The Privileges of Capitalism and Hard Work

Thursday, 23 Jan 2014 09:16 AM

By Armstrong Williams

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Communism is an economic construct that died because it had no incentives for anyone other than the politicians who, of course lived outside the economic rules of their society. The lack of incentives, combined with human nature, killed all work ethic.
 
Money became worthless because there was nothing to buy. Laborers engaged in ever poorer workmanship. State owned and managed companies were able to survive only because the public was forced to buy their shoddy goods. In the end, many in Russia suffered. The Russian saying in the 1970’s that “we pretend to work and they pretend to pay us” was a very telling slogan.
 
In a perfect world, where people are never selfish, communism and socialism might work. The problem with communism, socialism, and Marxism is that none of them account for, or complement, unfortunately, that their view of human nature is incorrect.
 
Each depletes economic virtue practically across the board. Those on the top are largely there because of cronies or having a strong family background with wealthy prominent members. They often stay in power via corruption and exploitation of the poor. Dynamic virtue will rarely be found in such a class of people.
 
Then there are the majorities who hold the power of uprising. This group of people includes more than just those on the fringe of society; it contains the lower and fledgling middle classes. They have no incentive to work; rather their lives are caught up in an illusion. They are provided with the crafty ruse that the life that they are living is on par with the middle class of the rest of the world.
 
They believe that their government is not buying them off, but that this system is actually more honorable. It is thought that communism is supposed to cure all of the ailments of capitalism. Communism is supposed to be an evolution of economic systems that is better than both socialism and capitalism.
 
In a perfect world, where people are never selfish, communism might work. However, this is simply inconsistent with human nature. People, whether because of biology, evolution or God’s will, work to better their own lives and to provide for their own families and loved ones. No amount of evangelizing, idealizing or governmental coercion can change this simple fact about Economic Man.
 
But what about capitalism? Can it and should it survive? A system of incentives that emphasizes work ethic and education is the only realistic way to ensure speedy, perpetual innovation and creativity. All other systems have proven to be failures in this regard. However, the recent “Great Recession” has raised the issue of capitalism’s viability, especially in the hybrid form that combines it with socialist elements. 
 
The main ill of capitalism is that it treats failure as the defeat it is. In a society of grade inflation, a lack of personal responsibility and everything is somebody else’s fault. Shouldn’t failure also get a trophy? When we start to reward failure, we begin the process of not acknowledging the importance of success.
 
When the government underwrites whole markets, capitalism cannot work, and we begin to lose track of the “real” values of the products within that market. In a capitalistic system, “stimulation” of the markets is the same as stimulants recreational drugs to a human being — it creates an unrealistic euphoria, which is short-lived and painful when the high of the stimulant effects fade.
 
False stimulation masks reality, rather than dealing with it. But the pain of what’s real the way things really are eventually returns – no matter if the stimulant is repeated because in the end, the government will collapse under the burden of propping up every failed or failing business. We have seen this in the latest economic crisis.
 
We saw this in the latest economic crisis, what we’re calling the “Great Recession” of the last half of the aught's. When it comes to assigning blame for the debacle, some say the lack of regulation was the main culprit – that what happened is Exhibit A in the case against free-market economics. That it was greed at the top – white-collar, high-society types who live in Manhattan penthouses – that brought the economy to the proverbial screeching halt. They neither create nor build anything, but instead come up with ingenious ways to shuffle paper and stocks and other financial instruments in order to profit from unsuspecting and ignorant and diffuse shareholders – that brought the economy to the proverbial screeching halt.
 
Others insist this is a simplistic and incomplete picture of what happened – that those who would blame capitalism aren’t backing the story up far enough. Sure, creative financial profiteers devised financial instruments like “credit default swaps” to earn money not from building or creating anything, but simply by having made a transaction.
 
But, free-market defenders ask: Why were they creating these complex financial instruments? Was it not the existence of millions of subprime loans in the first place that led to the perceived need for the insurance against their failure default that credit default swaps were created to provide? And why were there so many subprime loans on the market in the first place?
 
Is it not the federal government, through the Federal Reserve, that artificially determines the price of money – essentially a “price control” – by setting interest rates? What if the Fed set interest rates artificially low, thereby qualifying far too many folks for homes they could ill afford? And was it not also a result of government policy – passed by Congress and signed by the president, independent of and in addition to the Fed’s loose-money policies – that so many who weren't’t eligible for able to get prime loans on a home were suddenly eligible for subprime loans on homes they really shouldn't have been buying?
 
A free-market opponent might fire back that it was greedy predatory lenders who created the mess, not those who bought homes from them and certainly not Congress. But no one was forced to buy a home to make these purchases at gunpoint. In the age of the Internet, I find it hard to believe that folks who were told adjustable rate mortgages were a good thing didn't decide to check that out on the web. Within minutes, these buyers, who were allegedly duped into purchasing homes, could have been armed with the truth about these risky loans. Or maybe they did, but decided to take a shot anyway (in which case I still have to wonder why we feel sorry for the loss of their homes).
 
Armstrong Williams is the author of “Reawakening Virtues.” He is a political commentator who writes a conservative newspaper column, hosts a nationally syndicated TV program called “The Right Side,” and hosts a daily radio show on Sirius/XM Power 128 (6-7 p.m. and 5-6 a.m.) Monday through Friday. Read more reports from Armstrong Williams — Click Here Now.
 
 

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