Freeman

ARTICLE

After That

Capitalism Is the Great Liberator

JUNE 01, 2002 by NORMAN BARRY

Filed Under : Capitalism, Protectionism, Property Rights, Poverty, Morality

“Somewhere in the world today walks the next Marx. But he is not a communist. . . . Nonetheless, he or she will attempt to seize upon the trends behind today’s headlines to shape a competitor to ‘American capitalism’ that the disenfranchised in nations around the world can embrace.”

—DAVID ROTHKOPF1

David Rothkopf, chairman and CEO of Intellibridge Corp. and a deputy undersecretary of commerce for international trade in the Clinton administration, is convinced that out there is a new messiah just waiting for the opportunity to put the world to rights. You can be sure that despite good intentions he (she?) will be just like Robespierre, Marx, Lenin, Stalin, and the other monsters who regard the whole of humanity as so much putty waiting to be molded into some pretty shape by a liberator powered by the latest set of meretricious ideas.

Of course, Rothkopf wants to avoid this. He is merely issuing some kind of oblique warning: that if we in the West do not mend our ways, some new alleged savior will destroy our freedom and prosperity. He thinks that the new liberator might be less malign than his predecessors: he could even be “efficient,” rival Anglo-American capitalism with a new and better route to happiness, and perhaps resuscitate the corpse of market socialism so as to create a new world order based on justice and humanity rather than the unrestrained self-interest of Wall Street.

Rothkopf has a Janus-like attitude to America. He says it is the “most successful nation in world history” and talks of the “genuine magnificence of the American experience”; yet in the same paragraph he rails against the country’s hubris, self-interest, and apparent insistence that every other country should play by America’s rules (by which he means those of big “capital”). And, of course, the country most generous in its delivery of aid to the poor and suffering is castigated for its alleged parsimony with regard to the distribution its own great wealth.

Like many so-called liberals, Rothkopf secretly resents America’s (and the West’s) economic success and our legal and other institutions that guarantee some liberty. He thinks it has been bought at too great a moral cost (morality as defined by the East Coast intelligentsia). One suspects that the intelligentsia really would like the country to be nearly as desperate as those on which it bestows its virtue. Thus its critiques of America are guided by conscience rather than intellect, and sentimentality rather than reason. Rothkopf, therefore, gives no rational explanation of America’s success, or any recommendation of how its stupendously profitable institutions and practices might be exported to the rest of this benighted world. If we were to rely on the ranting of any new messiah, the supposed objects of his altruism certainly would not get that precious breakthrough into success.

For Rothkopf there is only the conventional complaint that America and the rest of the West are to blame for all the travails of humanity. It is as if the prosperity that we experience were simply a matter of chance and that we have a moral duty to spread our good fortune to other nations, including those that have willfully ignored the American experience, rejected its lessons, and worked for its downfall. Only the creation of international social justice and widespread redistribution will assuage American guilt for its purloining of the world’s resources. It is never the fault of those abject nations that have pursued manifestly erroneous paths to paradise.

Yet most, if not all, of the misery and suffering that we daily experience are explicable, and soluble, if only those unfortunate countries that Rothkopf worries so much about would adopt those practices that have successfully coped with scarcity, poverty, insecurity, and all of the other social ailments that have regularly afflicted mankind.

Argentina’s Error

Argentina bothers him. It is the victim, apparently, of a curmudgeonly International Monetary Fund’s (and America’s) refusal to lend the country even more money. But why is the country in a mess? Not complicated. It did the right thing, given its inflationary past, by tying the peso to the dollar. But it carried on spending in a good old socialist manner, especially in the extreme Peronista regional governments, and so produced a massive public-debt burden. Countries, like individuals, have to learn the hard way. If rich countries keep bailing poor ones out, the latter will be poor forever, just like individuals in welfare states. Hasn’t Rothkopf ever heard of “moral hazard”? These countries would be better off if the IMF and the World Bank had never been invented.

He attributes the misery of the Third World to Western niggardliness; but money has been thrown at Africa for the last 50 years and the continent has got poorer as a direct result. Those traditional trades and practices that had kept its countries from penury for centuries were replaced by massive Western-financed capital investment programs (when there was surplus labor), ludicrous “infrastructure schemes,” and money for poverty relief (which was often spent on weapons).2 Much Western aid actually went into the pockets (and then the Swiss bank accounts) of politicians educated at Harvard and the London School of Economics. Parts of Africa have now become a “commons” on which rapacious brigands prey and grab what they can.

The continent does not need democracy, foreign aid, or the advice of economists and sociologists: it needs the rule of law. The Western intellectuals ignore “developing countries,” for instance, those in East Asia, that have actually succeeded. The reason for this lack of interest is that these countries have used unmentionable Western methods of economic and social organization.

The Primacy of Property

What newly emerging countries need is law and property. The reason capitalism seems to be just a privilege of America and the West is that the fortunate citizens there have some security in their houses, their businesses (large and small), and their land. They can get loans on their property. In the rest of the world, property is precarious. People either cannot get proper title or the process is immensely long and costly. They may occupy bits of land insecurely, but “squatters’ rights” are not secured by legal documents. The people stagnate therefore in shantytowns. Has not Rothkopf noticed that capitalism is built up from small beginnings as well as great Wall Street adventures?

With his scattergun approach he is bound to get some things right. And he is correct that the changes that have taken place in the last ten years have not been sufficiently addressed to ownership. He even praises Mrs. Thatcher for her wider dispersal of share ownership in Britain. But he doesn’t really understand ownership. He would replace owners of legally protected assets by “stakeholders” in the world economy. He simply chastises the elites of the West (and old communist party hacks) for gaining vastly from the privatization in former Soviet regimes. This is partially true; however, the solution to the problem, difficult though it is, is not stakeholding but a much wider spread of private property ownership and its security, which has happened to an extent in Poland and the Czech Republic. What we do not want is the dilution of private ownership, which is precisely what stakeholding would bring.

It is certainly not true that privatization in Britain was a gift for “multinational corporations” or “powerful local business people with assets.” And even if this were true the free market would quickly break up those economic power structures that worry Rothkopf.

Virtue-Powered Politics

He, of course, looks to some revitalized political action, powered by “virtue,” to alleviate all our ills. But it is politics that diverts man’s natural creativity and industry from private to public action in the first place. And that is the route to underperforming economies and even poverty.

I guess Rothkopf would not want to be thought of as a leftist, least of all a Marxist, but he is a victim of that style of thinking. It is the illusion of the left that permanent changes in the world are brought about by single, heroic individuals with the right ideology who appear to create new futures and utopias. They, like Lenin, overturn those “laws” that govern our behavior. But no one can overturn the laws of economics, of scarcity, and of production. That rent control causes homelessness, minimum wages produce unemployment, and nationalization of the means of production creates economic misery are as certain as any of Newton’s laws; they just operate a little slower. Communism wasn’t defeated by students wearing T-shirts emblazoned with the likenesses of Mises and Hayek; it was defeated because the whole system was a flagrant breach of those laws. And it got through to people for whom Mises and Hayek could have been names of football players.

It is no coincidence that the political messiahs of the past have always been glamorous public figures who attract the interest of the intellectuals, while the real innovators, the harbingers of great progress and innovation, are the little guys working in their back sheds, slaving away on a new and untried idea or persisting with an unfashionable scheme that the established world of science and economics says is wrong. Governments, especially democratic ones, are moved by glamour, and they make life difficult for the real innovators with excessive taxation and regulation.

And there are little guys in the history of ideas too. What about the school of Salamanca, whose writers said all that needed to be said about markets back in the sixteenth century? There is scarcely a book on them to be seen in university libraries in which the shelves sag under the weight of vast tomes of completely erroneous and, at last, irrelevant Marxism. Yet Rothkopf thinks the world is waiting for yet another purveyor of witchcraft.

One small beginning to make “progress without glamour” possible would be to take the liberalizing of world trade seriously. But Rothkopf takes the Seattle and Genoa rioters’ view of globalization seriously. The expansion of world trade has apparently benefited only the elites of the West and impoverished the rest of mankind.

Now there is a genuine critique of the West in all of this, but Rothkopf completely fails to see it. Globalization has indeed advantaged the West relatively more than Africa and Asia, but that is only because it has not gone far enough. America and the European Union still operate a protectionist system geared precisely to protect home interests and punish the Third World, especially in agricultural products. The West currently spends $1 billion a day in agricultural subsidies to its own farmers. It is always electorally more popular to appease powerful pressure groups at home rather than take economically efficient and just action that benefits anonymous people abroad. There is also cheap labor overseas, but Western trade unions are determined to prevent the natural “socialism” of the market (the gradual equalization of wages through international competition) from operating. It is laughable to see earnest, idealistic Harvard grad students demonstrating alongside hardened steelworkers’ union bosses at world-trade conferences against the evils of globalization, and coordinating their violent anti-capitalist dissent by the use of high-tech mobile phones. The opponents of globalization do not want its benefits to trickle down to the masses; they want people to be permanently beholden to government. Does Rothkopf favor this?

Despite the horror stories we read about every day, the world is getting to be a slightly better place without a liberator. Absolute poverty is being reduced. There is no population crisis, and any environmental problems are soluble with conventional economic and legal techniques. If America and the West were to engage in a crusade to use government action to erase poverty, redistribute wealth, and spread “democracy” to the Third World, they would disrupt the corrective measures that are quietly taking place all the time.

Rothkopf is not a Marxist, or even particularly left wing, but if his ignorance of the explanations of economic success, and conditions of liberty, were to become even more widespread, then once again the world would be endangered by a malevolent agitator with superficial charm or a bewitching messiah with specious ideas. Contra Rothkopf, there is nothing for the West to be ashamed of provided we remain true to basic principles of liberty and the free market. Only its intellectuals cannot see this. And it is one of these, from Harvard, Yale, or Princeton, who is likely to turn out to be the new messiah, not the starving vagrant from, say, Indonesia, whom Rothkopf has penciled in for the role. But he (or she) cannot repeal those economic laws that will continue in their quiet, ultimately benign, way.


Notes

  1. . “After This,” Washington Post, January 20, 2002.
  2. . P.T. Bauer, West African Trade (Cambridge, England: Cambridge University Press, 1954) and Dissent on Development (Cambridge, Mass.: Harvard University Press, 1972).

Contributing editor Norman Barry is professor of social and political theory at the University of Buckingham in the U.K. He is the author of An Introduction to Modern Political Theory (St. Martin’s Press).

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