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Friday, August 29, 2014

Reviewing The Cultural Case For Capitalism Part 9 Of 12

In this week's episode of this blog's review of Jonathan Witt's A Cultural Case For Capitalism, we actually hit an agreement. But one has to wade through some stuff before getting there. So following the work before pleasure ethic, we will hit the disagreements first.

Witt starts this episode with an error by saying:
Jonah Goldberg’s Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning, details how the growth of government-corporate cronyism during the past 120 or so years has been largely a phenomenon of the socialist left.

The error is the association being made between corporations aided by government and socialism. Of course he is citing Goldberg here, but repeating an error is still an error. The error here is the conservative insistence that big government = socialism. Thus, regardless of the driving force behind any form of big government, conservatives, such as Goldberg and Witt, conflate all big government under the label of socialism. 

Such a mix is often used to link Nazism and Fascism with the Socialism of the Soviet Union. But just as we should note that many Socialists never saw the old Soviet Union as being socialist because its workers lost control to Lenin's vanguard, we should realize that there was another key distinction between Nazism and Fascism on one hand, and Socialism and Communism on the other. The former has business and industrial leaders as a driving force if not its primary support while the latter did not. Like Nazism and Fascism, the Socialism and Communism of the Soviet Union had elite centered rule. The difference was that, despite not representing the workers, it was not supported by business. And if you go to Marx, you will see that he emphasized what he called the proletariate dictatorship. Such a dictatorship, which is actually a partial democracy, was not in control over the Soviet Union. These details are omitted by many conservatives in order to associate both Nazism and Fascism with Socialism and Communism.

So if we brush aside the misnomer,  we get an idea of what Witt has been saying for the past few episodes: using government to gain a competitive advantage is bad while, from his praise for the American Tobacco Company and his neglecting to mention its violation of antitrust laws and the its use of a secret deal with another business to dominate the market (click here to see the previous review), businesses using other businesses to gain a competitive advantage is kosher.

Certainly, the use of government by a business to gain a competitive advantage over other businesses that are under the jurisdiction of the same government is unfair. But governments enabling domestic businesses to grow through protectionism is a long established practice that has served well the economies of many countries. Its abuses in Mercantilism were objected to by Adam Smith. But government does have the right to protect the businesses of its citizens from outside threats. Such protection allows varied domestic economic sectors to grow enabling economic diversification and eventual self-sufficiency. And this is being mentioned because this is what Witt proceeds to criticize part of big government socialism. We might also add that the legitimate use of protectionism is counted as heresy by those advocating the new "comparative advantage" in which what a country can produce is determined solely by how its products best serve the outside world, that is the Global Free Market. Such makes the smaller economies more dependent on the larger economies and it primarily benefits the elite investor class.

Witt goes on to say how our government has, through "regulations and market manipulations," helped corporate agriculture at the expense of family farms. He rightly calls this relationship between government and corporate agriculture, "Crony Capitalism," and rightly protests it--thus our agreement. But we should note the following:

  1. With the competitive nature of an unadulterated Free Market, the survival of any family farm was never guaranteed
  2. That his blaming of the government and its actions for the failure of the family farm oversimplifies the situation
  3. He never considers that crony Crony Capitalism could be a natural outgrowth of the Free Market.
We should note regarding the last point, that what's important to the Free Market as an institution may not be what's important to the Free Market's participants. For example, competition is important to a functioning Free Market so that it can serve the needs and wants of both businesses and consumers. Thus, when any business becomes too big so that competition is significantly reduced, regardless of whether the business relied on government help in growing, that business is a threat to the Free Market as an institution. 

But note what is important to the participants of the Free Market. Surely competition is their source of energy, but the sole concern of any business in the Free Market is self-interest and its sole ethic is maximizing profits. So how does the combination of self-interest and maximizing profit not try to eliminate competition? And as we mentioned before, this doing away with competition can be accomplished with or without the help of government. So while Jonathan Witt somewhat indicates that the family farm, domestic and foreign, is a rival of corporate agriculture, he fails to see that businesses can eradicate their competition even without without the help of government as seen in the history of the American Tobacco Company (again, click here to see the review of part 8 of this series).

Rather than saying that Jonathan Witt's Free Market is not being shot by a gun it didn't see, we should say that the Free Market is shooting itself with its own gun as Witt fails to see that the gun has no safety. Witt's scapegoating of big government's intrusion into the Free Market is not only stated so that we will object to all government interventions into the economy, it is described in a way so that we become unaware of the dangers posed by the Free Market itself. So while Witt claims that government's interference with private property was the problem, the real culprit was a natural part of the Free Market: self-interest and the maximization of profits.

In the end, Witt unconsciously supports that which creates what he fears and abhors: Crony Capitalism. By declaring that big government is the problem, he conflates functioning democracies with elite centered rule. Here, he implies that both should have the same limitations because it is only the size of government that matters. But by fleeing democracy, he runs into the waiting arms of elite centered rule private sector style. And it is this rule that looks to eliminate competition in the Free Market regardless of what government does. 



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