Question for Steve Forbes

Sharon Gitelle of the Forbes Blog Network sent the following:

Re: The Forbes Network: December 11th interactive call: Steve Forbes

Dear Mitchell,

Please join us for an interactive call with Steve Forbes, on Friday, December 11th at 3 PM Eastern time for a discussion about his new book called How Capitalism Will Save Us. (To learn more about this book please click here: http://bit.ly/WT2Um )

The expected duration of the call is 45 minutes.

Steve Forbes will be answering your questions about capitalism—please submit your question(s) to me by e-mail by Wednesday, December 9th. You will be notified by me if your question has been selected prior to the call.

My response:

Here is my question for Steve Forbes, Sharon.

In the 1870s an investment bank, Jay Cooke and Co., failed. In many respects it was similar to Citigroup and other of the Wall Street firms in that it had been heavily subsidized by the federal government throughout its life but was so incompetently run that it failed despite the large subsidies. In the case of Jay Cooke, the subsidy resulted in part from its involvement with the Civil War greenbacks (like Henry Paulson, one of its representatives, if I recall Salmon P. Chase, had been been appointed to be Secretary of treasury). In the case of Wall Street and the money center banks today, the government subsidy has taken the form of access to large amounts of artificially created money. That is, until the socialist Bush-Obama bailout, where cash was simply handed to the incompetently run American financial institutions.

In the aftermath of the Civil War, despite the subsidies it had received, Jay Cooke failed in tandem with the crash of 1873. No one was foolish or gullible enough to believe that sustaining Cooke would have helped the economy. That would have been a fool's fantasy. Following Cooke's failure and the crash there was a depression. The depression and crash were associated with the federal government's retiring of the greenbacks and deflation. During this continual deflation there were three depressions. However, real wages grew at a much faster pace than they have since 1970. Moreover, innovation occurred at a much faster pace than at any time in the history of the world, culminating with the creation of the concepts of television and radio by Nikola Tesla in 1897 and numerous inventions that were so vibrant that they continued to subsidize the American economy through the 20th century, a century of dramatically slowed creativity.

At the same time, real wages rose at an uneven clip, roughly two percent per year, more or less until the founding of the Federal Reserve Bank in 1913. As David Ames Wells points out in Recent Economic Changes (1889) the innovation and real growth of the economy was astonishing. What Wells mistakenly calls "overproduction" (see diatribe in Hazlitt's Economics in One Lesson) resulted from the dramatic innovation, as Wells points out. Of course, corporations, banks and Wall Street disliked the intense competition and deflation, which led to declining profits and hard work, but American workers saw their wages grow rapidly, as Wells pointed out.

Since the abolition of the gold standard in 1971, real wages of American workers have grown 2% over the 40 years. That's 2% in total over 40 years. In contrast, during the deflation of the late nineteenth century, real wages rose 2% per year. Yet, today's all-thumbs economics establishment claims that deflation is a major threat. It is, of course, to the banks who provide economists with endowed chairs, but it is not to workers who wish to raise their living standards. Workers did much better under deflation from 1865 to 1913 than they have under inflation from 1970 to 2009.

Thus, the 1873 failure of the major investment bank in America and the contraction of the money supply, deflation, left American workers much better off but Wall Street and corporate America less profitable. This was the period of freest markets in American history, the closest to what might be called a libertarian economy. Of course, Wall Street and the money center banks, then like now, opposed libertarianism and free market capitalism, preferring the socialist pattern that Alexander Hamilton and the Federalists advocated (Hamilton was indeed a socialist and advocated a government owned manufacturing firm that would establish American manufacturing).

Forbes has supported the bailout of Wall Street. In addition, you have echoed the all-thumbs economics establishment's obsessive fear of deflation. When I say "all-thumbs" I mean all-thumbs as far as the public is concerned, not all-thumbs as far as the government-subsidized banking interests are concerned. Politically the economists are wise servants of power.

Forbes has been on the bailout bandwagon. The bailout does not reflect libertarian or pro-free market sentiments, but sentiments in favor of the subsidization of a specific sector of the American economy through state intervention, Wall Street and banking. As I wrote to one of your columnists, and contrary to your philosophy, a libertarian America would need Wall Street as much as I need lung cancer.

Thus, it would seem that Forbes has taken not so much a free market position, but a crony capitalist or socialist position, closer to Hamiltonian Federalism, or fascism than to libertarianism, the idea that markets should be governed by a non-judgmental, objective legal standard.

Can you reconcile Forbes's position on the bailout with the views of Presidents Andrew Jackson and Grover Cleveland?

Best wishes,

Mitchell Langbert

Sharon's reply:

Great. Thank you!

Michael Moore: Educate Yourself about Capitalism and Pauline Kael

Dear Mr. Moore:

I urge you to educate yourself about capitalism. If you engage in a debate and do not know what the other side is saying, your supporters may cheer but you will convince no one.

In Aristotle's Politics, a readable book, Aristotle describes the various political and economic arrangements in existence in Greece at the time. More than a few, including Crete and Sparta, were communist. In fact, if you trace the development of the ancient economy from before that time through the days of the Romans and into the feudal periods, socialist and communist arrangements were common. Rome's was a welfare state. Individualist capitalism was unknown in the ancient world. The same was true in China. There was a debate in medieval China, the debate of Salt and Iron, in which Chinese scholars argued whether economic development should follow a socialist or guided capitalist model. Neither side advocated or was aware of the possibility of individualist capitalism.

If you look at the effect of three thousand years of various socialist arrangements in the ancient and medieval world it is this. Three thousand years ago, life expectancy was age 25--35. In 1750 life expectancy was still 35. Three thousand years ago people lived on something equivalent to a $200 annual income. In 1750 there had been some progress but not much at all. In other words, 3,000 years of socialism and communism had produced virtually no progress.

From 1750 to 1900, in England and America, capitalism was introduced. In that time life expectancy increased 50%, from 35 to about 50. Real wages more than doubled from 1840 to 1890. Workers flocked to America not because of an open frontier (there was an open frontier in Europe until a century or two earlier, and there still is one in Russia today) but because of the economic progress that was being made. No one benefited more from capitalism than the average worker.

Despite these gains, no system was more reviled. The reasons for this involve the cultural suspicion of a new idea. Individualist capitalism has almost never existed in world history, and its opponents fear it emotionally and hate it intellectually because of its revolutionary nature. Socialism is a profoundly reactionary movement.

As a result, repeated attempts were made to substitute new versions of the ancient political arrangement, socialism, for capitalism. On the whole, the most aggressive steps were taken in countries that were still feudalist or more primitive--Sweden, Russia, China, Cuba, Latin America, and Africa.. Sweden, for instance, still had remnants of feudalism in the 1950s.

The effects of these policies were this. In Russia, the murder of 65 million people; retarded economic development; depredation of the environment. In China, widespread hunger and retarded development; the murder of 25 million people. In Cuba, the murder of 100,000 people and despite your admiration for their $250 per capita year health plan, if you doubt that their economy is retarded economically I urge you to re-settle there. Feel free.

The income inequality issues that concern you are small compared to the ongoing butchering of humanity by socialism.

In spite of socialism's long wave of failure, ideologically driven universities, Democratic Party media sources, yourself, and their other brainwashed graduates continue to chant for socialism. Perhaps historical ignorance and the religious-like ideological character of universities and the Democratic Party media are the reasons. You can repeat yourself ten million times in religious chants against capitalism but you cannot change these facts: Under individualist capitalism, the common man more than doubled his life expectancy and increased his standard of living a thousand fold. Under socialism, there has been retarded economic progress, mass murder and ridiculously stupid policy making. If you're interested in the Swedish case, check out Roland Huntford's "New Totalitarians".

I am a fan of Roger and Me. I thought "Sicko" was ridiculous. And I will not bother with "Capitalism". Ignorance, no matter how entertaining, becomes tiresome. I do not think you can engage in a debate unless you are familiar with what the other side has to say. You are uninformed. I have read Communist Manifesto (because the left wing ideologues forced me to in high school) and I have read parts of Das Kapital. You have not read von Mises or Hayek.

I was motivated to write this by a Ron Paul segment that I saw on Youtube (I do not watch Democratic Party television). Mr. Paul raises points that anyone who's read a few books knows. I know you haven't read these books. But unless you can address in an articulate fashion what these books are saying, then you have little to say and no one is going to care what you say except your followers who are as ignorant and uninformed as you.

These books include:

Friedrich Hayek, "Use of Knowledge in Society" available for free online at http://www.econlib.org/library/Essays/hykKnw1.html

Henry Hazlitt, "Economics in One Lesson" Available for free from the
Foundation for Economic Education

Friedrich Hayek, "Road to Serfdom"

Friedrich Hayek "Constitution of Liberty"

Murray N. Rothbard, "For a New Liberty"

There are many more books but if you could address these, then your ideas would be markedly improved.

Last, I would like to address a point that Paul makes in the video that I think should give you pause. In your career, you were initially attacked by Pauline Kael. In a centrally planned economy, who would have been the planner of movies? I do not doubt for a second that it would have been Pauline Kael. Would she have allowed you to make Roger and Me?

If there were no private property (under socialism there isn't) then you could not have found investors or used your own resources. Therefore, you would not be a filmmaker. You are ONLY a filmmaker because of capitalism, the system you hate.

Let us look at how you make films. Do you depend on a central authority in Washington or Lansing? If you did, do you think that you could make competent films? But under socialism, direction from the center is the rule in all walks of life. If you see the problem with being centrally directed on how to make your films, you begin to see the arguments of Ludwig von Mises and Friedrich Hayek in the above material.

I urge you to consider educating yourself. Believers in individualism and freedom agree with you about the bailout and agree with you about income inequality. The reasons for these things are the social arrangements that left-wing academics have clamored for since 1890--Keynesian banking, the Fed (since Hamilton the institution of subsidy to the rich), and government regulation that protects and subsidizes big business.

Please educate yourself.

Sincerely,

Mitchell Langbert

Work Is for Chumps

In the nineteenth century Americans were taught to rely on themselves and to build a better mousetrap. Although we were much poorer then, progress was rapid. In the late nineteenth century, although the average American was more than twice as well off as at the beginning, there had been an expansion of government related to the growth of big business (this began with the Dred Scott decision, which asserted federal power to regulate the states) and, in large part due to the expanding press of that day, the public saw the affluence of corrupt big businessmen like Jay Gould and John D. Rockefeller as resulting from power rather than innovation. While there was a high degree of corruption then, though no more than there is now, the solution would have been to limit state power to grant land and benefits to private companies. Rather than follow that route, big business interests, reflected by Theodore Roosevelt and his advisers in the National Civic Federation, including George Perkins, a Morgan associate and executive of US Steel and International Harvester, convinced the public that increased government redistribution was necessary for a properly functioning economy.

The result was a ten decade long reduction in the rate of innovation. But Roosevelt-Wilson Progressivism wasn't enough. Theodore's cousin Franklin shifted the rhetoric of progressivism by introducing the rhetoric of fascist redistribution from rich to poor. Much like the Roman system on which fascism modeled itself, the New Deal aimed to shore up the wealthy but to do so in the cloak of free bread and olive oil. This was accomplished using the ideology of Keynesian economics and state activist "liberalism". Franklin D. Roosevelt's New Deal was a recreation of the Roman model of a state controlled, replicative system. Thus, the innovation that occurred after World War II took the "scale" concept that the 19th century had discovered using free market processes and applied it to a far greater degree. It was able to do this because of government subsidization and stabilization of big business. However, there were two effects that the American fascists in the Democratic Party did not want but could not avoid. First, the system caused the rate of innovation to decline. While in the 1960s Americans could still imagine flying cars (as in the children's cartoon "The Jetsons") today we are happy to get cash for clunkers. Second, the system eventually caused real wages to stagnate as it increasingly reflected special interest pressure on the Federal Reserve and banking system to redistribute credit from the innovative to the government, banking and big business sectors. This was also accomplished through high taxes (middle class Americans now pay half their income to the black hole of government waste) as well as Federal Reserve monetary expansion.

The result has increasingly been that those who create wealth are poorly paid and those who do consume it are well paid. That trend has been present since the creation of the greenbacks following the Civil War, and was also associated with both the First and Second banks in the early 19th century.

The result is that people who work hard and create wealth have seen their pay stagnate, while those who play the stock market, consume resources through law suits and are on the government payroll have seen their pay increase.

The election of Barack Obama is a reassertion of New Deal fascism and we can expect increasing efforts to redistribute wealth from those who work to those who do not. This is not a trend that a small number of hard working people can reverse. Ayn Rand had the solution in her book Atlas Shrugged: stop working.

Anyone who works to produce wealth in today's America is a chump. Go on government welfare. This is a socialist/fascist state. Only fools work hard.

Progressivism and the Roman Model

Progressivism, the paradigm for what later came to be called state-activist liberalism, was a variant of a twenty-centuries old model of economic development that the Romans conceptualized. Most models of economic development are variants of Roman policy. But the approach to economic development that was most successful, individualist laissez-faire capitalism, was in concept of more recent vintage even though elements of it existed in Hellenic times. The Greeks and the Hellenic states did not develop a method of analysis capable of identifying the elements of laissez-faire capitalism that facilitated development. The first to do so were the Physiocrats and Adam Smith in the 18th century.

Roman culture was based on the economic and technological advances of the Greek states. It is true that there was some innovation and dynamic business practice in the Roman world, but the Romans' statist model inhibited technological development and industrialization. Rather, the Romans conceived of progress as replication of the Greek polis and capitalist agricultural economy that the Hellenic states had innovated. This picture of cultural development drove the Roman concept of progress. Of course, Rome was unabashedly self interested and its chief concern was plunder and extraction of taxes from conquered territories. But eventually it did so through a developmental process. It assumed that the Hellenic/Roman model would maximize the productive output of the conquered territories so that imposition of the Roman model of social organization on the conquered territories would optimally increase its wealth. Therefore, progress meant that the rest of the world, which was barbaric, should adopt the Roman model.

The Roman notion of optimality was, therefore, static and did not conceptualize that technology or industrialization could radically increase and transform a nation's productive output. Moreover, it saw conquest and compulsion as essential to development. Thus, it rested on barbaric assumptions that are still reflected today in Marxist and other left wing ideology.

If productive output among primitive tribes is to be maximized, it is very likely that force is compatible with the optimality. The history of the idea of optimality might run something like this. Primitive tribes were traditionalist and saw their own way of life as optimal. Other tribes were not equal. Conquering tribes saw the optimal, profit maximizing approach as killing the other tribes and stealing their wealth. At some point tribal conquerors realized that enslavement could be more profitable than murder (a base realization that was forgotten in the twentieth century by the totalitarians following Marx and Hitler). Egyptian, Greek and to a lesser degree Roman culture were based on slavery. Ancient civilization would have been impossible without the innovation of slavery, which was actually more humanistic than the alternative to which Europe and China reverted in the twentieth century--mass murder.

The Greeks realized that trade could produce benefits that exceeded enslavement. Their colonies in Asia Minor and Arabia briefly realized that technology and enterprise could produce more wealth, but the realization was not firm and they did not develop a philosophical foundation for it. Moreover, the Greek and Hellenic states engaged in a considerable degree of class resentment and internecine warfare, which in turn limited their focus on the technological advances they were making.

The Romans saw adoption of the Hellenic model as optimal and ultimately their idea of optimal economic strategy was to impose the Hellenic model on the uncivilized.
Rome too became wracked with class conflict, notably the conflicts between upper and lower classes in Rome at the time of Julius Caesar and the resentments of the peasant army at the time of Septimius Severus and thereafter, leading to frequent murder and virtual enslavement of the Antonine-era upper class as well increasing statism and government control. The elements of what became medieval serfdom and the medieval economy were introduced in the time of Diocletian and Constantine. The Middle Ages were a continuation of Roman society in a barbarized form. The peoples whom Rome conquered did not understand the Roman concepts of government and the manorial system that existed under feudalism was a degeneration of the Roman model.

De Jouvenal traces how what he terms "Power", the centralizing force of kings over local fiefs, was a constant theme throughout the Middle Ages. This had in fact begun with Diocletian and really with Augustus, the creator of the Roman model of progress. This centralizing effort over many centuries was merely a reassertion of the Roman model. Part of the reason that the notions of liberty and decentralization were able to take hold were the barbaric feudalism that was an assertion against the Roman model. The assertion of the liberties of the aristocracy was not a continuation of the Roman model but a barbarian assertion of power by co-conquering barbarians.

The question is, though, how the decentralizing model of Locke, Montesquieu, Trenachard and Gordon, Adam Smith, the American Anti-Federalists and Jefferson evolved. The Reformation unquestionably played a role. The emphasis on individual conscience, direct reading of the bible, predestination and a direct relationship with God are powerful inducements to individualism.

The Romans might have been right about the development of much of the world, but not completely so, for the Persians and other oriental cultures had reached levels of development comparable to Rome's. Few today would argue that one civilization has the right to interfere with another. Today's critics of globalization argue that globalization interferes with local cultures. Yet, the same critics argue for centralization in their home countries, which involve greater degrees of compulsion and are less defensible on humanitarian grounds. A firm that builds a factory in a Third World nation compels no one to work there. Economic development leads to objectively better outcomes such as improved access to health care. The same advocates who would compel all Americans to participate in the same health plan would deny any access whatsoever to health care by the population of undeveloped countries.

In response to the individualist philosophy that appeared in England around the time of the Reformation, some began to argue for a divergent approach to progress that deviated from the Roman and hearkend back to the insight of the Hellenic states: businessmen experiment with alternative production methods and technologies, and so profit from their good ideas and suffer losses from the bad ones. This approach was relatively untried, yet it was productive of far greater economic progress than the Roman model.

The individualist model limits state power. But there are always moral issues in life that are difficult to settle voluntarily. These include how much to give to charity; whether bosses ought to be mean or kind to their employees; and the degree of compulsion the state ought to use in assessing taxes. Individualism did not permit a wide degree of choice with respect to the resolution of moral conflict. Henry David Thoreau's response to the ills of the liberal state were to reject the state altogether. But this would not have solved the moral problem with which he was most concerned: slavery.

Many will argue that the Civil War was about states' rights and the conflict between two economic systems, but historically its most important outcome (besides being the first example of what Thomas X. Hammes has called second generation warfare--and the killing of 600,000 human beings) was the abolition of slavery. This is a moral end, but to achieve it Roman means were necessary. The model of civilization and economy of the industrial north had to be imposed on the agrarian south. Thus, laissez-faire capitalism adopted the Roman approach to modernization in enforcing its economic model. Slavery and the kind of agrarian capitalism that the south practiced were themselves remnants of the manorial agricultural capitalism that was the basis of the Roman Empire.

Progressivism in turn was an amplification of the Roman approach to imposition of moral and developmental solutions as a form of development.

The Chinese Were Suckered

The Chinese have embarrassed themselves. They believed that export-led growth was possible for a nation with a billion citizens. Export-led growth is fine for Japan or Korea, but China is so big that exports can account for only a small portion of the working population. Moreover, technological and scientific improvement limits the importance of labor-intensive industry. Export-led growth is fine to a point, but ultimately the comparative advantage of low labor costs needs to be surpassed by growth in human capital and technology, leading to competitive industry. With the largest potential market in the world, why would not China think in terms of developing the capacity to market internally? This would imply distributed growth, possibly based on the extent of export led growth that it has already experienced.

This would be accomplished through free market capitalist development whereby credit is widely distributed and entrepreneurship rewarded, free of taxation. The Chinese could accomplish this with a gold standard.

Instead, the Chinese allowed themselves to be suckered by Wall Street investment bankers and the US. The philosophical reason is likely this: the Chinese are still Marxists, and they believe that capitalism depends on exploitation. It seemed to them that in order to grow, their workers needed to be exploited. So they focused on low, exploitative labor costs. Then, they allowed Wall Street and its employees in the Fed and in Congress to convince them to invest in dollars, further reducing the cost of their exports. Thus, the Chinese have voluntarily cheated their workforce out of wages in order to subsidize American consumers and Wall Street.

Unfortunately for the United States, though, its public has been bamboozled into the same Wall Street scam: the advocacy of paper money expansion, high taxes and allocation of credit to foolish big business uses such as the Latin American debt crisis of the 1980s, Long Term Capital Management of the 1990s and the sub-prime bailout fiasco of the 2000's. This has led to a steady reduction in Americans' standard of living, a declining real hourly wage, as politically connected Wall Street opportunists make off with the cream of fresh Federal Reserve Bank reserves. The waste balloons larger as the "conservative"/"liberal" debate, better called the "Progressive"/"progressive" debate, grows ever more insipid, ever less relevant. American political debate has declined to the point where the news is communicated by bungling, drooling cretins who do not understand any of the issues.

Americans lack the intellectual curiosity or the motivation to question the Keynesian, pro-banker model. American politicians have squandered America's wealth on incompetently conceived and executed programs whose main purpose is to waste money. Americans do not raise an eyebrow that 50% of their earnings go to subsidize foolish government programs that produce value equal to 5% of their earnings. Americans are too busy watching "Entertainment Tonight" to care.

The Chinese have the potential to become the leading global power. They can achieve this by following common sense. Their call for a new currency was common sense. But they continue to be suckered by Keynesian double talk and lies. The new currency should be gold. It should be objective. It should not be subject to political manipulation as would a new paper currency. It should not be subject to the opinions of greedy bankers who do not know how to produce value.

I urge the Chinese to adopt the gold standard and the capitalist economic system. Capitalism does not mean exploitation. It means increasing wealth. When freed of the disruptions of paper money, it functions better than any other system.

Socialism in One Lesson

I just received this e-mail from Nancy Razik and Ralph Neil Doolin. I am going to try this on my class:

>An economics professor at Texas Tech said he had never failed a single student before but had, once, failed an entire class. The class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said ok, we will have an experiment in this class on socialism.

All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too; so they studied little.. The second Test average was a D! No one was happy. When the 3rd test rolled around the average was an F.

The scores never increased as bickering, blame, name calling all resulted in hard feelings and no one would study for anyone else. All failed to their great surprise and the professor told them that socialism would ultimately fail because the harder to succeed the greater the reward but when a government takes all the reward away; no one will try or succeed.

Bertrand de Jouvenal on the Failure of American Scholarship

"A large part of the Western intellligentsia of today forms and conveys a warped picture of our economic institutions. This is dangerous since it tends to divert a salutary urge to reform from feasible constructive tasks to the unfeasible and the destructive. The historian's contribution to the distortion of the picture has been under discussion, especially his interpretation of the 'Industrial Revolution.' I have little to add. Historians have done their obvious duty in describing the miserable social conditions of which they found ample evidence. They have, however, proved exceptionally incautious in their interpretation of the facts. First, they seem to have taken for granted that a sharp increase in the extent of social awareness of and indignation about misery is a true index of increased misery; they seem to have given little thought to the possibility that such an increase might also be a function of new facilities of expression (due partly to a concentration of workers, partly to greater freedom of speech), of a growing philanthropic sensitivity (as evidenced by the fight for penal reforms), and of a new sense of the human power to change things, mooted by the Industrial Revolution itself. Second, they do not seem to have distinguished sufficiently between the sufferings attendant upon any great migration (and there was a migration to the towns) and those inflicted by the factory system. Third, they do not seem to have attached enough importance to the Demographic Revolution. Had they used the comparative method, they might have found that a massive influx into the towns, with the resultant squalor and pauperism, occurred as well in countries untouched by the Industrial Revolution, where they produced waves of beggars instead of underpaid workers...

"The vast improvement achieved in workers' conditions over the last hundred years is widely attributed to union pressure and good laws correcting an evil system. One may ask, on the other hand, whether this improvement would have occurred but for the achievements of this evil system, and whether political action has not merely shaken from the tree the fruit it had borne. The search for this true cause is not an irrelevant pursuit, since an erroneous attribution of merit may lead to the belief that fruit is produced by shaking trees..."

---Bertrand de Jouvenal, "Treatment of Capitalism by Intellectuals" in FA Hayek, editor, Capitalism and the Historians, pp. 99-100.

On Reconstructing The Idea of Capitalism

"I think...that the term 'capitalism' is an important one and that it should not only be retained but defended. We must clear away the rubble that has accumulated on this ancient citadel since Marx and Engels and Sombart wrote. As in the case of the excavation of Troy, only patience and devotion will permit us to triumph in the end. And the rubble is so heavy: dialectical revolution, rationalistic spirit, human exploitation, personal greed--all the cant, fury and misguided sentiment of one hundred years! The digging is worth our efforts, for at the bottom we shall find a system and a set of attitudes which have made possible material progress and the alleviation of human suffering. This system and attitudes we may as well call 'capitalism' and if we define it, for historical analysis, as the risk-taking function of private individuals (who, by the process--if they are successful--create capital) and the development and maintenance of sound fiscal policy by the state, I think we will able to save the term from the opprobrium from which it suffers."

L.M. Hacker, "The Anticapitalist Bias of American Historians" in F.A. Hayek, Capitalism and the Historians. Chicago: University of Chicago Press, 1954, p. 74.

Breaking: President George W. Bush Confused about Definition of "Capitalism"

Speaking at the Manhattan Institute yesterday, George W. Bush said that he believes in capitalism, arguing that:

"the surest path to...growth is free markets and free people."

It seems to me that President Bush is confused. Free markets and free people are by definition independent of government. Dictionary.com defines capitalism as:

"an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth."

President Bush has:

-used a government agency, the Federal Reserve Bank, to pump endless amounts of money into the economy for the past eight years causing massive distortion, over-building, over-purchasing and economic dislocation
-aimed to solve these government-induced problems, induced during his administration, by pumping even more money into the system
-caused the federal government to take a $150 billion stake in an insurance company, AIG, to help his cronies on Wall Street
-caused Congress to authorize $750 billion in bailout money to interfere with market forces
-overseen massive growth in the federal government budget
-failed to cut any government agencies or budgets of note

It seems to me that President Bush is confused. Capitalism means private ownership. The bailout his chief economic advisor, Henry Paulson, has engineered involves new breakthroughs toward public ownership.

The current instability in the economy is indeed due to big government, specifically the past 28 years of Federal Reserve policy, mostly during Republican administrations.

The Bush presidency has convinced me that northeasterners and anyone associated with a university in the northeast ought not to be allowed near the levers of power. President Bush, a graduate of the Harvard Business School, does not seem to know what capitalism means. He does not know what markets are. He is an economic illiterate. He is the symptom of an underlying problem. Progressivism, the dominant ideology in the northeast, is opposed to freedom and opposed to free markets.