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The Whole Point Of Capitalism

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mwkruse
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Forbes: The Whole Point Of Capitalism

If capitalism can't eliminate poverty, then Michael Moore is right–it's evil.

In his new movie, Michael Moore calls capitalism evil and argues that it should be replaced by democracy, basically flipping the current arrangement so that the economy serves our political ends. A lot will be said, good and bad, about Capitalism: A Love Story, about Michael Moore and about the lives of the economic victims. Moore's real question is, does it serve us or do we serve it? It's supposed to serve us. It's supposed to have a point.

We don't subject ourselves to the brutalities of a competitive economy because it's fun. We do it because we have a collective mission: the elimination of poverty and scarcity for all humanity. Before the study of economics became mired in mathematical theory and its practitioners started to fancy themselves as scientists, economics was widely regarded as a branch of moral philosophy. Adam Smith, John Maynard Keynes and Karl Marx all have this in common–they used the discipline of economic philosophy to try to create systems that would one day eliminate poverty and scarcity. That their ideas about how to do this diverge wildly doesn't really matter. That they share a goal does.

Capitalism emerged from all these moral arguments as a successful, self-perpetuating system that people generally seem to agree is humanity's best shot at one day beating scarcity and poverty. …

I'm not endorsing everything in this article, but one of the key pieces he hits is the need for entrepreneurial innovation, which means we need economic freedom. Many large corporations use government regulation as a barrier to entry for their industries. Their size means they can influence politicians and get the benefit of filled campaign coffers.

Regulation is critical to keeping large corporations transparent and preventing deceit and anti-competitive measures. However, we move into dangerous territory when government involvement becomes an exercise in managing business toward political objectives. The Kuyperian notion of sphere sovereignty vanishes with government and business as semi-independent spheres. While the state does not own the means of production, business becomes a virtual functionary of the state. That is a move that brings us to the brink of totalitarianism.

The answer to recent corporate misbehavior is not to make business a subsidiary of the state. The answer is for the state to regulate so that room is made for a semi-autonomous business sphere to run wild within just and ethical boundaries.

Comments

12 responses to “The Whole Point Of Capitalism”

  1. Travis Greene Avatar
    Travis Greene

    Michael Moore buries anything thoughtful he has to say in smugness, monologues, and exploitative editing.
    Re: business regulation…what do you think of Warren Buffet’s idea of removing all regulation, let people make money however they want, and then tax the crap out of it at the end, redistributing wealth via social services? Seems to me like there’s growing the pie and dividing the pie. Capitalism is good at growing the pie, not good at distributing it.

    Reply
  2. Viola Larson Avatar
    Viola Larson

    I read that linked to Presbyweb and wondered what you thought of it. Thanks for answering my question. I love your last line,”The answer is for the state to regulate in such a way that room is made for a semi-autonomous business sphere to run wild within just and ethical boundaries.” If I can wax theological that sounds like our relationship to God because of Christ.

    Reply
  3. JMorrow Avatar
    JMorrow

    Michael,
    You said:
    “However, when government involvement becomes an exercise in managing business toward political objectives we are moving into very dangerous territory.”
    When I observe the way the government has handled the bailouts and healthcare bills, I see a govt that defers to corporations more than controls them. This is largely because most govt officials know very little about the processes and minutae of business and the economy. When in doubt, or fearful of the public backlash they’ll defer to industry experts to resolve issues in the least abrasive way possible. When you look at it that way, doesn’t govt still seem to be playing second fiddle to business? It would be interesting to see how many of the persons behind the scense involved in drafting economic legislation have industry backgrounds.
    The question as I see it is why the regulatory schemes (or lack thereof) didn’t work before this current crisis? Business ran wild of course, but where was the self-discipline? What might B-schools, faith institutions and others do to make up for this social and cultural problem that is frankly making a mockery of “just and ethical boundaries”.

    Reply
  4. vanskaamper Avatar
    vanskaamper

    Given that the pie is grown by individuals, on what basis do we say that there’s a pie that needs to be divided by some authority?
    The more you redistribute, the less incentive there is for risk-taking with capital…i.e., job and wealth creation.
    The free market regulated by laws that maintain honest and open business practices remains the best way to “distribute” the pie…you earn based on how good you are at meeting other people’s needs.

    Reply
  5. vanskaamper Avatar
    vanskaamper

    Business ran wild of course, but where was the self-discipline?
    Because regulations gave them an incentive not to do so. The story of the mortgage mess is a study in the creation of perverse incentives and insulating people from the consequences of bad decisions.

    Reply
  6. Michael W. Kruse Avatar
    Michael W. Kruse

    Travis
    I think Buffet is a much better investor than he is an economist. 🙂
    “Capitalism is good at growing the pie, not good at distributing it.”
    I don’t think that’s true. Societies with flatter distributions also tend to have less mobility up and down the income ladder. Capitalist societies tend to have a wider spread with considerable mobility of people rising out of the bottom and falling out of the top. Those tend to be the trade-offs. Mobility, and the economic energy it brings, have to be factored in.
    Viola
    I borrowing from G. K. Chesterton … or maybe you figured that out. 🙂

    Reply
  7. Michael W. Kruse Avatar
    Michael W. Kruse

    JMorrow
    Great questions. I wish I had simple solutions. From a regulatory standpoint, I think we had something similar to 9/11 … multiple agencies responsible monitoring issues that were not well coordinated and well staffed. I agree with vanskaamper to some degree that bad government incentives played a role. Good old fashioned greed and denial also played a role.
    To some degree I think we have to keep in mind that we are dealing with fallen humanity. There are always going to be episodes of people behaving badly. No system to can entirely protect us from sin. That is why I caution against being to dismissive too quickly of capitalism. The choice is not between capitalism and perfect system that frees us of sinful humans. It is the choice between competing fallen systems.

    Reply
  8. Travis Greene Avatar
    Travis Greene

    vanskaamper, “Given that the pie is grown by individuals”
    I don’t consider that a given.
    “you earn based on how good you are at meeting other people’s needs”
    You absolutely don’t. This is exactly what I hate about capitalism: the inference that whether you are poor or rich, you deserve it.

    Reply
  9. Michael W. Kruse Avatar
    Michael W. Kruse

    Here we get into the marginal utility question. Why does Kobe make millions for playing a game while first grade teachers get such relatively low salaries? Economic value has no relationship to societal value.
    The issue is that finding or creating the next Kobe versus finding the next first grade teacher is a far more difficult task. The supply is more scarce relative to the demand. Similarly, which is more valuable to society, diamonds or water? Yet which has more economic value?
    I don’t know that I would say that we always get what we deserve, but our economic outcomes are strongly correlated with the decisions we make. The question is whether the economic calculus should be the only factor in our decisions and should it be the primary variable upon which rate success?

    Reply
  10. Travis Greene Avatar
    Travis Greene

    My point is even our ability to make decisions is a gift. The attitude that capitalism breeds, the sense of entitlement and total lack of recognition that all of our power to make wealth comes from God, needs to be roundly exposed and denounced even if capitalism is the best system we can come up with now.

    Reply
  11. Michael W. Kruse Avatar
    Michael W. Kruse

    “… the sense of entitlement and total lack of recognition that all of our power to make wealth comes from God, needs to be roundly exposed and denounced …”
    I agree. But I think this tendency to justify ourselves is not new with us. When Jesus tells the “eye of needle” story, the listeners marvel that if the rich can’t enter who can? Feudalism justified everyone’s status as divinely ordained. Hinduism justifies status based on reincarnation.
    I’m not sure people in capitalist societies are particularly different from others throughout history in using the cultural ethos to justify themselves. It is one of the marks of the Kingdom that we challenge this.
    The flip side is that good decisions in a relatively just system do tend to get rewarded. We want to incentivize good decisions. It is in the best interest of society, and the poor, that we do so. If there was no relationship between choices and outcomes there would be no basis for stewardship.

    Reply
  12. John Avatar
    John

    The whole point of capitalism is to reduce everything to a salable commodity, and hence inevitably to destroy both the entire natural world and humankind too.
    Everything and everyone reduced quite literally to the bottom line, and hence to be flushed away.
    The war of all against ALL, and everything–including the Divine Reality.
    Such is also the inevitable outcome of the entire Western “cultural” project and its drive to total power and control.

    Reply

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