11A087 Freedom & Capitalism by Jim Davies, 3/29/2011    

Are these two things one and the same? - not quite. They relate closely, because in a zero government society I'm quite sure that free people would choose to interact in a capitalist manner, and so the great benefits of capitalism would be fully enjoyed; but some might disagree with that prediction. Free people might choose some other arrangement, theoretically. In any case we need to understand what capitalism is, for some today have towards it a virulent hatred.

When we probe, it's clear that what people detest is better called State Capitalism, ie the close alliance between big government and big business - or better yet, just "Fascism." Easy to agree that such an alliance is deeply damaging to freedom and very unhealthy. True capitalism is what happens when a person saves some of what he earns, investing it in ways to make his work more efficient. Irwin Schiff explained it simply in his "How an Economy Grows and Why it Doesn't" at pages 3 thru 5; castaways invent a fishing net to raise their productivity. Savings can of course also be invested in ways to help someone else to produce more, in return for a share of his profits. For this to work powerfully, on a large scale as well as a small one, no government is required.

As mentioned last week, I'm re-reading an excellent book by Thomas DiLorenzo, How Capitalism Saved America - and it's that true form of capitalism to which he refers. Strongly recommended, the book expands on the above definition of what the subject means, then relates how it brought huge and sustained benefit to America, from the first days after the Pilgrims landed, to the present. In its first chapter, DiLorenzo quotes the Fraser Institute, which publishes each year how the countries of the world rank in degrees of freedom, using criteria such as the size of govenment and its taxes, the legal structure and property rights, access to sound money, liberty to trade internationally, and regulation of labor and business. It then compares its "Economic Freedom World Index" with the per-capita income enjoyed, and the correlation is enormously impressive; nearby is the latest edition, for 2007. Even if one had no other information about why free capitalism produces prosperity, this chart should leave no room for doubt that it does, in fact, do so.

DiLorenzo emphasizes that for capitalism to work, it's essential to have a legal structure to secure property rights, and while it's a subtle point I part company with him there. Certainly, property rights are vital, certainly they must be enforcible - but a "legal structure" is not the way to enforce them - unless by that term one includes the kind of free-market justice system that will prevail in a zero government society; and I think DiLorenzo does not. He has in mind a written code of law, enforced by a limited government. That is the usual "classical liberal" ideal and while it would be far superior to what we have today, it is Utopian; that is, even if implemented, it can not survive. That can be proven theoretically, and we have two centuries of experience, much of which DiLorenzo chronicles in his book, to prove it conclusively in practice.

Don't let that deter you from reading his book. The ways in which government has systematically hindered free capitalism, and thereby impeded progress and prolonged poverty, are presented in awesome, horrifying and convincing detail.

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