Senator Chris McDaniel submitted this column to this website.
The European nation which recorded the largest decrease in income inequality between 1985 and 2008 was Greece. In calling for higher taxes and more regulations to manage its sprawling welfare state, its economy suffered greatly. The Greek government was consequently left with an unwelcome reality -- either it could pay down the debt or put more money in the pockets of the poor, but it could not do both. Now a debt crisis threatens the country's stability.
Unwilling to learn from history, a number of American malcontents, who believe they have been insufficiently rewarded by the capitalist system, are now demanding federal action to “solve” wealth inequality by insisting on higher taxation combined with new regulations of the labor and capital markets.
Members of the Occupy Wall Street movement, for example, rightly bemoan public bailouts of financial institutions because of corruption and greed, but they have no objections whatsoever regarding forced wealth transfers to benefit their own selfish interests. Politicians should, they contend, seize wealth and redistribute it as long as is taken from the so-called wealthy and given to them.
Since they lack something of value to offer the market, they want to make sure nobody else has it either, preferring to use government to achieve what they never could with their own talents, ambition and drive.
Inequalities created by capitalism may be resentful to some, but they are the byproducts of a necessary process. Supreme Court Justice Mahlon Pitney in Coppage v. Kansas said it best when he examined capitalism's systemic exchange: “It is from the nature of things impossible to uphold freedom of contract and the right of private property without at the same time recognizing as legitimate those inequalities of fortune that are the necessary result of the exercise of those rights.”
Richard A. Epstein, one of the brightest legal minds in the country, recently discussed the beneficial aspects of free markets, social cooperation and voluntary transactions in his article, “Three Cheers for Income Inequality.”
He explained that an effective system works in three stages. “First,” he wrote, “these transactions, on average, will make all parties to them better off. The only way the rich succeed is by helping their trading partners along the way. Second, the successes of the rich afford increased opportunities for gain to other people in the form of new technologies and businesses for others to exploit. Third, the initial success of the rich businessman paves the way for competitors to enter the marketplace. This, in turn, spurs the original businessman to make further improvements to his own goods and services.”
Simply put, inequalities created under capitalism pay for themselves by resulting increases in wealth. Forced transfers of income, on the other hand, are dangerous because they remove capital that is required to generate new ventures and erode incentives to create wealth in the first place.
The weakness of egalitarianism is that it demands uniformity, refusing to consider differing abilities or efforts. If financial inequality exists, it is because successful individuals outperform unsuccessful ones, prospering without government aid or resorting to force.
Individuals, rather than being punished for success, should be encouraged to advance according to their abilities and achieve whatever their talents allow. Government should never spread economic misery by bringing down the most capable to the level of the least capable. Forcing some to fail won't make others rise.
Capitalism has allowed unparalleled progress, despite the gaps that develop between the rich and poor. Although not always perfectly “fair” in outcomes, it provides a sustainable abundance of food, energy, housing and medicine for all classes of society, while assuring individuals the freedom to take risks, compete, invest and achieve financial independence.
There is a place for reform to improve the conditions of the disadvantaged, including educational opportunities, job creation and even private charity. Likewise, corporate welfare or government favors designed to enrich the powerful at the expense of the powerless must not be condoned. But that does not mean our economic system should be re-engineered to chase a utopian fantasy.
Equal opportunity is one thing; equality in outcome is something else altogether.
If you have any questions about this issue or any others, please feel free to contact me at cmcdaniel@senate.ms.gov or call me at 601-359-2220.
You can also contact me via Facebook at http://www.facebook.com/chris.mcdaniel1 or at Twitter by visiting https://twitter.com/#!/senatormcdaniel.
Wednesday, August 22, 2012
Senator Chris McDaniel: Capitalism works
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16 comments:
That's probably the best commentary on the issue which I have ever read. The thing is, it's like arguing with a fence post when it comes to the Dems because in order to understand capitalism, one must have common sense and logic, two traits sorely lacking in the minds of most on the left.
That's not to say all Democrats are stupid....in fact, that's hardly the case. Many Dems have quality educations with impressive degrees and are very "book smart".
That having been said, there's a reason you won't find many Dems running their own businesses. It requires skills they simply don't have, just like running a government of a society based on capitalism.
Successful people prosper without government aid, and corporate welfare and government favors should not be condoned. I agree wholeheartedly. I wonder how the farmers and other agricultural producers in Mississippi feel about giving up their subsidies?
Wealth transfer has been around since the first tax was levied. Its level of acceptance depends upon who the wealth is being taken from and who it's being given to. Bill Billingsley
A bit long but absolutely right in every respect. I'm not surprised Bill felt a need to add to it.
So a lawyer who's goal is to be U.S. Senator (obviously a career politician in the making) is honestly talking about capitalism? Was Mitt Romney too busy passing more health care to address it? Or maybe the bailed out bankers?
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No question capitalism worked.
But, as he said, capitalism depends on a healthy middle class.
Now capitalism is facing competing dynamics.
Smart capitalists are moving production to countries with cheap labor.
We are experiencing a severe recession, the first since NAFTA.
Capitalism dictates that shirts be sewn in Bangladesh instead of Ellisville or Columbia.
The largest electric blanket factory in the world will never return to Waynesboro.
Laurel's Masonite once had 4,000 employees, now fewer than 500.
Bicycles aren't made in Greenville anymore, nor are Fruit of the Loom underwear.
Under capitalism, it has to be that way.
Those who think the current economy just a blip on the radar and that jobs will come back when some politician gets it right are silent when you ask them to be specific about what Americans will be making.
And the middle class used to be the supervisors of the workers and the owners of businesses from whom the workers purchased their needs.
So, capitalists, tell us how capitalism will save the USA.
Awesome article. A return to the free market system is our only hope.
So, capitalists, tell us how capitalism will save the USA.
So, IDIOT, tell us how a non-capitalist system will avoid, what has historically not been avoided, like long lines for basics including bread and other foodstuffs.
Bring on the black market! Because dumbshits like you are going to starve which, overall, will actually produce the greatest good for the greatest number.
Time was, an uneducated person with no real skills could get a job making stuff, providing a decent living for the worker (say, $50 a day), and manufactured goods that were affordable for many people. Over time the technology to produce equal quality goods spread around the world, and uneducated person with no real skills in other countries could make the same quality items for $5 a day, so the total cost dropped even when shipping costs were increased. Lowering the cost of production by manufacturing overseas either 1) let companies compete by lowering prices, or 2) allowed companies to maintain a profitable return on investment even if they had to drop prices to compete.
The losers in this whole mess are uneducated Americans with no real job skills, who would be forced to accept close to $5 a day for their labor to remain competitive in the job market, and that's not going to happen. Welfare and food stamps provide that much without the dreariness of getting up and going to work each day.
So, as long as we continue to produce uneducated high school dropouts with no real job schools, and subsidize them to do nothing, we will have a widening gap between those who produce goods or services that can't be replicated by third-worlders for $5 a day, and Daniel Patrick Moynihan called the "permanent underclass" back in the 1960s when this predictable outcome first got discussed.
Yes, SF, I tend to notice what other people miss. You're welcome. BB
The losers in this whole mess are uneducated Americans with no real job skills,
IOW, Soetero Democrackheads.
Go ahead and shoot your last rounds of ammo at the enemies boys. The Free State of Jones very own Messiah has spoken. Whodathunk that the the Oracle of Omaha has been replaced by the Ellisville Wizard. BTW, I guess this is the newest rendering of trickle-down-my-leg economics.
(This totally commercial update brought to you by Howard Industies and the Pickering family and the swinging lifestyle family of Moselle, MS.) Yep, fellow happy campers, Reunion isn't the only swinging game in town.
Well, there are no economists in the room, no economic historians, and certainly no sociologists.
Capitalism is about supply and demand, goods and services, products and distribution.
It is about a man being able to prosper from the fruits of his labor.
To work best, free enterprise depends on a level playing field in the market( usually the role of government is to attempt to insure fairness with as little interference as possible) so that monopolies, for example, can't develop and prevent better goods and services from becoming available.
It is not " capitalism" to create and sell worthless instruments. It's not good banking practice to make bad loans on worthless assets.
When capitalism is working well, the middle class grows and prospers. It doesn't decline.
Putting all the wealth and power in the hands of a few has never worked well. Any of you guys been to India? Then there's the Mariannas where capitalism as you are suggesting absolutely existed.
Money managers transferring wealth acquired by others is not " producing" anything. It is a system function. Creating wealth and managing wealth are being deliberately confused in the public mind.
Greece is an absurd analogy but IF one is going to use Greece , one should take a look at the political system and the multitude of political parties ( self interest groups really) that couldn't do anything but argue and at the regionalism as well.
The world use to laugh at Greek antics in government until they got to watch us cut off our noses to spite our face. We've been less physical but our invented arguments are far more bizarre.
The government did not cause Lehman's to go under. The government did not make banks loan money on overvalued assets and sell those assets to the unsuspecting by telling them they were worth more than they were. The government didn't create derivatives. That was unregulated greed.
The real irony is that much of it was an instant replay a smaller " dry run" in the '70s. Anyone remember S&Ls?
We put in some regs and then , soon as it was politically " doable", took them away so the opportunity for legally stealing reappeared.
Yes, and there's no such thing as money anymore. There is currency.
There has been no such thing as money since Nixon did away the the gold standard in 1971.
Currency, be it a dollar or a yen is worth what a government says it's worth and it's worth is tied to trade.
The Federal Reserve prints IOUs and in the form of bonds and prints more and more currency to pay debt . It's a ponzi scheme.
It is simply getting more and more "investors" to pay the debt to previous " investors".
So, let's not pretend we have capitalism anymore or that one party or the other is the champion of capitalism.
"So, let's not pretend we have capitalism anymore or that one party or the other is the champion of capitalism."
You make it sound as if there has ever been some question as to which party is the party of capitalism. Seriously? LMAO
The government did not cause Lehman's to go under.
The government actually did. The government engineered the bailout of Bear Stearns. Just as it had ten years other in the LT collapse. Fuld knew that the government would do the same for Lehman so he resisted all buyout attempts. Then it hit the fan. If the government hadn't rescued Bear, Fuld would've sold. Period. Once the government starts meddling, its never good.
KF, the government didn't make financial decisions for Lehman's.
The government didn't regulate or rescue, but the bottom line is they didn't force Lehman's to make bad decisions on behalf of their investors either.
Of course, I would urge everyone to really look at how fiat currency plays a role in the deficit and economic collapses of financial systems, not just here but in other countries.
It's really not all that different from how derivatives were/are an imagined instrument of value.
Oil, land, gold... physical assets have fluctuating value based on economic conditions but the values are tangible. If you acquire/accumulate currency it is not backed by anything tangible you can be given in exchange anymore.
We don't have stock certificates we can hold anymore and the last time I actually had one, the company demanded it be returned. The company was sold, restructured and I was advised the certificate worthless. I didn't return it. The company still exists and is profitable but my stock certificate is worth only the paper upon which it is printed. Everyone should consider the implications of that. I had NO REAL investment in the tangible assets of that company. Those assets could be sold without me getting any share of their value though I owned stock. That would be true for stock owned in oil and gold as well. You don't own the gold or oil , you own stock in the management entity. What if the management entity sells more stock than the assets are worth and try to increase management value by selling more shares to pay dividends to investors...after , of course, paying themselves first?
And, then what if government then prints currency backed by no assets to help that management entity continue to function?
Just think about it a bit...
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