Myths About Capitalism

[Danno 1,228]

Myths About Capitalism

By John Stossel

I won 19 Emmy Awards by reporting a myth: that business constantly rips us off -- that capitalism is mostly cruel and unfair.

I know that's a myth now. So I was glad to see the publication of "The 5 Big Lies About American Business" by Michael Medved.

"You can only make a profit in this country by giving people a product or a service that they want," Medved recently told me. "It's the golden rule in action."

Medved used to write about the movies, so he's familiar with the businessman as villain. I'll play a clip from the movie "Syriana," in which an oil tycoon makes this ridiculous speech:

"Corruption keeps us safe and warm. Corruption is why you and I are prancing around in here instead of fighting over scraps of meat out in the street."

"What's interesting," Medved commented, "is that in the old days, Hollywood would have businesspeople who were very positive: George Bailey, the Jimmy Stewart character, is a banker in 'It's a Wonderful Life.'"

No longer. Today's movie capitalists are criminals or playboys. Apparently, Hollywood writers think it's plausible that CEOs have lots of time to sip cocktails and chase women.

"In school, we all studied a book called "The Theory of the Leisure Class," which ... indicted the leisure class and these people who were out there exploiting other people and really had nothing to do except sit on their yachts and go to their swimming pools and their vacations."

In real life, that's nonsense.

"The higher up on the income scale you go, the less leisure time you have. You make money in this country by working hard."

Medved's second myth is that when the rich get richer, the poor get poorer. This is the old zero-sum fallacy, which ignores that when two people engage in free exchange, both gain -- or they wouldn't have traded. It's what I call the double thank-you phenomenon. I understand why politicians and lawyers believe it: It's true in their world. But it's not true in business.

"If you believe that when the rich get richer, the poor get poorer, then you believe that creating wealth causes poverty, and you're an idiot," said Medved. "One of the things that I hate is this term 'obscene profits.' There are no obscene profits ... . (The current economic downturn shows) "that when the rich get poorer ... everybody gets poorer."

Myth No. 3: Government is more fair and reliable than business.

"Remember the last time you went into Starbucks, and then remember the last time you went into the DMV to get your license," Medved said. "Where did you get better treated? And it's not because the barista is some kind of idealist or humanitarian. She wants a tip. She wants you to come back to the Starbucks ... ."

But the left doesn't get it.

"This is the suspicion of the profit motive -- the idea that if somebody is selflessly serving me, they're going to treat me better than somebody who wants to make a buck," Medved said. But "(i)f you think about it in your own life, if somebody is benefiting from his interaction with you ... it's a far more reliable kind of interaction than someone who comes and says I'm in this only for you."

Myth No. 4: The current downturn means the death of capitalism.

"Capitalism is alive and well," Medved said.

I'm also bugged when people argue that today's problems prove that capitalism "failed." What failed? We had a correction. A bubble popped. But from 1982 to now, the Dow rose from 800 to 11,000. Had it happened without the bubble, we'd say this is one of the great boom periods.

Medved added: "This is one of the biggest lies -- the idea that because of capitalism, we're all suffering. ... Poor people in America today, people who are officially in poverty, have a higher standard of living in terms of medical standards, in terms of the chances of going to college, in terms of the way people live, than middle-class people did 30 years ago. It's an extraordinary achievement of technology and of the profit sector."

Copyright 2010, Creators Syndicate Inc.

Page Printed from: http://www.realclearpolitics.com/articles/2010/04/21/myths_about_capitalism_105250.html at April 21, 2010 - 05:18:16 AM PDT

[JohnSmith2007 353]

Amen and thank you Mr Stossel

[Ali G. 37]

Danno this is the biggest horseshit I have read in a while. For starters, DMV is not a customer service agency.

Hey, the guy is a talk show host, a career path that you guys seem to worship. Surely if someone has his own radio show, they are some sort of business and economics genius.

Edited April 21, 2010 by Ali G.

[Ali G. 37]

Here is my favorite "myth" about capitalism.

• Goldman Sachs pays out $16,000,000,000 in bonuses in 2009
  
• Goldman Sachs is charged with deliberately defrauding investors.
  
• Goldman Sachs just announces an additional $5,000,000,000 in bonuses.
  

Dannos and co throughout this great union are silly enough to actually support this. Yet at the same time, wave their flag [daily] and sleep with a copy of the constitution under their pillow. Furthermore, professing their love for the country and the most important thing of all in the Constitution; hence it being in the preamble and about three times the size of regular text: "We the People"

Edited April 21, 2010 by Ali G.

[JohnSmith2007 353]

Here is my favorite "myth" about capitalism.

• Goldman Sachs pays out 16 billion in bonuses in 2009
  
• Goldman Sachs is charged with deliberately defrauding investors.
  
• Goldman Sachs just announces $5.1 billion dollars in bonuses.
  

Dannos and co throught this great union are silly enough to actually support this. All while waving their flag and sleep with the constitution, claiming they love the country and the most important thing of all in the Constitution, hence it being in the preamble and about three times the size of regular text "We the People"

Why are you here in such a terrible place? Good God, to hear you rail against the US you would think you would swim back to your beloved Australia. I invite you to do so asswipe.

[Ali G. 37]

Why are you here in such a terrible place? Good God, to hear you rail against the US you would think you would swim back to your beloved Australia. I invite you to do so asswipe.

Hey dumbazz, where in what I wrote am I dissing the US? If you can't take the heat, get out of the kitchen.

I've dealt with lowlifes like you for a while now, hence know your strategy inside out. When you have nothing legitimate to say, you resort to get out idiocy.

PS Where the #### is Lesotho anyway?

Edited April 21, 2010 by Ali G.

[JohnSmith2007 353]

Hey dumbazz, where in what I wrote am I dissing the US? If you can't take the heat, get out of the kitchen.

I've dealt with lowlifes like you for a while now, hence know your strategy inside out. When you have nothing legitimate to say, you resort to get out idiocy.

PS Where the #### is Lesotho anyway?

GFY

[Ali G. 37]

GFY

[w¡n9Nµ7 §£@¥€r 123]

BY - That's a troll ID. Lesotho is just a placeholder.

[Ali G. 37]

BY - That's a troll ID. Lesotho is just a placeholder.

[Mark&Gladys 0]

Well this is an interesting and intelligent thread. Let's all play nice. Everyone gets an opinion, but state yours tactfully please.

I have thought about the basic points in this article for some time. While I am not an economist it occurs to me that Capitalism works well right up to the point of maturity. What I mean is that free enterprise and competition works to promote improved efficiency, service, value and product quality until there are too few players left and monopolies begin to dominate. When that happens then consumers are taken advantage of and a few become very rich while the losers in the business arena pay dearly. There are examples everywhere - and why most anti-trust legislation is in place. Microsoft is a prime example where no real competition remains. Goldman Sachs may also fit this category. It is much the same in the agriculture industries where huge agronomic companies dominate and farms get larger and larger. Many if these institutions then become "too big to fail" because of their impact on the GNP and on the lives and financial stability of so many.

I am not sure what this all means. But I see it as a serious flaw in Capitalism and free market economies. This system has produced tremendous gains for us all, but at the point of maturity serious problems can develop.

Edited April 21, 2010 by Mark&Gladys

[one...two...tree 2,762]

Well this is an interesting and intelligent thread. Let's all play nice. Everyone gets an opinion, but state yours tactfully please.

I have thought about the basic points in this article for some time. While I am not an economist it occurs to me that Capitalism works well right up to the point of maturity. What I mean is that free enterprise and competition works to promote improved efficiency, service, value and product quality until there are too few players left and monopolies begin to dominate. When that happens then consumers are taken advantage of and a few become very rich while the losers in the business arena pay dearly. There are examples everywhere - and why most anti-trust legislation is in place. Microsoft is a prime example where no real competition remains. Goldman Sachs may also fit this category. It is much the same in the agriculture industries where huge agronomic companies dominate and farms get larger and larger. Many if these institutions then become "too big to fail" because of their impact on the GNP and on the lives and financial stability of so many.

I am not sure what this all means. But I see it as a serious flaw in Capitalism and free market economies. This system has produced tremendous gains for us all, but at the point of maturity serious problems can develop.

Great post! Stossel is a dye-in-the-wool, Ayn Rand loving Libertarian. Well so is Alan Greenspan. In fact, Greenspan knew Rand personally, and here's what he had to say after the huge financial fallout:

Greenspan admitted fault in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected. (During testimony, Rep. John Yarmuth (D-KY) compared Greenspan to Bill Buckner, the Boston Red Sox first baseman whose fielding error caused the team's loss in the 1986 World Series.

....

" I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms," Mr. Greenspan said. "My mistake was fundamental."

"You found that your view of the world, your ideology was not right, it was not working?" said California congressman Henry A Waxman, the committee chairman.

"Absolutely, precisely," Greenspan said. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."

link

.......

You'd think a Libertarian like Stossel would take note of such historical significance (a prominent Libertarian admitting that his ideology was flawed) as a journalist? Nah. He'd rather hold firmly to his ideology and not let the facts get in the way. He's a hack...plain and simple.

Edited April 21, 2010 by El Buscador

[Obama 2012 1,714]

"Capitalism" in this case failed due to lack of Government regulation on a very untable, very inflated market.

You cannot have a completely free reign $55 trillion unregulated derivatives market and expect things to workout AOK.

Then of course there's this idea that 'everyone deserves a home' so we're going to force our hand to pressure banks to give loans to people who have no business getting those loans. OH, but that's ok, because they can just sell those loans on risk factors in the derivatives market, so all will be OK!

The whole thing was bullshit and it's one instance when I'll say that lack of regulation was the problem and then of course allowing the financial markets/insurance markets to work together by deregulation there.

Of course, Capitalism wasn't the problem here. It actually there again, was government for 'lack of' action.

[Ali G. 37]

Well this is an interesting and intelligent thread. Let's all play nice. Everyone gets an opinion, but state yours tactfully please.

I have thought about the basic points in this article for some time. While I am not an economist it occurs to me that Capitalism works well right up to the point of maturity. What I mean is that free enterprise and competition works to promote improved efficiency, service, value and product quality until there are too few players left and monopolies begin to dominate. When that happens then consumers are taken advantage of and a few become very rich while the losers in the business arena pay dearly. There are examples everywhere - and why most anti-trust legislation is in place. Microsoft is a prime example where no real competition remains. Goldman Sachs may also fit this category. It is much the same in the agriculture industries where huge agronomic companies dominate and farms get larger and larger. Many if these institutions then become "too big to fail" because of their impact on the GNP and on the lives and financial stability of so many.

I am not sure what this all means. But I see it as a serious flaw in Capitalism and free market economies. This system has produced tremendous gains for us all, but at the point of maturity serious problems can develop.

Very well said and it does sum it up.

Lets contrast the status-quo here to understand it better. What happens overseas is that the federal government and a range of independent federal watchdog agencies step in and allow the free market to work more effectively and equitably. They will break up monopolies and promote competition. They also set the bar higher. For example, set minimum wage in line with the actual cost of living. They still have capitalism, they just reign it in and avoid it from ending up a pyramid scheme; with a select few at the top holding the majority of the wealth. America once had this model, hence the 90%+ tax rates on the wealthy between the 40's to 60's. It also coincided with one of the strongest growth periods in America's history and for the majority of Americans. Nowadays, the anti-tax mob will have people disingenuously believe that even 30% kills the economy.

People will say the economy has grown exponentially since then and it has grown. However, in reality it has only grow for the top 10%. The hundreds of ghettos after ghost towns between NYC to LA are living proof of this disparity. Compared to their Canadian neighbors, various European cousins and third cousin Aussies, the average Joe American is now quite poor.

Edited April 21, 2010 by Ali G.

[one...two...tree 2,762]

"Capitalism" in this case failed due to lack of Government regulation on a very untable, very inflated market.

You cannot have a completely free reign $55 trillion unregulated derivatives market and expect things to workout AOK.

Then of course there's this idea that 'everyone deserves a home' so we're going to force our hand to pressure banks to give loans to people who have no business getting those loans. OH, but that's ok, because they can just sell those loans on risk factors in the derivatives market, so all will be OK!

The whole thing was bullshit and it's one instance when I'll say that lack of regulation was the problem and then of course allowing the financial markets/insurance markets to work together by deregulation there.

Of course, Capitalism wasn't the problem here. It actually there again, was government for 'lack of' action.

Phew. I'm relieved to hear you say that. As my earlier post demonstrates, even Alan Greenspan recognized the flawed thinking that these institutions can regulate themselves.

Edited April 21, 2010 by El Buscador