Why the world needs capitalism

Why the world needs capitalism

By John Silveira

Issue #167 • September/October, 2017

Our friend, O.E. MacDougal, came to visit us at Backwoods Home Magazine and to fish the rivers and the coast of southwestern Oregon. It was going to be a long, relaxing Fourth of July weekend for him. Mac, as we call him, is Dave Duffy’s poker-playing friend from Southern California, and Dave, of course, is the publisher of this magazine.

Whether or not communism, socialism, and fascism have any success depends on how they deal with capitalism.

I was at my desk thinking about some things while half listening to them as they sat at the editorial table in the middle of the room and talked about fishing " rods, reels, bait, places to go, and stuff like that.

Then Mac said, “You’ve got that faraway look in your eye, John.”

I didn’t intend to trigger a political conversation, but I did have something on my mind and I said, “After last November’s presidential election, I’ve been wondering if the United States is becoming a fascist country.”

He looked at me kind of funny for a few seconds, then said, “We’ve had conversations along this line before, haven’t we?”

Dave nodded and I vaguely recalled talking about fascism in the past.

Mac said, “In many ways, we’ve had the economic trappings of socialism, fascism in particular, in place since at least 1933. Do you recall what fascism is?” he asked.

I did that thing people do when they’re trying to remember something: I rolled my eyes up to look at the ceiling. “I don’t think I can give an exact definition,” I said, “but I know it’s not something good.”

“Don’t feel bad,” he said. “No one seems to know quite what it is, anymore. Because of Hitler and Mussolini, it’s equated with evil. The irony is that despite Stalin, Mao, Pol Pot, Kim Jong-un, and a host of others, communism is not seen as evil " at least not in the media or by the left. But from the standpoint of its economic theories, fascism is just another form of socialism. In fact, the economics practiced in most Western countries, including the United States, are the same as were practiced in Nazi Germany and Mussolini’s Italy. That is, capital, property, and the means of production are in private hands, but their use is often directed and regulated to meet the ends desired by politicians and bureaucrats. Where we differ from the Nazis and the Italian fascists is that their governments were extremely authoritarian and nationalistic.”

“And fascism is intolerant,” I said.

“No.”

“Fascism is about concentration camps and persecution,” I said.

“No. You’re thinking about the Nazis. Fascism was adopted by many countries, and Mussolini and the Italians were the first to implement it. The Germans " specifically, the Nazis " adopted it after Italy did, and, though the Nazis had their concentration camps, the Italian fascists didn’t, nor were they anti-Semitic. Early on, Mussolini extolled the virtues of Italian Jews and he didn’t bother them until he did it to appease his wartime ally, Hitler.”

“That didn’t make it right. It was still the wrong thing to do,” I said.

“Absolutely. But my point is, the Nazis didn’t need fascism to build concentration camps. They could have done it with any economic system. And concentration camps are not one of the defining characteristics of fascism any more than they are a defining characteristic of communism, with its gulags, or capitalism, with its WWII internment camps, and our history of forced relocations of Indians to reservations. As far as I know, during World War II not only Germany, but at least three of the other combatants had ‘camps’ for their own citizens. Others may have had prisoner of war camps, but the former Soviet Union, the United States, and Canada all interned their own citizens.”

“Canada?”

“They interned people with Japanese ancestry, just like we did. On the other hand, the Soviets had their camps for political enemies, dissidents, and malcontents. And they had them long before Hitler started his concentration camps and they lasted until well after World War II.”

He turned to Dave, “Do you mind if I Google something on one of your computers?”

“Go for it,” Dave replied.

Mac got out of his chair, leaned over the keyboard of one of the office computers, and began a Google search.

He looked back over his shoulder at me. “Do you know who George Orwell was?”

“The guy who wrote Animal Farm and 1984. But Orwell was a pseudonym.” I paused. “His real name was … ”
I couldn’t remember.

“Eric Arthur Blair,” Dave and Mac said, almost in unison.

“Yeah,” I said. But I never would have remembered it.

Mac turned back to the computer and when he found what he was looking for he said, “In an essay, titled Politics and the English Language, Orwell wrote,” and now he read from the screen, “‘The word Fascism has now no meaning except in so far as it signifies something not desirable.’ He wrote that in 1946, a year after he published Animal Farm and three years before he published 1984.”

“What’s your point?” I asked.

“In 1946, fascism was still pretty new. Right? The United States and its allies had just ended the Second World War that was supposed to be against fascism. Yet people who had fought against it were already forgetting what it actually was.”

“So, refresh my mind. What is it?” I asked. And almost as an afterthought, I asked, “And how does it differ from the other ‘isms’?”

“You’re turning this into a big question,” Mac said. “But to tell you the truth, to talk about what fascism is, it’s probably a good idea to compare it to some of the other ‘isms,’ specifically communism, socialism, and capitalism. If we know how they differ from each other, we can even talk about which one is best.”

“Is ‘ism’ a word?” I asked, even though we had both just used it.

He paused. “It’s in the dictionary.”

“I guess that makes it a word,” I said, and he and Dave laughed.

“And you’re going to talk about which one is best, too?” I asked.

“Yes,” he replied.

“Wouldn’t that be just a matter of opinion?”

“Not really,” he said. “I think there’s a way to evaluate each of these economic philosophies and objectively determine which one is best.”

“So, which ism is best?” Dave asked.

“Do you want a spoiler, now? Or should I build up to it?” Mac asked.

Dave and I looked at each other, then back at Mac. We both said, “Tell us now.”

“Then tell us why,” Dave added.

“Capitalism,” Mac said.

“Really?” I asked.

“Yes, and I think you’ll see why, after we talk about what each of them is. And you’ll also see that whether or not the first three, communism, socialism, and fascism have any success depends on how they deal with capitalism. The more accepting they are of it, the better they do. The more they reject it, the more likely they are to fail.”

“So, where are we going to start?” Dave asked.

“Before we get started, I hope you realize that whenever and wherever any of these isms are implemented, none of the systems is pure.”

“You’re saying that in the real world there is no pure communism, pure socialism, pure fascism, or pure capitalism?” Dave asked.

“That’s right.”

Dave nodded.

I said, “I understand.”

“So, first, let’s talk about the nature of the economics in each system. After all, they are all theories about how an economy should be managed.

“To start out with, communism, fascism, liberal socialism, democratic socialism, and social democracy are all forms of socialism, and socialist theorists believe the state should guide an economy. And I should mention that there are other types of socialism, too, such as utopian and guild socialism that we’re not going to talk about. The first five are the ones that are in practice today.

“But, on the other hand, those who advocate capitalism do not believe politicians, bureaucrats, or panels of experts can efficiently and fairly run an economy. They believe that a free market with individuals making free choices, that suit them, will create the best economy.

“So, let’s consider some of these forms of socialism and see how they have dealt with, or are currently dealing with, capitalism.

“We’ll start with communism. In a communist economy, as envisioned by Karl Marx and Friedrich Engels, the state owns everything. There is no private property. The most commonly cited real-world example of a communist state is the now-defunct Soviet Union. Under the tsars, Russia had a terrible economy. It was a feudal society, and most of its population were serfs who owned little or nothing to speak of. Then came the Bolshevik Revolution, and under communism in the Soviet Union, which included Russia, the economy was still a disaster. Food shortages, in particular, were rampant. So the communists tried to improve the economy and make it the ‘workers’ paradise’ they pretended it was. But after several decades, and despite five-year plans and seven-year plans that were supposed to alleviate poverty and bring the Soviet Union on par with the West, nothing worked.

“Then, and I don’t know who got the bright idea, they " the communist government " began to allow people to produce food on their own, outside of the collective farms. This didn’t happen until after their longtime and ruthless dictator, Josef Stalin, died. Stalin would never have allowed such a program because " if you don’t mind the metaphor " allowing this bourgeois cultivation of private crops was planting the seeds of capitalism. But it was an experiment borne of desperation, an attempt to feed the Soviet people. And it turned out that many people were eager to plant their own crops and did so once it was blessed by the leadership.

“In the end, only about five percent of the farmland was under private cultivation, but that five percent accounted for 25 percent of the food produced in the Soviet Union. It wasn’t widely talked about because it was an embarrassment to the communists that privatization worked better than collectivization. In fact, even the workers on collectivist farms, who were allowed to have their little capitalistic side ventures, produced much more per acre on their own plots " where they had a personal stake " than they did on the collectivist farms where they worked for the state.”

“They were motivated because they realized that hard work on their part would lead to personal gain, not collective gain,” Dave said.

“That’s my conclusion,” Mac said.

“But that’s profiting through greed,” I said.

“Greed,” Dave said, repeating the word. “Greed in the form of privatized plots paying off for both the guy growing the crops and society. I’m not sure I see the downside.”

“Kind of makes you rethink the word greed, doesn’t it,” Mac asked me.

I didn’t answer.

Then he said, “Here’s another little story you may find interesting. It’ll give you another view of how the Russians began to wake up to the virtues of capitalism. It took place just before the breakup of the Soviet Union. Boris Yeltsin was a member of the Soviet Politburo. In 1991, after the breakup of the Soviet Union, he would become the first President of the new Russia. But two years earlier, in 1989, he was on a visit to the United States. Part of that visit included a tour of the Johnson Space Center in Houston, Texas. I guess it was a standard tour given to foreign dignitaries. He had a nice visit, but he wasn’t bedazzled. However, shortly after leaving the Space Center, he went on a spur-of-the-moment, 20-minute side-tour to a supermarket in Houston.

“A supermarket,” Mac repeated, adding emphasis to make sure we didn’t miss it.

“It was supposed to be just an in-and-out visit. But when he walked through the door, he was floored to find a produce section, a fish section, a meat section, canned goods, toiletries, pet food, and everything else that we, as Americans, take for granted, all under one roof. And anyone in capitalistic America could just walk through those doors and buy whatever he or she wanted and be out in minutes.

“At that time, in the Soviet Union, people expected to wait hours in long lines when they went shopping, and they hoped the shelves weren’t empty by the time they reached the head of the line. Yeltsin admitted that even high-ranking members of the Politburo didn’t have anything like this Texas supermarket available to them. He was also amazed to find out that, to run a store like this, the managers didn’t have to have some kind of special education, that they weren’t political appointees, and that they rose up through the ranks on their merits. Last, he couldn’t believe that stores with shelves overflowing weren’t unusual in this country, and that there were tens of thousands of them, all over the United States. Even Podunk towns had supermarkets like the one he visited in Houston.”
He paused again. “How big is Gold Beach?” That’s where the magazine is, Gold Beach, Oregon.
Dave looked at me.

“About 2,500 people, I think,” I said.

“And you’ve got two supermarkets. There wasn’t even one in the Soviet Union.

“While he was in the store, he got to sample freebies " cheese and stuff like that. That didn’t happen in the Soviet Union. He talked to customers " average Americans " and asked them what they were buying and how much they were spending. He watched them put things in their shopping bags that the average Soviet citizen might never see in a lifetime. He was, perhaps, even more amazed that these American shoppers didn’t think they were doing anything extraordinary. And, as you know, in a late-20th-century capitalistic America, they weren’t.

“In more than half a century, communism had not produced anything even close to a typical American supermarket. He told his fellow Russians, his entourage, that if the Soviet people knew things like this existed in America, there’d be a revolution. Two years later, he left the Communist Party. When he became the first Russian president, he took steps to try to bring capitalism to the Russian people.”

“How did that work out?” I asked.

“It hasn’t. But it’s not capitalism’s fault. The truth is that the Russian government, first Yeltsin, then his successor, never allowed actual capitalism. Under Yeltsin, in privatizing national assets, he was really selling them to cronies in exchange for loans to run his election campaigns. He was creating an oligarchy. Then, when Yeltsin’s health began to decline and he had to step down, he appointed the Prime Minister to succeed him as President. That man was Vladimir Putin. Putin began undoing a lot of what Yeltsin had done and began nationalizing many of the industries.

“Though leftist intellectuals in the West like to blame the failures of the post-Soviet economy on capitalism, it’s not true. Russia has yet to see capitalism as practiced in the United States or Western Europe.”

“Except for things like the privatization that allowed citizens to grow crops,” Dave said.

“Yes! I stand corrected. And if they encourage more people to pursue their self-interests and start their own businesses, they’re going to see a revolution that will make their country richer.”

He looked at us.

I was still stuck on “greed,” but I didn’t say anything.

“Okay, that’s communism. The next one we’ll talk about is democratic socialism. About the only place you’re going to find it is in Norway. It’s a form of socialism in which the government either outright owns or has a large stake in most, if not all, of the major businesses. In fact, the Norwegian government owns a whopping 37 percent of the Oslo stock market. Businesses are heavily regulated and monopolies are allowed, but only if they are state-controlled. It still allows a lot of small businesses " again, regulated.”

“So they’re heavily vested in capitalism,” Dave said.

“That’s right,” Mac said.

“So, are they a capitalistic country or not?” I asked.

“Remember, I said none of these systems are pure. Like a lot of other European countries, the Norwegians are using capitalism to fuel a welfare state. Without capitalism generating wealth, they’d be like the old Soviet Union and the communist East Bloc countries before the end of the Cold War.”

I nodded.

“Then there’s liberal socialism,” Mac said. “More and more European countries are relying on free markets and capitalism to fuel their welfare states. This includes the ‘socialist paradises,’ like Sweden and Denmark. They’ve come to realize that this is the way to create wealth. So, unlike Norway, where the government has part ownership of so much of the industry, industry is largely left in private hands and, of course, individuals can own property. But the state still takes an active role in what is called a ‘social market economy.’ This means the government regulates business and may even keep weak companies from folding, companies that would have to close shop in a free-market economy. It generally accomplishes its goals through regulation, subsidies, taxation, and even tariffs to stifle foreign competition. But the success of the governments that embrace liberal socialism and the reason they can provide so many benefits to their citizens is that they’re very tolerant of capitalism. Let’s face it, not a one of these governments would be able to provide the benefits they do without the wealth capitalism generates.”

“The way European countries are talked about, I thought they were totally socialist,” I said.

“I don’t know what ‘totally socialist’ means,” Mac said, “other than what we just talked about: communism. The successful socialist countries are ‘mixed economies.’”

Dave said, “A better way to put it may be to say that they’re welfare states fueled by capitalism.”

Mac thought a second, scratched his head, and said, “Yeah!”

“What’s next?” I asked.

“There’s fascism. Fascism is the economics of liberal socialism, but with a dictatorship and it’s mixed with nationalism.”

“And?” I asked.

“That’s pretty much it. Like liberal socialism, it’s regulated capitalism.”

“Are there any countries that succeed without capitalism?” I asked.

“Other than countries that are lucky enough to be sitting on a lot of a valuable natural resource, such as oil, and have a small enough population to spread the wealth around, like Saudi Arabia, Qatar, and some of the other Arab countries? None that I can think of. And, in those countries, when their oil runs out or demand falls off, no one knows how the game is going to change. It may not be pretty.

“Even though the evidence is in and it’s clear that socialism is a disaster without capitalism to support it, we’re watching countries that are trying to eradicate capitalism by nationalizing everything in sight. Countries where capitalism has been destroyed when socialism was introduced, such as Venezuela, descend into quagmires of poverty.

“Venezuela, despite having the world’s largest proven oil reserves, can hardly feed its people because one of the first things the late Hugo Chávez did when he came to power was to nationalize thousands of private businesses along with all foreign holdings, and he stamped out capitalism wherever he found it. The result was to turn what had once been a relatively affluent South American country into what is almost a communist country like the old Soviet Union or present-day North Korea, with a government that is both tyrannical and corrupt, and that can barely feed its people. In crushing all vestiges of capitalism, Chávez, and now, his successor, Nicolás Maduro, have turned off the production of wealth, something the leftists in Western Europe and this country have been smart enough not to do.”

Silence.

“Is that it?” I asked.

“Does it explain what you wanted to know?” he asked.

“Well, it still bothers me that capitalism is about greed,” I said.

“Like the word ‘fascism,’ ‘greed’ has come to mean anything you don’t like,” Mac said. “But let’s consider ‘greed.’ A lot of people call Bill Gates and Steve Jobs greedy because they got rich by building two monolithic companies that created vast amounts of wealth for themselves. But those people leave out that Gates and Jobs also directly created tens of thousands of jobs enriching the lives of their employees, their products made other companies more efficient and prosperous thereby indirectly creating even more jobs and wealth, which in turn creates even more wealth and jobs. But neither one of them did it because they were striving for sainthood. Yet, out of all that so-called greed, every day Gates’ accomplishments do more to improve people’s lives than Mother Teresa did in her lifetime. But he was ‘greedy;’ she wasn’t.

“There are thousands of others like Gates and Jobs, men and women who got rich by exercising what many called greed. They built oil companies, factories, fast food eateries, and almost everything else that enriches people’s lives. And without the wealth they create, they’d be no modern hospitals, fire and police stations, or even universities " where students and their intellectual professors can whine about the evils of capitalism.

“Would you prefer this country to be more like East Germany when it was still communist and people weren’t allowed to be greedy, get rich, and drag a whole lot of other people kicking and screaming into the better jobs, houses, cars, and TV sets that we have now? Neither the bureaucratic machinery of East Germany nor the bureaucratic machinery in any other country have been able to do what a bunch of self-motivated greedy people have done to drag us out of poverty. It’s the creation of wealth that grows an economy, creates jobs, and feeds people. The only wealth contained in state and federal bureaucracies is what they take in the form of taxes and permits from people who actually do produce wealth.

“History has shown that the success of socialist countries depends on how well each of them deal with capitalism. None of the socialist philosophies work without it.”

“Is there a better word than ‘greed’?” Dave asked.

“Yes. The late Milton Friedman used the term ‘self-interest.’ It not only doesn’t sound as bad, but it’s more accurate. And Friedman was quick to point out that it is this pursuit of self-interest in capitalism that has done more to improve the standard of living of the common man and to eliminate poverty than anything else man has ever devised. No other system has created more wealth or alleviated more poverty than the one that allows motivated people to pursue their self-interests and enrich themselves. None.”

“What about ‘crony capitalism’?” I asked.

“By definition, it’s when businesses form a relationship with politicians and bureaucracies that protect the businesses from competition or failure and enriches the ruling class. So, what’s it sound like to you?”

He was addressing me, but Dave said, “It sounds like a very corrupt form of capitalism.”

When Mac didn’t respond, I said, “Then it’s not actually capitalism.”

“That’s right.”

“And the downside of it is … ?” I asked.

“The consumer and businesses that try to run fairly pay for it. Once a business is ‘protected,’ you’re going to see less price competition " so prices will be higher, and innovation from other companies will be stifled.”

“Then it shouldn’t be called capitalism,” I said. “It should be called ‘crony-something-else.’”

“How about crony socialism?” Dave asked.

“That would be more appropriate.”

“So, wind this up,” Dave said.

“Virtually all of the socialism that has any success has run on a foundation of capitalism because capitalism has been the only reliable creator of wealth in history. Whenever socialism without a capitalistic foundation is instituted in a country, that country is almost guaranteed to become or remain impoverished. And despite what leftist intellectuals and college professors say, the more we welcome capitalism, the better off we’re going to be.”

“And one other thing,” Dave said.

“What’s that?” Mac asked.

“We have to go fishing.”

They looked at me. “You coming?”

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