Thursday, July 26, 2012

Capitalism and The Godfather Movies

The History Channel recently broadcast a show called "The Godfather: Legacy."  It was a look at the three movies and was fairly informative.  Several of the key people who helped make the trilogy were interviewed, and of course, this included the director Francis Ford Coppola.  Unfortunately, Coppola said that what happened in the movie shows the consequences of capitalism.  ARGH!  Really?!?  No, no, no!  Wrong, wrong wrong!  This is wrong with wrong sauce.

While I like the movies and think that they are beautifully crafted, I cannot accept that if we had a pure capitalistic system it would look like the world of the Godfather.  A free market means that I am free to choose to buy or not to buy, hence the word "free."  A free market does not force or even threaten the use of force to get people to buy or not buy.  If there is such a threat, then we have a system other than that of a free market.  Making an offer one cannot refuse in a free market means a really good price, not the threat of being shot in the head.

A system that threatens or uses force to get its way is the opposite of the market.  Such a system is really the system of government.  Government cannot do anything without taking from someone first.  The government must take before it can do.  The only way it can take is through the use or threat of force.  So when we watch the Godfather movies do not think that this is a movie about capitalism.  If anything, they are movies about power and coercion. It is the use of power and coercion that is more closely connected to the actions of the state than to any market.

Saturday, July 21, 2012

Competition vs. Conflict

Last week President Obama said that we do not live in autarky.  In other words, one person did not build a business, he had help.  Well, duh!  No one argues that we should each live in solitude, not even the more ardent Randian Objectivist.  

So what is he really getting at?  He is trying to emphasize that communities need to work together.  Fine.  However, his emphasis is on the public sector's "contribution" to society.  Here are a few thoughts on this...

First, before government can make any contribution to society, it must first take from society.  Just because the public sector has spent money on an area, e.g., roads, schools, etc., it does not mean that such things would not be produced if the private sector was left alone.  In deed, the public sector tends to crowd out the private sector whenever it does anything.  Additionally, the public sector is unable to determine whether it is spending money efficiently and thus is always more wasteful of resources than the private sector.

Secondly, autarky may be a starting point for economic theorizing, but it does not mean that we stay there.  Austrians almost always start with the assumption of a lone individual on an island when developing theories of capital and interest.  However, one of the most important insights of all of economics is the Law of Comparative Advantage, which Mises takes to the level of the individual and calls it the Law of Association.  It says that when we specialize and trade, we are made better off.

Finally, many on the left simply do not understand how a free society works.  At the center of the economic system all they see is one person trying to out-compete all rivals--doing whatever it takes to get resources for that dollar of profit.  This conception of the market economy is a skewed envisioning by Marx and the left.  

While there is competition, to be sure, the market cannot operate at odds with itself.  The market is less about competition than it is about harmony.  Consumers have preferences that are subjective and unknown to the producers of goods and services.  Manufacturers have resources and plans to make goods, but do not know which goods to make and in what quantity or quality.  The problem that faces every society is to convert the resources into  goods and services, but not just random goods and services.  They need to make items that satisfy the most intense wants and desires first, and then work down the consumers' preference list.  The market coordinates the conversion of these resources through the use of the price system.  The result is a harmony of action.  Different firms, through trial-and-error, through profit and loss, through competition discover the best combination of resource blends.  The result is that more people are served with less waste than any other system ever.

The reason why the left, Marxists in particular, focus on the single aspect of competition is that they view the world through the lens of conflict.  Marxism is born from Hegelianism.  Hegel saw the world in terms on conflict.  There is a thesis, which is today's mainstream.  Through time, a reaction builds in opposition to it, the antithesis.  A conflict eventually ensues and a synthesis emerges.  For Marx, the Monarchy was the thesis and the exploited were the antithesis.  The result that emerged from the French and American revolutions were the rise of Capitalism.  Capitalism is the new thesis, in which the proletariat will rise up against the bourgeoisie.  The result of this conflict will be Communism.  To the Marxists, the totality of history is conflict, so why should the internal workings of a free society be any different?

What a horrid way to look at the world--conflict, fighting and death!  A vision of a free society is one of liberty and one of individual responsibility.  In this vision, I need you and rely on you so that I can better myself.  When I trade with you, we are not in conflict, we are mutually helping each other.  We are both made better off by the trade.  A free society is the furthest thing from autarky.  If, in college, our President read Bastiat instead of Marx,  I doubt he would be able to make such foolish statements.