Capitalism

There is a real misunderstanding in this country of capitalism. Our great wealth is the result of free markets, but since it doesn't have a voice, it is an easy target for socialists and others trying to incite class warfare. Capitalism is best described as an interconnected ecosystem. People transact with one another for mutual benefit without someone commanding the process. The government's job in this system is simply to enforce contracts and protect property rights. That's all that is needed for wealth to be created for everyone who is motivated to succeed.

Lately, the popular theme in the media has been "anti-rich" articles. These have been plastered all over the liberal media. One of my market following websites is MarketWatch.com and sometimes it appears that they hold competitions for the most extreme socialist articles that their authors can produce. Farrell and Nutting would appear to win with the number of comments they draw in.

So in today's article, 10 Doomsday trends America can’t survive, the entire opening discussion centers on how capitalism is a saboteur, is destroying America and is corrupting our souls. No really, it does say this. Then it goes on to discuss mostly problems in American that are not even related to or dependent on capitalism, but on our failed political system. There is no mention of the problems related to the socialist parts of our economy (social security, medicare, medicaid, welfare, etc.)

The following are my (expanded upon) comments posted at the bottom of the article:

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"the war waged by the wealthiest people in America on the disappearing and shrinking middle class of our country."

It is shrinking because more people are joining the wealthy, and have been since this 'problem' was first noticed. In fact, the living standards of this country are constantly increasing, not decreasing. This is a good thing. What these authors and socialists want to make you angry about is that there are people out there who have several multiples of your wealth, even though this has zero impact on your life and means absolutely nothing to you.

Most importantly, I will also point out that there is no set definition of what constitutes a middle class, which allows our nefarious authors to define it however it suits their argument. Is it a household (the dynamics of which have been changing for decades) or is it per capita?

And, on average, a person's income is based on his or her stage in life. So with the current baby boomer generation at the peak of their careers, this will also skew the distribution and the dynamics will be changing as they begin to enter retirement. Furthermore, if a retired person only makes $25k a year on social security income but has $1 million in a 401(k), is he considered poor, middle class, or wealthy? The only data that will end up in IRS statistics is the income component (putting him or her in the poor category), and not the corresponding net worth. So once again, the definition of the middle class is so unclear that using it to advance arguments is not honest discussion.

Class warfare being waged by Democrats would be a more apt description for the heading of Farrell's article.

1. Doomsday Capitalism: Death of the American dream, spirit, soul

"The nation’s billionaires are on the warpath. They want more, more, more. Their greed has no end and they are apparently unconcerned for the future of this country if it gets in the way of their accumulation of power and wealth.”

Many billionaires continue to gain wealth naturally because they still have an interest in or still head companies they founded (Steve Jobs, Fred Smith, Larry Ellison, Warren Buffett, Bill Gates, for instance). I doubt it is about wanting more more more, but instead is a result of how they spend their time. Many billionaires continue to work because they enjoy it and would probably be bored sitting under a palm tree 12 hours a day.

And when Steve Jobs's company created the iPod, iPhone, and iPad which lead to an increase in the quality of people's lives, was it a warpath where he was sitting in a dark room rubbing his hands together trying to think of ways to accumulate more wealth and destroy the country?

Furthermore, the latest Bill Gates / Warren Buffett pledge has hundreds of wealthy people including dozens of billionaires pledging their wealth to charity (maybe more of the damage will occur from these philanthropists sending the money overseas to places like Africa).

2. Doomsday Democracy: ‘Mutant Capitalism’ killing ‘We the People’

(Mutant, Capitalism is a new one, lol)

"the insatiable Super Rich 1% rule America."

This is not a problem with Capitalism, but a problem with politics. Don't setup a straw man. This same problem exists in every economic system. Feudalism, communism, socialism - except in these systems, anyone who isn't in good favor with the political leaders is poor and doesn't have any say in the outcomes.

But this ruling rich 1% must have multiple personality disorder, because for every election cycle different political parties are gaining and waning, and laws are constantly changing. I would expect consistency if this statement were true.

3. Doomsday Conspiracy: Wall Street takeover, the new ‘Invisible Hand’

Every anti-wealth article wouldn't be complete without a notable Wall Street mention.

"Wealth can easily buy favorable laws, making even the most unethical, selfish, corrupt behavior legal by fiat. "

Once again, this is a problem with our political system, not capitalism. And if you read between the lines here, he is saying that it would be better for nobody to be wealthy. Welcome to China, 1960.

4. Doomsday Politics: Monopoly of Super-Rich Anarchists rules America

Straight out of the rhetoric handbook, add as many extreme adjectives as possible: The super rich are now anarchists.

With number 4, you can see Farrell is repeating the same things in different ways. It is clear that he could not actually come up with ten doomsday talking points.

5. Doomsday Economics: Growth is a numbers game for politicians

I fail to see the direct connection to capitalism. Whether an economist is wrong on a forecast of not, it doesn't change the outcome.

6. Doomsday Psychology: The broken promises of behavioral science

So what is your beef with capitalism in this one? It is so vague, but implies choice for consumer investment. You want to remove choice for the consumer so that everyone has to live with a one-size-fits-all constraint? It's hardly a recipe for success.

The house always wins only when you are gambling. Investing is not gambling, but there are risks as there is no free lunch.

7. Doomsday Technology: Innovation, derivative casinos, the singularity

Without looking it up, I bet you could not even define what a derivative is. And with HFT, only day trading gamblers will be affected here.

8. Doomsday Warfare: Pentagon math: population + commodities = wars

Once again, this is hardly in the exclusivity of capitalism. Population boom and lack of resources will eventually be a problem for this entire planet regardless of what economic system is used if population growth is not slowed. However, this same story has been touted for centuries, from Malthus, Osborn, to Ehrlich and among others. But amazingly, billions of additional people later, these predictions have all failed and I would bet that capitalism is the reason why. Capitalism is about specialization, and comparative advantage. As more of the world converts from the system where each family grows their own food, makes their own clothes, and builds their own houses, the world becomes more productive which benefits everyone through trade.

9. Doomsday History: This time really is different — the final meltdown

So it would appear that pretty much all your 'evidence' against capitalism isn't related to capitalism at all. Once again this is a problem with our political system where America thinks that we have to control the world and have military bases in every country. Capitalism would be just fine even if we closed them all down.

10. Doomsday Investing: Survival strategies in the post-capitalism era

So this would seem to be an argument for capitalism, because property rights are respected in it. In your dreamworld, bandits and gangs run the world. This is what you want? A Somalia system?

So in conclusion, Farrell attempted to attack capitalism but ended up attacking our political system, but blaming it on capitalism. This is not the most apt line of reasoning.

In the words of Gorden Gekko, "Greed is good." The desire for wealth aligns people's incentives to get educated, work hard, take risks and innovate. By doing this, they not only make their lives better, but make everybody's lives better. Take a look around, there is no better economic system.