A Flawed Understanding of Capitalism

Who's The Real Capitalist?

In listening to the argument between those who say Romney’s actions at Bain represent the so-called “excesses” of capitalism, and those who argue Romney had been nothing but a capitalist, and that there’s nothing wrong here, I find both sides of the dispute to be guilty of playing on bad definitions, poorly informed public sentiments, and worst of all, pure political hyperbole that may advance this candidate or that one for a short period of time, but will not accrue to the benefit on the right side of the aisle.  Rather than all this bomb-throwing, I’d prefer to sort this out, step by step, and weigh out the results as it is, rather than how any particular party wants it to be.  It’s time to untangle this so we can move on.

The parties representing the various points of view in this discussion to which I will confine my remarks are these:  Gingrich, Romney, and the media(left, right, and stooge.)  The first I will address is the view advanced by Newt Gingrich that Mitt Romney’s profits at Bain were excessive in light of closing down companies to do so.  First of all, let’s be honest enough to admit that there is nothing fundamentally wrong with profit from selling one’s labor, one’s property, or one’s investments.  This argument is so thoroughly flawed that as Limbaugh suggested Tuesday, it is more akin to the argument of Elizabeth Warren than a Republican seeking the nomination for President.  In justice, however, let us admit also that with 98% of all SuperPac advertising in Iowa and New Hampshire being used to assail Newt Gingrich, he was probably a little bit angry and lashing out.  I expect this wasn’t Gingrich’s strongest argument, and if  he had to do it again, I suspect he might change his approach.

In reviewing media defenses of Gingrich, I have read arguments that are roughly like this:  “Well, capitalism is all well and good, but you still have to temper it with morality.”  I want those purveyors of this opinion to pay closest attention to me, as I tell them that they’re shoveling manure.  Capitalism reflects a system of morality, and if you don’t share it, fine, but do not pretend that it means something else.  Do not take “capitalism” and twist the label to fit what is merely modified socialism.  There is nothing wrong with profits, whether large or small, nor any size in between, provided only this:  Those making profits do so by their own efforts and with their own wealth and property.  That’s the morality of capitalism.  It’s a morality I endorse entirely, and unreservedly.  Do not offer to me that capitalism must be “tempered” by something.  To temper a thing is to alter its fundamental structure.  In this case, “temper” is merely happy talk for “rigging the outcomes we prefer in spite of the market.”

You might claim “but to tear down a company in order to liquidate it and thereby turn a profit, when they didn’t build it is to be a vulture.”  True, but in capitalism as in nature, vultures perform a vital role, and while we may not regard the vulture with much sympathy, the truth is that he’s cleaning  up messes and putting to use that which would otherwise go to waste.  Then there are those who argue that if Bain hadn’t liquidated such companies as Smith Corona, they might still be in existence, and that their employees might still have jobs.  Let’s get something straight, right here, and right now:  There is no entitlement to a job.  There is no guarantee of work.  When a person accepts a job working for others, he is taking a risk that is subject to all the same vagaries of the market as those who invest in it.  This notion that capital must be the risk-taker, while labor must never shoulder the burdens of risk is absurd.  As long as a person works for others, that employee is accepting as one of the inherent risks of such an arrangement that the job could end for any reason, tomorrow. To make the petulantly childish argument that employment should be without risk is a tired attempt to subvert capitalism with collectivist ethics, and I will be no party to that.

On the other side of this ledger, we have Mitt Romney who argues that what Bain Capital did was perfectly legal, ethical, and within the description of capitalism.  When it comes to this “vulture” function others have derided, he’s correct, and even in his statement that he likes to be able to fire people, he is committing no breach.  The truth is that I like to be able to fire people, and if you’ve ever worked in an environment wherein getting rid of incompetent employees is institutionally difficult, you’d understand why.  Nothing saps the strength of any company more than the incompetent, the slackers, or those simply not up to the job for which they were hired.  With all of this in mind then, let us make clear where Romney falls off the tracks and plummets into the abyss, if this isn’t it.

Romney’s problems with capitalism are birthed less of his actions while at Bain than while in the Governor’s office in Massachusetts.  Romney-care, the completely socialist Massachusetts program that is the logical forerunner of Obamacare, is as anti-capitalist as it gets, complete with an insurance mandate.  This may be the shortest argument in this article, but it’s the most important:  Any health-care mandate, and any redistributionism is flatly anti-capitalistic.  Romney can parade around with his faulty excuses for this program on the basis of federalism, but it doesn’t wash.   This program forces people to buy insurance, and that is a tyrannical, anti-free market, anti-capitalist assault on the rights of individuals.

Another problem with Romney is that he implemented other socialistic programs while Governor, including “Welfare Wheels.”  It’s impossible for Romney to claim that Romney-care was a one-off or some sort of aberration in an otherwise capitalistic record.  More, he favored TARP, and this by itself is as anti-capitalistic as can be described, and I really don’t understand how the defenders of Romney on this issue can avoid addressing this, because it has been one of the staggering expenses absorbed by tax-payers, and if Romney’s support of TARP is any indication of how he will govern as President, he is a walking disaster for all Americans, and for capitalism in general.  There’s also some indication that while at Bain Capital, he was one of several beneficiaries of a bail-out when the parent company, Bain Company, sought and received forgiveness of some $10million in debt from the FDIC.

One of the things that demonstrates the point is a statement Romney made during a CBS interview on Wednesday, via TheHill:

“In the general election I’ll be pointing out that the president took the reins at General Motors and Chrysler – closed factories, closed dealerships laid off thousands and thousands of workers – he did it to try to save the business.”

Romney is now holding forth Obama’s GM bail-out as an example?  This isn’t the view of a capitalist, and I want you to understand that when Romney holds forth this view, he’s become a statist. The truth may be closer to this, and it’s what Mark Levin said in the first hour of his show last night:  Mitt Romney may be less a capitalist, and more of a corporatist.

Understanding this vital distinction is to enlighten the difference at stake in this nomination fight.  Capitalism is a distinctly classically liberal ideology inasmuch as it requires a strict observance of individual liberties, and almost complete sovereignty for actors within the free market.  Corporatism is illiberal, meaning it relies on coercion of individuals on behalf of corporate entities.  In that sense, it can be accurately stated that corporatism is a non-monarchical development of feudalism.  In corporatism, dynasties are favored, and the ruling class may not exercise direct power, but instead command economic decisions through their influence over the state.  In effect, it’s another manifestation of what you know as “crony capitalism,” a concept recently revived by Sarah Palin and other critics, who have accurately pointed out how thoroughly corrupting such a system can be.  What is critical to know about corporatism is that in order to operate, there must be a strong and thorough collusion with state authority and intervention into the market.  It often co-exists with socialism, and in fact, this has been the operative condition of the United States since approximately the time of Teddy Roosevelt.

Progressives of both parties are those who have sought to unite the worst features of corporatism with the worst actions of socialism.  This is the true nature of Mitt Romney, and of his general governing demeanor.  This is why I cannot support him, in point of fact, but it is also why such critics of Romney as Gingrich and Perry have a difficult time engaging in credible criticisms of him: In various ways, they too have been guilty of the same basic flaws, to degrees greater or lesser.  The media that is defending Romney is a part of the corporatist front, and it’s clear when you view Fox News that in the main, that is the nature of their advocacy.  Many have noted in the last several months that Fox News seems less and less conservative, while becoming increasingly friendly to establishment Republicans.  Bill O’Reilly is the perfect example, but the continuous presence of Karl Rove is another.  Rove is merely a political strategist and public relations master for the progressive, corporatist front.

The truth is that we must defeat not merely socialism, but also corporatism, and the problem is that while Gingrich runs around making arguments from the point of view of a socialist, he does so in grotesquely erroneous  identification of Romney’s worst actions as those of a capitalist.   Gingrich dare not assail Romney as a corporatist, of course, because Newt has had his dalliances with corporatism too.  Clearly, Perry and Santorum also avoid this, and for precisely the same reason.

So it is that at the moment, in the GOP you have a battle among progressive corporatists and a single libertarian, but no true capitalists.

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18 Responses to A Flawed Understanding of Capitalism

  1. It is just dishonest to say Gingrich is arguing from a socialist mindset. He has NEVER advocated government interference with business. HE IS arguing for the morality of how profits are made.

    You damn Sarah Palin as she made the EXACT same point against in her speeches in Alaska running for Governor.

    You err in assuming that advocating responsible capitalism is the same as arguing for government interference. That is naive and certainly dangerous.

    As I point out in my piece (here http://t.co/WJO898s) the REASON we have government encroachment is because of IRRESPONSIBLE capitalism. There is no need for a law to protect workers pensions if all employers are protecting those funds that the employees earned. However, with one greedy capitalist, society enacts a law to try and protect those workers AS IT SHOULD.

    When government already controls these functions through socialism or communism, you still get greed – but now in different (multiple) ways that are far inferior.

    Adams, de Tocqueville, Jefferson, Monroe ALL have said that FREEDOM doesn't work if people do NOT self-regulate themselves.

    Capitalism is NOT moral. It is a system that can amplify the heart of it's operator for bad or for good. There is a great story about Smith Wigglesworth the famous preacher who taught hellfire and brimestone sermons against sins. A group at a tavern wanted to tease him and waved money in front of him while taunting him to take it. Wigglesworth didn't hesitate and grabbed. This shocked the gathering of sinners and they protested, "Smithy! Don't you know that money came from drinking and gambling?" Wigglesworth didn't hesitate a moment and said, "This money has served the devil too long. time for it serve God.."

    You may like to divorce the philosophy or system of capitalism from God's law but if you do – you are then serving Mammon. That is not just a philosophy but an actual demonic god. Which means you are motivated by selfish greed, rather than amassing that to A) provide a product or service beneficial to someone or B) to use your wealth to the betterment of society.

    The problem with your analysis is that you stop at your devotion to capitalism only in contrast to socialism or communism. Freedom loving Patriotic Christian people understand that society and our country will NOT be helped by those whose sole goal is to amass wealth for themselves. Look at the Saudi Princes who conduct free market capitalism for themselves but use their capital to ONLY gratify themselves. They have to have a brutal police force and suspend "freedom" for the uneducated masses who are NOT served by a new 80 story Ritz Carlton shaped like a camel. They are free to do it – but "capitalism" used to only on selfish purposes creates anger and deprives the society of a greater good from those who would have started micro-capital lending built products and services that might not have garnered the most profit.

    Nice try Mark but frankly I'm surprised you are this far distant from Palin's views who herself said last night on Fox Business that the BAIN questioning was perfectly acceptable.

    • MarkAmerica says:

      Jim, I'm going to answer this point by point:

      "It is just dishonest to say Gingrich is arguing from a socialist mindset. He has NEVER advocated government interference with business. HE IS arguing for the morality of how profits are made."

      Really? He took money from Fannie/Freddie for the "historian gig." That's a quasi-governmental 'enterprise' from which he was taking money. If the government wasn't interfering in business through Fannie/Freddie, what was it doing? Also, I don't come to your site and call you a liar. You get one more crack at the whole 'politeness' approach.

      "You damn Sarah Palin as she made the EXACT same point against in her speeches in Alaska running for Governor."

      No, it wasn't exactly the same, and of course, I don't damn her. Please knock off the nonsense, Jim.

      "You err in assuming that advocating responsible capitalism is the same as arguing for government interference. That is naive and certainly dangerous."

      "Responsible capitalism" is a redundancy. There is no other kind. Failing to recognize this fact is dangerous.

      "As I point out in my piece (here http://t.co/WJO898s) the REASON we have government encroachment is because of IRRESPONSIBLE capitalism. There is no need for a law to protect workers pensions if all employers are protecting those funds that the employees earned. However, with one greedy capitalist, society enacts a law to try and protect those workers AS IT SHOULD."

      Unnecessary. We have laws against fraud, theft, and embezzlement, which are ordinary laws in a capitalistic system. What more does government need to do? And how does this relate to Gingrich/Romney/Bain Capital/Etc ?

      "When government already controls these functions through socialism or communism, you still get greed – but now in different (multiple) ways that are far inferior."

      I have no problem with what you seem to consider greed, which as you explain it, seems to be the pursuit of wealth. Feel free to explain further.

      "Adams, de Tocqueville, Jefferson, Monroe ALL have said that FREEDOM doesn’t work if people do NOT self-regulate themselves."

      True. Self-regulate. They say nothing of the notion that if people fail to self-regulate, that we should impose tyrannical systems upon them. They merely state it is the inevitable result. Of course, some seek those sort of systems for what you see accurately as a different(and is in fact the most dangerous) form of greed.

      "Capitalism is NOT moral. It is a system that can amplify the heart of it’s operator for bad or for good. There is a great story about Smith Wigglesworth the famous preacher who taught hellfire and brimestone sermons against sins. A group at a tavern wanted to tease him and waved money in front of him while taunting him to take it. Wigglesworth didn’t hesitate and grabbed. This shocked the gathering of sinners and they protested, “Smithy! Don’t you know that money came from drinking and gambling?” Wigglesworth didn’t hesitate a moment and said, “This money has served the devil too long. time for it serve God..”

      Capitalism is moral. Your failure to understand that capitalism is a system that requires concepts like individual choice and property rights that are all moral constructs is your fatal flaw here. As for Wigglesworth, I'd ask him only "Whose God, and how do I know you're putting the money in His service?"

      "You may like to divorce the philosophy or system of capitalism from God’s law but if you do – you are then serving Mammon. That is not just a philosophy but an actual demonic god. Which means you are motivated by selfish greed, rather than amassing that to A) provide a product or service beneficial to someone or B) to use your wealth to the betterment of society."

      I work for my purposes. I do not work for yours. I am the one who has identified the link between morality and capitalism, but you disclaim the connection. What your A & B propose is that my only purpose upon this rock is to somehow serve others. I dispute that assertion. If I provide a product and service, I do so because it will ultimately benefit me. If I provide a lousy product or service, the market will reject me and I will be faced with insufficient produce to fund my existence. Therefore, serving others as the means to serving my own interests is really what is at stake. I suspect that you work, Jim. Would you do it for free? If not, don't talk to me about your altruistic motives, because such claims seem a sham in the face of reality. I may indeed better society by virtue of my wealth, if I invest it, or otherwise expend it in the market, but that is not the primary reason one amasses wealth. One amasses wealth as a hedge against tomorrow's uncertainties. One builds and accumulates wealth on the basis that time is money, and money is time, and by saving/growing/building/making money, one buys more time, if not in actual years, days,and minutes, but at least in how one must spend them.

      When I hear those who claim to use their wealth 'in the betterment of society,' who first comes to mind is George Soros and his ilk, who believe they know what is best for society, and since they have the money to leverage its imposition, do so, or at least try.

      "The problem with your analysis is that you stop at your devotion to capitalism only in contrast to socialism or communism. Freedom loving Patriotic Christian people understand that society and our country will NOT be helped by those whose sole goal is to amass wealth for themselves. Look at the Saudi Princes who conduct free market capitalism for themselves but use their capital to ONLY gratify themselves. They have to have a brutal police force and suspend “freedom” for the uneducated masses who are NOT served by a new 80 story Ritz Carlton shaped like a camel. They are free to do it – but “capitalism” used to only on selfish purposes creates anger and deprives the society of a greater good from those who would have started micro-capital lending built products and services that might not have garnered the most profit."

      Have you ever been to Saudi Arabia, Jim? Saudi Princes cannot claim to practice capitalism. Everything they have is derived from the poisoned well of expropriation. They are only princes by virtue of a flawed claim of what is effectively the same as "Divine Right" under their moral system. The moment you bring the aggressive use of coerciom and/or force into the equation, you're no longer talking about capitalism.

      Self-gratification has created more jobs than all of your posturing about the common good ever will. When I take a job, or produce wealth through entrepreneurial endeavors, I do so because I am reminded by the pinch of hunger in the pit of my stomach that I must earn my existence, but not by the purported hunger pains in the pit of your stomach. That you may ultimately fed by some side-effect of my efforts to feed myself is happy circumstance for you, but it is not the same as having set out first to feed you, and the world, before myself.

      "Nice try Mark but frankly I’m surprised you are this far distant from Palin’s views who herself said last night on Fox Business that the BAIN questioning was perfectly acceptable."

      I might say the same to you, but you were neither nice nor accurate, with respect to my views, or the facts, so it might be time for you to reconsider what it is you support. After your screed, I am not certain I can take for granted your representation of Palin's ideas, opinions, or conclusions. The Bain question IS acceptable, but for reasons different than Newt is raising, but of course, in a campaign, virtually ALL questioning is acceptable. Not having seen the clip(although I will now endeavor to find it) I can guess that Governor Palin's generally in favor of this vetting process, as I've heard her say things like that on numerous occasions, and I agree that we must ask these questions, all of them, not only to reveal the nature of the people running, but also those asking the questions, and in fact in preparation for Barack Obama, whose campaign will take this Bain line of questioning to a whole new height if Romney secures the nomination.

      One of your basic misunderstanding comes from your fallacy of composition, inasmuch as you seem to substitute your particular moral strain for the entire subject of morality. That's a messy proposition, don't you think? If we were all to take the view that our individual moral standards were THE moral standard for the world, how would we impose them? This is the problem answered by capitalism, free markets, and liberty. If the rules prevent and punish only the imposition of coercion and force, there is no further need for the discussion. I can worship God, you can make offerings to Dionysus, and somebody else can pray to Allah, so long as we accept a mutual system of exchange, with the same basic ground-rules. The problem is that through the various systems we discuss on this site, or anywhere, there's no agreement about those ground rules. Corporatism, socialism, and indeed any form of statism seek to circumvent an objectively defined set of ground rules favoring no one. The means of that circumvention is always the same: Coercion and Force. Only capitalism, un-modified and "untempered" offers a solution. Only under a capitalism in the social realm may people of vastly different personal moral bases trade and exchange in peace. Feel free to respond, but knock off the baloney.

  2. markmcinturf says:

    I appreciate your remarks about capitalism and admit to not understanding them as completely as I might. What I can say is this: I hate, loathe and despise any and all attempts of government to mandate some concoction of fairness and bear it on the free markets. I fully believe in an unfettered opportunity for anyone talented enough and willing to gamble their own prosperity in pursuit of greater wealth to do so. I also believe that for a society to truly gain from such activity that the words "equal opportunity" must have teeth. To have teeth, things like business law, honesty, integrity, truthfulness and morality must be observed. When you consider the fact that less than 3% of the country's population have amassed a net worth greater than several times that of America's GDP – common sense demands we realize that not many of the aforementioned values are being applied. If all we are is a society focused on wealth and having more of it than the other guy, we are doomed to suffer consequences we're not prepared to bear. As always, the devil is in the details. We certainly need the entrepreneurs and the gamblers but the entrepreneurs and the gamblers need the working man or their ideas and their gambles won't succeed. Both types of people are equally crucial to the process of wealth creation and both should be reasonably rewarded. What's happened however is the creation of an unimaginable… unfathomable contrast in wealth between a very few and a great many. For 5 decades, the middle class has lost ground to the wealthy and yet forced to pay more for the poor and/or the lazy. We have arrived at a point where we're asking ourselves why we (any non-gambler… any non-entrepreneur) are willing to participate in the process at all. IE: Why would you be willing to help me get rich (or richer) if all you'll ever get out of it is a comparative kick in the teeth financially? The middle class is largely made up of aging baby boomers. As we retire, die and subsequently fall out of the rat race (which we are now at the rate of something like 10,000 a day) the wealthy will soon have no-one left to take advantage of. Shortly after, the poor and the lazy will become untenable. Revolution is truly right around the corner…. to what I don't know. I do know that I hope I don't live long enough to find out.

    • johnannegalt says:

      Fantastic response to Jim's seemingly emotional rant. I particularly enjoy the blatant use of logic to completely unravel his attempt at criticizing your article. My favorite was this bit.. "Only under a capitalism in the social realm may people of vastly different personal moral bases trade and exchange in peace."

  3. eyetooth tom says:

    "leave a comment"…eunuchs, the bunch of them.

    • MarkAmerica says:

      Who's a eunuch, Tom?

      • eyetooth tom says:

        I appreciate your asking for a qualifier as to the truth and reality of my statement. I just say all running are tending to interests of those interested in formulating a system of government for not only commerce but controlling the masses, like religion used to do. Eunuchs were considered safe to watch over the household while the master was away or busy.
        Just an empirical observation from here. Only how much time will tell?
        So who? Contenders. The next puppet.

  4. CPB says:

    We don't have "real" capitalism in America because government screws with it too much – at all levels, in many different ways. All of these candidates are somewhat guilty participants because they all have some kind of government background – as you point out. The ONLY reason Republican candidates ought to be talking about this Romney-Bain mess at all is because Obama and his crew will eventually say all of this – times fifty. They really ought to be little smarter about it – seems kind of stupid to just hand over perfect ad sound bytes to the Dems.

    • MarkAmerica says:

      I ALMOST completely agree with you. Bain and the FDIC debt forgiveness remains an issue.

    • MarkAmerica says:

      You're quite right, of course. Too often we have tossed capitalism overboard. We're now a mix of mostly statist directives, with a diminishing window of opportunity for real laissez faire capitalism.

  5. I wandered in here as I was following Zemata links for my own post, which says much the same as yours, although neither as eloquently or well. Your response to Jim was pitch-perfect, by the way. Thank you for a great read, I shall return soon.

  6. Mike Holly says:

    The comments here appear way off (although I only had time to skim them). This debate is being turned into a referendum on capitalism when clearly crony capitalism is the problem. Government has been in bed with Wall Street. For example, one of the main drivers of corporate raiding has been tax laws that allow companies to deduct interest on debt. The lowering of the interest rates has been another key problem. We need people who examine the violation of free market principles.