Everyone hates capitalism, so it can’t be all bad. “Poor of the World, Unite against Capitalism!” says a huge poster in Managua…featuring the largest picture of an accused rapist we’ve ever seen. No kidding. Daniel Ortega’s stepdaughter said he had raped and abused her since she was 10 years old.
What is wrong with these people? Do they never learn anything? ‘Capitalism has failed,’ they say. ‘We need government to fix the problems…’ The rich hate capitalism because it threatens to take away their money. The poor hate it because they think it keeps them from getting any money in the first place. And everywhere you look, the chiselers are offering bailouts, boondoggles and bamboozles. With so many people trying to improve on capitalism, it’s a wonder they’ve never come up with something better.
Danny Ortega makes it sound like capitalism is a system invented by rich people to keep poor people down. Instead, it’s what happens when you leave people alone: some people watch TV…some blabber about politics…and some build wealth. The rules are simple: Thou shalt not steal, it saith in the Bible. Do unto others as you would have them do unto you, Jesus added. Everything else – from hedge funds to derivatives – is merely an elaboration. People make deals with their neighbors in order to get what they want. One plants the wheat; the other bakes the bread. As long as they respect each other’s deals and each other’s property, everything goes tolerably well.
But the urge to larceny and slavery is as strong as rum punch. One man gets a bottle of Flor de Cana rum; another wants to punch him and take it away. And if he gets away with it, we’re all in trouble. In the second half of the 20th century, approximately 2 billion people participated in a bold experiment. The idea was to prove – or disprove – that central planning would do a better job of providing goods and services than people left to their own devices.
After Mao came to power, for example, China turned its back on capitalism for an entire generation. Millions starved or were killed outright in various hokums such as the Great Leap Forward and the Cultural Revolution. Then, Deng Xiaoping announced a change. “To get rich is glorious,” he proclaimed. Since then, the comrade capitalists have been creating wealth at the fastest rate in history.
Too bad the Chinese weren’t running things in Africa. But then, Africa had a big disadvantage, says Damisa Moyo; the rest of the world was ‘helping’ it. Rather than allowing nature to take her course, Africa has gotten one bailout after another. Thanks to so many bailouts, it is now more busted and more desperate than ever.
“Think about it this way,” says Ms. Moyo, “China has 1.3 billion people, only 300 million of whom live like us, if you will, with Western living standards. There are a billion Chinese who are living in substandard conditions. Do you know anybody who feels sorry for China? Nobody. Forty years ago, China was poorer than many African countries. Yes, they have money today, but where did that money come from?”
It didn’t come from bailouts, she points out. And it didn’t come from anti-capitalist claptrap-babbling demagogues. Russia, too, prospered only after it sent the Bolsheviks packing. Gorbachev introduced his perestroika program in June ’87.
In the control group, meanwhile, Americans made their own anti- capitalist mistakes. The central bank lent money at artificially low rates – distorting the value of all capital assets. Tax policies, government-backed lenders, and government’s banking regulations stimulated the housing bubble. And the use of the dollar as an international reserve currency created what was effectively an all- night party with an open bar. Instead of having to settle up in gold, as they did up until 1971, the U.S. could pay its bills by emitting more pieces of green paper. Then, local economies had to put out great quantities of their own paper money just to keep up. This liquidity created a series of bubbles…leading up to the great bubble in finance and housing that blew up ’07-’08…
Late at night, after the party has been going strong, all credits are almost equally fetching. An Argentine bond? A house in Pomona? A share of Renault? All went up in value. But come the morning light, and investors begin to make distinctions: then, they want only the best credits.
A business that is losing money is like the Soviet Union – it is a wealth destroyer, not a wealth-builder. It produces things that are worth less than the resources that went into them. Eventually, it needs a perestroika; propping it up with bailouts and boondoggles only deepens the losses. In the soviet economy, businesses were taking valuable raw materials and working them up into shoddy finished products that no one wanted. In the capitalist blow-out, valuable products and services were produced by the boatload, for people who couldn’t really afford them. Naturally, the producers are worth a lot less than people thought. So are the houses their over-indebted customers live in. And so are all the debt-based instruments that their spending was meant to support. The wealth of the entire world is estimated to have a value of around $100 trillion. Capitalistic markets, in their wisdom, have judged about a third of that wealth no longer viable.
“Today, it’s America that must have a perestroika,” says ex-Soviet boss Michail Gorbachev. “You don’t have to be a Nobel Prize-winning economist to understand that it’s not normal that the country with 20% of the world’s GDP consumes 40% of the world’s resources.”
Yes, Gorbachev is right about a number of things. The western, capitalist economies are in the midst of their own perestroika. They are being restructured. But not by the world-improvers. Instead, they are being restructured by capitalism itself… Leave capitalism alone and it will do the job far faster and far better than the meddlers could ever do.
for Markets and Money