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Saturday, 6 December 2014

Evil Capitalists

Everywhere you look you find people denouncing Capitalism. Some do it on the grounds that it is allegedly full of ‘contradictions’ which cause booms and busts. It is difficult to be polite about their intelligence. Let’s be kind and blame their education – their miseducation. Ever since Hayek we have known what causes booms and busts. He and the other Austrians spell it out very clearly.

What follows is my summary of the Austrian Theory of the Business Cycle.

When governments manipulate credit with a view to stimulating economic activity, it works for a while because investors receive a misleading signal: money is cheap; we can confidently invest in long term projects. They borrow.

If money were cheap because consumers are consuming less and saving more, this would be OK. But consumers are getting the same misleading signal. They borrow. They buy champagne and caviar and houses and holidays with the cheap money. These goodies suck resources from the economy: labour, energy and raw materials. So consumers and investors are competing for the same resources. Economics is about scarce resources.

Investment requires savings – or should. If I save I can invest in your enterprise. I can’t indulge my lust for lollipops and put the same money into a bank which will advance you what you need to build your workshop. Cheap money conjured out of thin air by governments and the banking system is like the froth on your pint; it is based upon a lie – the lie that we can get rich by doing arithmetic.
Some must save before anyone can invest.

If our money were sound… Start again. When our money was sound, when it was based on precious metals (precious because we agreed to compute the value of everything in terms of gold and silver), saved money could be converted (by mixing in creativity and hard work) into products which were useful and desirable. In less than 300 years our ability to create products (wealth) spiralled upwards and upwards in the most virtuous economic circle the world had ever enjoyed. Poor people drove cars! The petrol for these cars became cheaper and cheaper – thanks to men like Rockefeller. Cars themselves became cheaper – thanks to men like Ford. It was a miracle! We didn’t understand what was going on. It was too new for us to get our heads around. Dyspeptics like Marx told themselves and the rest of us that all this unprecedented prosperity was based on the exploitation of workers – the same workers whose lives (in material terms) were getting better by the decade. Incidentally, a decade was the time it took for the price of kerosene (or paraffin) to be cut by 90% – thanks to John D Rockefeller. We did not give Rockefeller and Ford their due. The Devil bade us listen to Marx. We did and then to Keynes.

The meteoric rise of western economies has slowed and occasionally flat lined, thanks to governments too much influenced by Marx and the baleful JM Keynes. Fortunately, the economies of India and China and much of southeast Asia have adopted increasingly free markets. As a result, abject poverty has declined since 1970 by EIGHTY PER CENT. When did you ever hear a leftist rejoice in this statistic – when? What do they actually want – an end to poverty or an end to wealth? It’s a good question. They advise us to sabotage our industries by adopting inefficient technologies and abandoning efficient technologies. When wealth is reduced, who suffers most, those who have a lot or those who don’t?

Poverty is bad. Wealth is good. The cure for poverty is wealth – and we know how wealth is created. The obvious analogy is sickness and health. Doctors and other health professionals strive to promote health and reduce sickness. Do they ever suggest that health/sickness is a zero sum game, that to reduce the sickness of A we should reduce the health of B?

Do you have any leftist/socialist friends? Ask them what they want. Listen carefully. Do they mention increased well-being for the poor; or do they launch into demands for greater equality? I’d love to hear your feedback. Wilkinson and Pickett and Thomas Picketty denounce inequality of income. They have no interest in reducing poverty. Read their books. Those who applaud them are likewise uninterested in creating wealth, the only antidote to poverty.

And another thing…
These dimwits hate capitalism and capitalists – their myopic picture of capitalism, derived apparently from the game Monopoly. This absurd game can bankrupt me if I land on Park Lane and you have built two hotels on it. Please explain how this in any way corresponds to the real world. I always found it unutterably boring – and now I know why.

They have one picture of capitalists – fat men with waistcoats and white moustaches. They meet real capitalists every day of their lives – but fail to identify them as capitalists. Their own butcher, for example (who may or may not be a nice man), qualifies as a capitalist because he has used his resources (a legacy or savings or borrowings) to create wealth in his community, at the same time providing work for an apprentice or two. Wicked capitalist! Excuse me? The baker and the candlestick maker do not (per se) get rich at the expense of others. They get rich(ish) by getting up at 5:00 am – as do the newsagent, the taxi driver and the takeaway owner. I have been well served by all the latter in the last week. I do not resent their success (such as it is) for one second.

You may not have the nous or the energy to be an entrepreneur. Perhaps you are a saint, the noblest metier of all. Do not presume (whoever or whatever you are) to sneer at those whose efforts and sacrifices give us practically all the material benefits we enjoy. If they benefit from their efforts and sacrifices – get down on your knees and give thanks that (even in this fallen world) attention to our own needs and wants can actually benefit our neighbours.

Adam Smith and JD Rockefeller are not likely to be granted canonisation any day soon. I dream of a pope who will create another category of super blessed – the material blessers of humanity. I am sorry to say that it ain’t going to be the current Holy Father.

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