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Friday, August 15, 2014

Reviewing The Cultural Case For Capitalism Part 8 Of 12

In this week's episode of Jonathan Witt's A Cultural Case For Capitalism, Witt wants to draw a sharp distinction between the Free Market and Crony Capitalism. In addition, he wants to tout the achievements of the global market that, is in large part, a result of Crony Capitalism. It's as if he wants it both ways.

Again, Witt's target is Wendell Berry because of Berry's criticisms of Capitalism. We should note that Witt does appreciate some of what Berry says. However, Witt believes that Berry's writings approaches "land idolatry," something we should keep in mind for later, and it is, as written above, that Witt believes Berry can no longer distinguish between "free economies" and Crony Capitalism. Crony Capitalism is where competitive advantages in business comes from a collusion between those in the private and public sectors. This is why Witt presents as an alternative "the American Experiment of broad economic freedoms and limited government." 

One problem with Witt's solution is that this American Experiment contained neither. We should note that many American based corporations were able to establish themselves because of government provided protectionism and maintain themselves or grow because of State Capitalism--which is where a significant part of the business comes from the state. Another problem with Witt's solution is that his support for "limited government" practically conflates democratic governments with elite centered governments by aiming to limit all of them without distinction. This not only limits the power democracy can have in society, it fails to eliminate elite centered rule because such rule stems from power and power is not limited to those who have authority. Power is equated with having the ability to make changes whether one has the governmental authority or not.

And in fact, Witt seems to be targeting democracy when speaking about limiting government. For when Witt rightly criticizes Crony Capitalism, he neglects to tell us that unfair advantages in the Free Market can be gained through secret deals between businesses and elites in the private sector. His example of the American Tobacco Company, having morphed into the Tobacco Trust, provides such a example of that happening. In Part 7 of A Cultural Case For Capitalism, Witt tells the story of the founder of the American Tobacco Company, James Buchanan Duke, and how he "aggressively expanded" the new technology of a cigarette rolling machine invented by James Bonsack. Hidden behind the phrase "aggressively expanded" is the fact that a secret deal between the two, which included diminishing royalties, gave Duke a price advantage over other companies which made it necessary for other companies to eventually join Duke's group to survive.  1 Eventually, his Tobacco Trust was found to be in violation of antitrust laws and was ordered to break up. 2

If anyone wants to claim that the government's use of antitrust laws in principle is an example of government overreach, he/she will have to argue with one of the economic heros of the modern Free Market and of those, like Witt, who write at the Acton blog, Milton Friedman. For it was Friedman who said that there are two threats to the Free Market: government and businesses. And he added that it is government's responsibility to the Free Market to prevent any business from gaining unfair advantages that would reduce competition.

So what we have here with Witt's parts 7 and 8 of A Cultural Case For Capitalism is a double standard where if businesses gain a competition destroying advantage through government favors, it is called Crony Capitalism. But if there is collusion between businesses to gain the same kind of advantage, it is used as a positive example of building a company. Again with the emphasis on limited government regardless of whether it is democratic, this points to Witt favoring elite centered rule with the real power resting with non-elected elites from the private sector. 

Now we must deal with Witt's endorsement of the global economy and large corporations. Here, Witt points to a one factor analysis--that the current economy has reduced abject poverty in the world. Witt does acknowledge corporate abuses in this but praises the result in a way that suggests that the ends justify the means. His one factor analysis also suggests that, like what he accuses Berry of, he has submitted to an idolatry--it is the love of money.

So here, we really need to ask critical questions about this victory which Witt so praises. We need to ask how much misery has actually been reduced by this global economy when some countries are seeing a reduction in the number of people in the middle class because more are approaching poverty and how much misery is being alleviated by the reduction Witt brags about. We might also ask about other costs such as damage to the environment, exploitive working conditions, and a loss of freedom along with a reduction in reliance on democratic procedures.

We might also want to look at the specifics of the numbers themselves. When I have seen these kind of claims, most of the reduction of those living in such poverty are from Asia. And while a substantial number of them come from India where free trade measures have moved tens of thousands of Indian farmers to commit suicide due to debt, another significant number of people being raised out of "extreme poverty" come from China. And the problems with using numbers from China are multiple. 

The first problem with using China is that, because of the global economy, China has suffered severe environment damage such as dramatic increases in air pollution. Second, because of this global economy, some workers are pressured into accepting sweatshop labor conditions for the privilege of working and being raised out of extreme poverty while others lose their jobs. And finally, one cannot attribute China's improved numbers to the Free Market since their market is significantly controlled by the State. So to include China's numbers in with the statistics being used to make claims about the Free Market reducing world poverty is deceptive at best.

What we see with Witt's new global, free economy are inconsistencies along with partial information used to obscure its complete impact on the world. But most of all, this economy is reducing the control people have over their lives by shrinking democracy and shifting that control to elites in the private sector. And I write this as someone who views Wendell Berry's alternatives to Capitalism as being impractical. 

References
1.  Brandt, Alan M.: The Cigarette Century: The Rise, Fall, and Deadly Persistence of the Product that Defined America, p. 29. Basic Books, 2007 cited in http://en.wikipedia.org/wiki/American_Tobacco_Company

and 

https://www.tracy.k12.ca.us/sites/rlee/Shared Documents/History of the Americas II/Industrial America Unit/Industrialist Biographies/Duke Bio 2007.pdf

 

2.   http://en.wikipedia.org/wiki/American_Tobacco_Company  








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