Throughout the last couple of weeks, “Occupy Wall Street” protestors have listed many demands and grievances, most of which are completely and utterly ridiculous, as evidenced by the Founder. Based on some of the rhetoric seen in the news, it seems a handful of protesters wish to end capitalism as we know it and replace it with something only Mao or Lenin could dream of. Even after listening to such economic illiteracy, however, I still remain optimistic about these protests. Large crowds are forming all over the country; which is good in the sense that people are actually starting to give a damn.
More specifically, though, there is a distinction that needs to be made between capitalism and corporatism – something most of the protestors across the country are failing understand.
People feel like the system of capitalism is screwing them over. And, to be honest, I don’t blame them – we were told in high school and college that the US is a capitalist society. Reality says different, however. We are what we do. Not what we say we are. They believe greed screwed over the middle-class. But greed has always existed - whether it be during the time of the Romans or today.
The solution to our problems is not to blame capitalism. Instead, we must look deeper and recognize that we operate in a rigged system that is only achieved through the force of government.
To start, the use of force is the most obvious distinction. Capitalism is predicated on people freely participating in voluntary and mutual exchange. This does not mean people can steal, pollute, cheat or commit fraud on others. The rule of law still exists in a free market. The most important aspect of capitalism, though, are the incentives provided through profit and loss. In a free market economy, individuals are free to succeed as much as they are free to fail. Individuals don’t succeed simply because they enjoy the benefits of hard work; it’s also because they fear the alternative – failure.
The truth is, greed needs fear. Greed is only good for society when it is compromised with an equal amount of fear and risk. Fear is the greatest regulator of greed, not a government agency, and fear for many years went missing, while corporatism took over.
These protesters don’t seem to comprehend this, however. It’s almost as if the protesters are trying to bring down a giant statue by only focusing on its shadow. The source of the problem is big government lending itself to special interests through the Federal Reserve System, bailouts, subsidies and favorable regulations.
The most damning thing about corporatism is that it allows for the federal government to pick favorites. Corporatism bails out any politically well connected business, provides subsidies and gives special tax loop holes to the well connected oil companies, allows special interets to write the (well intended) regulations, and inflicts an inflationary tax on the people – a tax that favors big business, while stealing from the hapless members of society.
With big government sticking its hands into almost every industry, it creates an environment where the big boys have every incentive to rig the system. Sadly, though, there are no angels in government. Power corrupts, and the more it’s centralized into a government body, the more it harms the people. When government is smaller the incentive to write the rules is mitigated, if not eliminated, because, if there are less regulations coming out Washington, what incentive do the big boys have to rig the regulations in their favor? Less. Which is exactly what we need. Less rigging of the system.
Blame corporatism for what is often confused for capitalism. In a true free market, banks and corporations would not hold the influence they do in Washington D.C. Greed may have led to this crisis; but only because government intervened, played favorites, and removed fear from the economy.
The phrase, “all persons are entitled to keep the fruits of their labor” doesn’t exclusively apply to success. The fruits of one’s labor can dry up, wither away, and rot just as easily.
I say, “let the cronies rot.”
