leisure over discipline and denial." That total household wealth in the U.S. hit $55.6 trillion last month didn't seem to concern or register with him, nor the impossibility that Americans could possess any wealth if indolent leisure and rampant consumption were the nation's ethos.

Barber contradicted himself once again in urging capitalism to "learn to defer profits and empower the needy as consumers." Apparently he forgot that profits are by definition the remuneration of abstinence, so it would seem we're not the prodigals he says we are.

Still, he has a point that big business and big capitalists can help the less fortunate, and sure enough they are. He might simply be reminded that it is abstinence in the name of profits which enables the rich to offer aid. Just last week the Wall Street Journal's Jason Riley wrote about hedge fund manager Lance Laifer, and his successful efforts to fund malaria-free zones in Afric.

Author Robin Meredith wrote in the latest Forbes that Starbucks (no doubt Barber would deem it guilty of "shaping" American wants) pays its servers in China $6 for an eight-hour day; a low wage until one considers a nearby "Chinese-owned teahouse where the staff works a 12-hour day for $3.75."

Barber calls on pharmaceutical companies "to sell inexpensive retro-vials to Africans with HIV instead of pushing Botox" stateside, but he forgets that it is the profits earned from Botox sales that enable pharmaceutical companies to sell or give away low-cost goods in Africa.

Capitalism is the villain in Barber's piece, yet capitalism has proven time and again to be the singular cure for the poor health threatening the Third World. According to the 2005 Economic Freedom of the World report produced by the Cato Institute, the nations in the top quintile of average per-capita GDP also have the highest average life expectancy; 77.7 years versus 52.5 years for citizens of countries in the bottom quintile.

Barber concludes by saying to "sustain itself, capitalism will once again have to respond to real needs instead of trying to fabricate synthetic ones." He gets it backwards. That capitalism gives people what they want means that it alone will have the wherewithal to provide the jobs, aid and medicine to those not lucky enough to live in cultures blessed by the most compassionate economic concept ever known.

John Tamny is the editor of RealClearMarkets. He can be reached at jtamny@realclearmarkets.com

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I tell you, those liberal college professors, what planet are they from? Thanks, John.

And, if you want to contribute some of your capital to the War Effort in Iraq, then here's a wonderful idea.

2 comments:

Stacie said...

Your blog just keeps getting better and better...keep up the great work.

Webutante said...

Thanks for your encouragement, Stacie.