Capitalism is liberty

Ludwig von Mises, economist

The statists and the Marxists pursuing their radical and revolutionary agenda have found themselves in an ideal position to deal a devastating blow to capitalism. They are doing so by calling our current system- the one that is on the verge of collapse- “capitalism.” The fact is that this is not so. The fact is that our system is not capitalist, and our markets are not really free, as they have been quietly undermined by decades of misguided economic policies firmly rooted in Keynesian interventionism and in inflationary monetary theory. Simply put, for true capitalism and free markets to exist the individual consumer, or what Adam Smith termed “the invisible hand,” is what determines whether a business succeeds or fails, what prices of various goods should be, and how they ought to be produced.

For true capitalism and free markets to exist they must be free of the coercive power and influence of government. They may be moderately regulated, but not managed. For true capitalism and free markets to exist, individuals must be free to conserve or distribute the fruits of their labor as they see fit. For true capitalism and free markets to exist the money that is the life-blood of the system must be sound; it must be free of manipulation and inflationary practices, and the only way to assure this condition is to attach it to something of understood and accepted value and worth, such as gold.

Unfortunately for those radicals and Marxists who would call the current system “capitalist,” none of these conditions exist. Our current system is neither capitalist nor socialist, but interventionist where the general theory is that central government planning can produce conditions of prosperity through policies of manipulating currency, markets and prices. The problem with interventionism is that one foray into a specific sector of the general economy will necessarily require additional interventions into other sectors because of the law of unintended consequences. For example, when government fixes the price of a good at a value that is below what the uninhibited market would pay, then the cost to the producer has increased and he or she may no longer be financially able to produce said good to sell at the required price. The choice is then to either cease production and go out of business, or to petition government to extend price controls to the suppliers which will, of course, have the same unintended effect on their production and require ever more and more price controls; this, therefore, increases dramatically the scope of the intervention and government control over the economy.

When government exerts control over the economy, the action in and of itself necessarily limits the ability of the producer and consumer to freely choose, and thus by definition encroaches on liberty. When government power and authority increases, then the power, authority and freedom of the people must necessarily decrease. And, when government controls your choices and your money it controls you. Thus, interventionism if continued as the guiding premise of economic policy must always lead to increased control and decreased liberty, and such conditions must therefore lead to an evolutionary authoritarianism, from corporatism to fascism to socialism. Interventionism creates an unsound prosperity via “bubbles” and cycles of boom or bust which creates an atmosphere contributing to economic, social and political instability and is therefore a serious threat to liberty, because as the booms become busts, the theory requires more government intervention in an effort to correct the inevitable crash and create a recovery. More government control means less choice, and less choice means less freedom. This is most definitely far removed form capitalism.

Sadly, too many believe the falsehood that the current system of interventionism is actually capitalism, a condition the current radicals and revolutionaries in power are only too eager to exploit in order to hasten the inevitable evolution of authoritarianism that will ultimately allow them to achieve their ultimate goal of total control, total planning and redistribution of wealth. The most important action in combating this imminent threat to liberty is to defend capitalism.

Defending capitalism is defending liberty: we were intended to be an economy of liberty. The statists blame capitalism but what we have now is not capitalism. To paraphrase Mises’ definition, a free-market capitalist economy is: an economic concept of civilization that is based on the private ownership of the means of production and which permits and encourages the division of labor, economic calculation, capital accumulation, technological improvement and the voluntary social cooperation of a market economy. It is the antithesis of statism, fascism, socialism, and communism, which are based on government ownership or control over the means of production. George Washington remarked that “government is force.” That means socialism, Marxism, communism, these are all eventually carried out at by government force, and history shows this to be true. With this in mind, consider that:

• 40% of the national income is Federal spending
• there are almost 75,000 pages in the Federal Register filled with regulations covering every aspect of our society and our economy, and the number of those regulations is being increased exponentially by this Congress passing bills no one has even read before voting on.
• Bank bailouts: Some of those banks did not need or want that money, but all of them were forced to take it. The action was not about saving banks so much as it was about controlling them. After the stress tests the government required all the major banks except Goldman Sachs to raise additional capital by selling more shares of common stock, a substantial amount of which were purchased by the Treasury, making the U.S. Government part owner of almost every major bank.
• In April the Fed was discovered to have increased assets noted as a “central bank liquidity swap” from $24 billion at the end of 2007 to $553 billion at he end of 2008, which it then loaned to foreign banks. How did the Fed increase its assets? It created money and credit out of thin air. The result of this and it’s monetizing of the debt through either direct purchases or indirect purchasing agreements will be high inflation with is a serious threat to the stability of the dollar, and if continued will lead to it’s collapse.
• The government, through the unprecedented acts of this Congress and its predecessor, is on the verge of taking over healthcare, which accounts for almost one-sixth of our economy. It is also on the verge of: taking over the internet and giving the President the authority to shut it down arbitrarily; mandating “diversity” in all radio and TV programming; forcing through a Cap-and-Trade bill that will require you to get a Federal inspection in order to sell your home and will set limits on how much energy you can use in your home, for example to keep it comfortable during the hot Florida summers; of setting caps on salaries of any company that has received TARP money – directly or indirectly.
• Debt clock: The current deficit is $11.8 trillion, of which almost $4 trillion is now held by foreign countries. US current gross domestic product, current year to date, is $10.2 trillion, of which over $3 trillion is government spending. That doesn’t include the bailouts, now approaching $13 trillion, nor does it include the amount of money printed or credit created by the Fed. It also doesn’t include the amount of debt that has been purchased or monetized by the Fed, because no one really knows how much that is because they won’t open their books for audit.
• Unfunded liabilities: Medicare and Medicaid, Social Security, and Prescription Drugs are currently almost $60 trillion. Unfunded means they have no way to pay for it.
• The purpose of 9 out of 15 cabinet level positions is to regulate the economy and that doesn’t include the so-called “czars” advising the President, many of whom have been given real power to accomplish real results through implementing regulations consistent with the President’s agenda, but are outside the confirmation process and unaccountable to Congress. When “regulation” is merely a euphemism for “manipulation,” then what we have is a managed economy – an economy managed by bureaucrats making decisions that affect your life and your liberty, yet you have absolutely no say in the decision-making process.

This management and over-regulation is not capitalism – it is central planning. Interventionism always leads to socialism, evolving from corporatism; and socialism always leads to authoritarianism – it can’t be any other way, because there is from the very instant that the interventionist policy begins, the need to control more and more. The fact is that free markets and liberty are inextricably interconnected, and thus if one is lost so is the other. It is also a fact that the more free and open a society is, the less it is subject to the fear of arbitrary government actions, the more prosperous that society will be because innovation, creativity and entrepreneurship are not stifled by de facto government rule.

We are in the midst of a revolution, and whether we want to accept it or not doesn’t matter. Our Constitution, our liberty and our free markets have been under assault quietly for decades. It is only now when confronted with an Administration and a Congressional majority that espouses values more closely akin to Marx and Lenin than Madison and Jefferson that we have been so rudely awakened and jolted into action. It is a revolution, a war for the very soul of this republic, and what is at stake is the future: ours and our children’s. Defend capitalism. Defend liberty.

Image:  Chad MacINNES

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