Originally posted at Monty Pelerin's World [11],
“Capitalism is not things; it is a mentality.”
So stated Ludwig von Mises in a talk in mid 1952 in a series of lectures entitled Marxism Unmasked which he gave at the San Francisco library.
Mises provided examples that illustrated this mentality or its lack. One pertained to India (my emboldening):
Nehru [Jawajarlal Nehru, 1889 - 1964] has been quoted as saying ”We want to give every encouragement to private industry.We won’t expropriate private businesses for at least ten years — perhaps not even that soon.”
You cannot expect people to invest if you tell them that you will expropriate some time in the future. Therefore, conditions are much worse now than when the British were there. Then you could still hope that the British would remain and that they would not expropriate your business.
Nehru had little understanding of capitalism and its requisites. He liked the things it made possible, but not the conditions necessary for their achievement. Barack Obama, at least in this respect, is a modern-day version of Nehru.
The Other “Isms”
Marxism, Socialism, Facism and virtually all other isms except capitalism are anti-economic.
Economics does not have all the answers, nor is economics a precise science. Those who pretend otherwise are generally responsible for the quackery that is passed off as economics. Economics is about human behavior. It is a positive approach to dealing with the human condition.
Isms are normative. They imagine human behavior in some ideal sense, according to some dreamer-in-chief. Behavior modification is always necessary in order to move to this “perfect” condition. The premise that it would be a better world if only people behaved differently underlies every one of the isms.
Economics, to the extent that it is science, is “wertfrei.” Its purpose is to understand and explain human behavior. A narrower purpose, one that has captured the profession, is how human behavior impacts markets and market transactions. Economics should not not try to effect human behavior, but to explain it. It does, however understand how incentives and disincentives affect behavior.
All political visions involve the improvement of man and/or society by changing the nature of man. Social planners want to “improve” and “perfect” matters according to their ideas of what these terms imply. Little commonality exists regarding utopian visions. One commonality between these utopian ideas does exist — the universal failure of all such schemes.
There is no better way to understand the wisdom “the perfect is the enemy of the good” than to study the historical wreckage that has resulted from trying to “perfect” society.
Every scheme requires the use of force to make people change behavior to something they otherwise would not do. The force, misery and deaths associated with these schemes exceed those from wars. Stalin, Hitler, Mao were leaders in the death count, but there were numerous others whose names are less known. Their methods and devastation were comparable.
Barack Obama and The “Isms”
President Barack Obama is not a capitalist. That is obvious. What “ism” best describes him is not.
Most people probably do not think Barack Obama is a Marxist. Barack Obama does not speak of himself as a Marxist, but he was, based on what little is known of his early life. His parents, grandparents, mentors and friends believed in Marxism. Barack has admitted to choosing his friends on that basis.
I suspect Obama is a Marxist, but will not use such an unacceptable term to describe himself. In politics appearance is what matters and words are charged. “Liberalism” (a co-opted term) is less damaging than Marxism, but it has become so stigmatized that political marketeers have switched to the less known and as yet not fully discredited term “progressive.”
To political opponents, a progressive is an extreme leftist or perhaps even a Marxist. But labels are meaningless. Deeds, not marketing tags, are what matter. On that basis, Obama appears to be very close to a Marxist. The argument is moot, however. Does it matter whether Nehru was Marxist or merely a Socialist? To quote one of the next presidential aspirants, “at this point, what difference does it make?”
Obama’s Nehru Moment
Barack Obama’s concept of capitalism is similar to Nehru’s. He doesn’t understand capitalism. He believes it is physical things like machines, tools, factories and wealth. These result from capitalism, but capitalism depends on freedom and individuals pursuing their own interests. If you remove these conditions, the machines, tools, factories and wealth diminish or vanish.
Nehru talked about expropriation. Obama talked about “sharing the wealth” with Joe the Plumber:
And I think when you spread the wealth around, it’s good for everybody.
The difference between expropriation and “sharing the wealth” is measured in degrees. Nehru was willing to confiscate everything, at least with respect to foreign investment, and foolish enough to announce it. Obama unwittingly expressed his intended predation, although did not define it. He clearly communicated his willingness to confiscate more (in the form of taxes) than was currently being confiscated. He didn’t limit the confiscation to foreigners. Nor did he specify the amount.
Confiscation need not be total to destroy an economy.
The Incorrect Assumption
Capitalism, as Mises pointed out, is a state of mind and an environment that allows men to pursue their own self-interest and betterment. This environment is responsible for the growth in per capita income and wealth that characterizes capitalist countries.
Statists (and many non-Statists) suffer from an erroneous assumption that an economy performs two functions — production and distribution. Pedagogically, that is true although the two functions are not independent of one another. Assuming this independence does great damage.
The production of wealth and the distribution of wealth are are interdependent. The idea that you can alter the distribution of wealth and not affect its production is naive and wrong.
Work, by definition, is not something enjoyed. That is why people must be paid in order to engage in it. When the rewards for working are reduced, you get less work and output. Raising taxes in order to “redistribute the wealth” is the same as cutting wages or income for productive activity. It is an expropriation in the same sense (although not total) as Nehru proposed in India. It has the same effects. It reduces effort and output. It causes decisions to not be made. A country is made poorer than it otherwise would be by its mere suggestion.
Government cannot change the distribution of wealth without impacting the production of it. This simple fact is either unknown or ignored by the Obama Administration. Everything done by Obama produces adverse effects on the standard of living in this country. More regulation raises costs and reduces incentives for producers. Forced medical care raises the costs and lowers the wages of workers. Deficit spending necessitates higher future taxes which means lower returns on investments and investments not made.
The consequences should be obvious and play out in our economy:
- There is no economic recovery.
- Businesses, especially small ones, have laid off employees or reduced their positions to part-time in order to avoid the onerous costs of ObamaCare.
- Labor participation rates are disgracefully low.
- Un-doctored unemployment statistics are in double-digits.
- Business expansion is deferred or canceled in light of the uncertainty regarding future regulations and tax rates.
- More people are dependents of the government than ever before.
- Government is bankrupting itself in an effort to hide these effects.
This partial list could be greatly expanded, but there is no need to go on.
The policies of our version of President Nehru have effectively expropriated our future and the future of our children.