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The Free Market The FREEMarket PUBLISHED 12 TIMES PER YEAR BY THE LUDWIG VON MISES INSTITUTE The Case for Legalizing Capitalism Kel Kelly Kel Kelly has spent over 13 years as a Wall Street trader, a corporate finance analyst, and a research director for a Fortune 500 management consulting firm. Results of his financial analyses have been presented on CNBC Europe, and the online editions of CNN, Forbes, BusinessWeek, and the Wall Street Journal ([email protected]). t is a common assumption in today’s world that capitalism is, at best, out of control and, at worst, outright evil. Everyone knows that it causes most of our Ifinancial, economic, and social problems, and that we need a referee—the gov- ernment—to make sure that all is fair and that we innocent citizens are not taken advantage of by predatory companies and capitalists. The fact, of course, is that everyone is wrong. My urgent goal in writing The Case for Legalizing Capitalism (Mises Institute, 2010) was to create a one-stop refutation of all anti-capitalist arguments, using plain economic logic and applying free-market (i.e., classical liberal) arguments and economic laws to today’s political scene, across the entire political-economic spectrum. In short, the goal was to condense the world of the Mises Institute into one book. During my study of free-market economics over the years, it occurred to me that this fascinating, economically sound reasoning for how the world really works and what would genuinely help our lives was widely discussed in the pro- capitalism, academic-type world, but that the general public was wholly unaware of these astounding insights. I wanted to explain free markets in plain English to average citizens, so that they could understand which government policies help or harm them, and, as a consequence, so that they could vote in such a way as to improve their lives. My main message is that most of our economic problems derive from previous government intervention in the economy. In its attempts to “help” us, the govern- ment has managed and regulated the economy, and passed laws that sounded constructive but that in fact hurt the economy and us. K Vol. 28, No. 8, August 2010 Ludwig von Mises Institute • Mises.org 2 August 2010 The Free Market Political economic reality is replete increase in the wealth of the rich, a with the law of unintended conse- moderate improvement in the wealth quences. Our economic problems are of the middle class, and stagnation in the natural result of political forces, not the living standards of the poor. As has the natural result of (supposedly evil) happened to other countries at various market forces. We have voted our cur- points in history, we are now on the rent problems into existence by elect- verge of retrogressing economically. ing politicians who promised to help Consider this remarkable irony: us by means of economic intervention most citizens put their faith in gov- and regulation. ernment—the entity that steals from As Austrians know, most people us, causes wars, imprisons and starves believe we have free markets, but we innocent citizens, and is an absolute have no such thing. This is true regard- monopoly—to provide for us and keep less of the fact that politicians of all us safe. stripes—and most of the media— At the same time, they see busi- claim that we do. The government has nesses—which have eradicated dis- its hand in every company and every eases and starvation, engaged in peace- industry in the nation, controlling what ful exchanges instead of war, produced things are produced and by which virtually everything we currently own means. Indeed, it even manipulates and enjoy, paid us our wages and pro- market prices and production directly. vided capital for us to improve our Left-wing pundits ridicule those productivity, all the while being fully who label such government manipu- restrained by hungry competitors (in lation and control “socialism,” but it is in fact just that. Socialism involves free markets)—as our enemies from government control of the means of whom we need protection. These com- production, and its real purpose is monly held but irrational prejudices redistributing property for the benefits for government and against businesses of “society” (society being receivers, form the very foundation of the politi- not givers). Controlling production cal arguments espoused by profes- and redistributing wealth are precisely sional anti-capitalist “thinkers.” the goals and justifications of our gov- And yet, when capitalism has been ernment’s constant intervention in the allowed to flourish to even a moderate economy. degree, it has succeeded in improving But this constant “helping” through the lives of all involved—rich, poor, attempting to “manage” has resulted black, white, man, or woman. Only in a constant decline in our ability to capitalism, with its true free markets produce real wealth and thereby to and true freedom for individuals can improve our standards of living. As solve our economic problems and it is now, we are seeing a consistent bring prosperity. Copyright © 2010 by the Ludwig von Mises Institute, Creative Commons 3.0. ISSN: 1051-4333. Editor: Jeffrey A. Tucker Contributing editors: Thomas J. DiLorenzo, Jeffrey M. Herbener, Robert Higgs, Mark Thornton Publisher: Douglas E. French The Free Market is published 12 times a year. Note: the views expressed in the Free Market are not necessarily those of the Ludwig von Mises Institute. Ludwig von Mises Institute, 518 West Magnolia Avenue, Auburn, Alabama 36832-4501 Phone: 334.321.2100; Fax: 334.321.2119; Email: [email protected]; Web: mises.org Mises.org Ludwig von Mises Institute The Free Market August 2010 3 “Capitalism” is neither the Right- markets work, I analyze how govern- wing, crony-capitalism corporate-wel- ment has interfered in the market- fare economy, nor the anti-rich, wealth- place and caused the very problems redistribution social-welfare economy for which the free market is commonly that we have today. In a truly capital- blamed. Banking and the business cycle ist society businesses never receive are given a thorough examination so as money or special privileges from gov- to demonstrate that our government- ernment: they succeed if they please sponsored banking system is artificial, consumers in offering them what they unnecessary, and the sole source of our want, and they fail if they do not. By economic crises and recessions. the same token, in a truly capitalist I explain why our most screwed-up society, individuals never receive spe- industries—including healthcare, air- cial privileges or transfer payments. lines, and oil—function so ineffectively, Instead, they have an abundance of and why regulations such as price con- jobs and of wages commensurate with trols, government-granted monopo- the value of their work (more than a lies, the restriction of production, and “living wage”). the prevention of business competition Real economics (i.e., free-market and of free exchange between enter- economics) proves that under capital- prises and consumers only harm con- ism, it is virtually impossible for things sumers (i.e., all of us), while benefiting like inflation, shortages, booms and select government-favored companies. busts, recessions, unemployment, star- In the third section I compare the vation, and unaffordable healthcare to historical results of government man- exist. Competition and the threat of agement versus free markets. I look at competition serve as iron-clad shackles several “case studies” of relatively free on companies. On the one hand, it pre- markets that were ruined by govern- vents them from underpaying, over- ment manipulation and control, includ- charging, or undersupplying. On the ing the Great Depression, the fall of the other hand, it assures that they guar- Roman Empire, and the transition of antee the safest, lowest-priced, high- various countries to communism. est-quality products that can possibly Then, through comparisons of free be produced at any particular state of versus unfree countries from an empir- technology and development. ical and statistical viewpoint, I show The Case for Legalizing Capitalism the direct correlation between free begins with economic basics, explain- markets and higher standards of liv- ing labor, production, exchange, sav- ing. Also in this section, I examine the ings, trade, and economic progression. concept of the evil corporation in order In the process, many common anti-cap- to reveal that corporations—unless italist arguments are disproven—that given the power by government to do labor is exploited, that some involun- so—can not only not harm us but can tary unemployment is “natural,” that only benefit us. outsourcing is harmful, that we should In the fourth section I take a deep “buy American,” that we need “energy dive into several special topics: moral- independence,” that sweatshops and ity, war, and environmentalism. A core child labor should be extinguished, that tenet of leftists’ promotion of social- there is an economic threat from China, ism is that it is moral, while capital- and that jobs or companies should be ism is immoral. Not only do I show protected. this is completely opposite from the In the second section, having laid truth, but I reveal that socialists are out a solid explanation of how free hypocritical, dishonest, thieving, and Ludwig von Mises Institute Mises.org 4 August 2010 The Free Market harm those they are supposedly trying most recognized economists today to help (usually themselves). In a large argue. Finally, I explain popular news subsection, I address the causes of and headlines/stories in terms of their real solutions to poverty in detail. political and economic signifi cance— The notions that most wars are insights that are usually obscured due needed, that they keep us safe, and to a lack of economic knowledge on the that they are justifi ed, are, through his- part of both writers and readers.
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