The
anti-capitalists are running amok pointing accusatory fingers. They claim the
collapse of the housing and financial markets was due to cowboy capitalism,
casino capitalism or greedy capitalism, etc. etc. etc.
People everywhere
are crying out for Congress to investigate. Investigate! But who will
investigate Congress, its malfeasance and lack of oversight? This is a Congress
that desperately wanted people without jobs, credit histories or down payments
to own homes. The Democrats pushed for it and looked the other way. Republicans
went along to get along.
After all, why
shouldn't unqualified people own homes? Isn't this what the Federal Reserve Bank
of Boston advocated in its Guide to Equal Opportunity Lending -- a proactive
implementation of the Community Reinvestment Act? The Boston Fed, in pursuit of
"social justice," promoted a fraudulent study. It abdicated a central bank's
fundamental obligation to promote and maintain stability in financial markets.
The Boston Fed even reminded lenders that they were subject to
multimillion-dollar fines (1 percent of net worth) for failure, in effect, to
make "bad loans." (See: Anatomy of a Train Wreck -- Causes of the Mortgage
Meltdown).
Fannie Mae and
Freddie Mac (created by Congress), the Federal Reserve, the House Financial
Services Committee, Barney Frank chairman and the Senate Banking and Housing
Committee Chris Dodd chairman and a host of government agencies all played a
part in the subprime loan debacle. None of them represent capitalism! Banks
under capitalism do not voluntarily make loans to unqualified people with zero
down when there's little chance of being repaid.
These watch dogs
were too busy taking money from people who earn it and giving it to those who
didn't to notice the tsunami. Congress's concern over the seriousness of the
financial crisis can be measured by how it turned an initial 3-page bailout into
a 450-page rescue plan larded with earmarks, pork and special privileges.
Ostensibly a plan to rescue homeowners, many who lost nothing. Tens of thousands
made no down payments, and for 3 years before resetting, their monthly payments
were less than rent. They got an option cost free and now the government wants
the taxpayers to bailout these reckless home speculators. What a country!
Can free enterprise survive?
What about the
errant banks, insurance companies and businessmen who ran them? Adam Smith,
father of capitalism warned, "People of the same trade seldom meet together,
even for merriment and diversion, but the conversation ends in a conspiracy
against the public, or in some contrivance to raise prices." And in 1776 he
further observed, "It is not (however) from the benevolence of the butcher, the
brewer or the baker, that we expect our dinner, but from their regard to their
own interest," as if led by an invisible hand.
Many people are
shocked upon learning that most businessmen, in fact even highly successful
ones, cannot define America's predominant economic system. In fairness it must
be pointed out that the business community is actually comprised of two types of
people -- "political businessmen" and "free enterprise businessmen"
(businesswomen). Political businesspeople seek to privatize profits and
socialize losses, just as the big investment banks and Congress are doing today.
True capitalists ask no favors or subsidies from government.
What defines capitalism?
Capitalism (free
enterprise) is the system of social cooperation based upon voluntary exchange
and division of labor, with productive resources privately owned. Capitalism is
the societal structure that protects individual rights, including the right to
own property. People are free to deal with one another or not, as their
individual judgments, convictions and interests dictate. People deal with each
other through reason, i.e. by means of discussion, persuasion and contractual
agreements on a voluntary basis. For these reasons, capitalism is the only moral
economic system ever devised by man. Since transactions are voluntary, they only
are consummated when all sides feel they are better off -- in short -- everyone
wins.
Under capitalism
Ludwig Von Mises avers, government is not a necessary evil, as often heard.
"Government is not evil, but a means, the only means available to make peaceful
human coexistence possible." Government, when limited, is indispensable in
maintaining a free market when it creates a fair field without favor, invokes a
common justice, enforces voluntary contracts and defends the citizenry against
predators, both foreign and domestic.
The opposite of
capitalism is socialism. Socialism is the government ownership or control of the
means of production and/or the government control of the results of production.
Bear in mind that ownership and control amounts to the same thing. One owns what
he controls and controls what he owns. Under socialism where transactions are
dictated by government, one person's gain is another person's loss as the state
attempts to insure equality and social justice -- taking from Peter to pay Paul.
An obvious recent example would be the ensconcing of people in homes with
subprime loans they cannot afford via the Community Reinvestment Act, Fannie Mae
and now the bailout -- something capitalists never do except through charitable
contributions.
If you who expect
the average American businessman to put up a desperate fight in defense of the
system, you're simply out of touch with reality. There's no reason to expect
businessmen to be more committed to the system of economic freedom than anyone
else. They're not even the primary beneficiaries of the system. It's consumers,
the average everyday Mr. and Mrs. America who, far from being exploited under
capitalism, are precisely the principal beneficiaries. Today's credit meltdown
is not a failure of capitalism. It is an example of creeping socialism turning
into galloping socialism through misguided government intervention in the
markets.
__________________________________________________________________
Schnaubelt, president of Citizens for
Private Property Rights, has been a commercial real estate broker
for 39
years and was a San Diego City Councilman from 1977-81.
This article appeared in
the San Diego Daily Transcript on Wed., Oct. 21, 2008.
____________________________________________________________________________
Fred Schnaubelt