All Commentary
Monday, September 1, 2008

Book Reviews – September 2008

The Politically Incorrect Guide to Capitalism

by Robert P. Murphy
Regnery • 2007 • 194 pages • $19.95
Reviewed by George C. Leef

Once Regnery had begun its “Politically Incorrect Guide” series, it was inevitable that the publisher would eventually get around to a book on capitalism. The books in the series have been broadside attacks on the mistaken views that Americans have on such topics as American history and the Constitution—views that reflect the prevalent hostility to individual liberty and strictly limited government. Robert Murphy’s contribution is a superlative effort, debunking a large number of common myths about capitalism and explaining to the reader why market processes always work better than government coercion.

Murphy’s 16 chapters cover the waterfront. He begins by providing the reader with a straightforward definition of his subject. “Capitalism,” he writes, “is the system in which people are free to use their private property without outside interference.” That freedom allows individuals to choose what to do (and not do) with their lives: what jobs they want, what goods and services they prefer, how much to save, where to invest, and so on. All alternative systems, he points out, depend on coercion, with people in authority dictating some or most aspects of other people’s lives to them.That’s the way to get people’s thinking on the right track!

Murphy makes clear that capitalism isn’t just one of many competing economic systems, but is unique in that it’s the only one that works without coercion. This is a key point, and I wish that Murphy had developed it more fully. But in a short book some sacrifices must be made.

Page after page debunks erroneous ideas that are commonly held about capitalism. For example, it is widely believed that child labor was a black mark against capitalism, showing its cruelty. Surely government intervention, even though coercive, was a good thing, since it ended the terrible exploitation of children—right? Murphy shows that this idea is mistaken, writing that capitalism’s “vast expansion in production allowed more and more families the luxury of keeping their children out of the labor force.” He then points out that during the Industrial Revolution, infant mortality fell dramatically and life expectancy for everyone rose.

Murphy never concedes an inch to capitalism’s opponents. You’ll look in vain for even a single sentence beginning like this: “Although capitalism is generally beneficial, we have to keep in mind that. . . .” The book never apologizes or “leaks.”

Here are just a few controversies in which many writers would backpedal. Aren’t athletes and corporate CEOs paid too much compared to, say, teachers? Murphy carefully explains why the great differences in compensation under capitalism are both necessary and justified.

Don’t labor unions help the worker to get more of what he deserves by offsetting the “bargaining power” of business owners? Where some writers would agree, but then add that unions sometimes go too far, Murphy explains that the apparent union gains for some workers come at the expense of others.

Isn’t it a good thing that we have antidiscrimination laws to keep capitalists from shutting out minorities from a chance at good jobs, housing, and so forth? Murphy stands firm against antidiscrimination laws, which necessarily involve coercive interference with freedom of contract. He explains that capitalists have a strong incentive to hire the most competent workers they can and pay them wages set by competition.

The book also includes many attacks on the supposedly benign motives of those who advocate government economic intervention. For instance, Murphy shows that the so-called “prevailing wage” law passed by Congress was motivated by nothing other than a desire by white construction workers and their political allies to prevent black workers from underbidding them on lucrative government construction projects. Bravo! Most people are willing to take at face value government pronouncements on the alleged need to interfere with capitalism. Murphy does his best to get his readers to look skeptically at government actions and dig for the real reasons behind them.

Another feature of the book I like is its numerous references to other books that have made the case for capitalism. Readers are encouraged to expand their understanding with the inclusion of little “A book you’re not supposed to read” features. For example, when discussing the fallacies regarding international trade, Murphy recommends Douglas Irwin’s Free Trade Under Fire, and when disabusing readers of the myths about the Great Depression, he recommends Jim Powell’s FDR’s Folly. That’s more effective than a bibliography tucked away at the end.

Murphy’s book is an excellent choice if you want to introduce a young person to the case for capitalism. It’s thorough, clearly written, and enjoyable to read. Veterans of the battle for freedom will also benefit from Murphy’s many sharp insights. I hope we will be hearing more from him soon.

George Leef is book review editor of The Freeman.

The Shock of the Old: Technology and Global History Since 1900

by David Edgerton
Oxford University Press • 2006 • 288 pages • $26.00
Reviewed by David K. Levine

The Shock of the Old chronicles the recent history of technology. It is not about famous inventions, but about technologies that have proven useful over time—a good meme that I looked forward to learning about. The book is easy reading; who would think that learning about corrugated iron could be fun? And it nicely highlights the importance of several such lesser-known technologies.

Edgerton’s other theme, the disappearance and reappearance of technologies such as condoms, oxen, and ship-breaking, is not news to economists—it has been decades since Paul Samuelson elegantly conceded this point to Joan Robinson—but may be news to the general reader of history.

On the negative side, the book lacks a strong theme: it is a compendium of facts with no analysis or conclusion. This isn’t just the reaction of an economist to a historian. Nobody would accuse historian William McNeill of failing to analyze. What, for example, are we to make of the fact that each year 100 million bicycles are produced, but only 40 million automobiles? On what scale does one bicycle equal one automobile? What if I said “more children’s toy cars are produced than automobiles”? What would that signify? Insofar as the book has a theme, it is that old technologies still matter. But so what?

More important is the discussion of “Creole” technologies; that is, technologies that are adapted to local circumstances. Examples in the automobile industry include the Ambassador in India, and the VW Beetle in Mexico and Brazil (Edgerton seems to have missed the Ford Falcon in Argentina), produced long after they were supplanted elsewhere. The other leading example given is the use of small-scale production in 1950–70s China.

What would analysis show about these examples? They were all bad things and all driven by trade restrictions—testaments to what happens in the absence of free markets. It isn’t that people in Brazil wanted to buy decades-old automobiles or couldn’t afford nice new Japanese models. Their government simply didn’t allow them to buy the nice new ones. Edgerton does not find this worthy of notice. Indeed, he seems to put the private sector on the same level as government when it comes to foolish adoption of technology. Yet the only evidence of private-sector failure (against numerous examples of public-sector failure) is this: “Following the privatisation of British Railways in the 1990s, existing maintenance regimes were disrupted, with the consequences that essential maintenance procedures were no longer followed, resulting in serious accidents.” Interestingly, while Edgerton says that “the present does not seem radically innovative,” it took me less than 30 seconds using that present innovation, the Internet, to establish that this is not true.

The book places a great deal of emphasis on the importance of maintenance of capital investments. It claims that large centralized organizations are needed to oversee maintenance, then goes on to provide overwhelming evidence that centralized governments do a poor job of providing maintenance and that decentralized free markets do a good job. (Except, of course, for the railway non-fact above.)

Edgerton then examines how imitation “with low R&D expenditures” is generally more effective than true innovation. This is a point frequently made in the economics literature. Again, the role of government is not well discussed: The conclusion from the fact that the USSR spent a lot of money on R&D and got very little useful innovation seems obvious.

Free-market competition is the key to innovation. Edgerton does a fine job of examining how competition between nations has led to substantial innovation. He also has a good discussion of autarky that, sadly, is not well tied in to the rest of the book. For some reason, that discussion is followed by a section on hydrogenation that seems pointless and out of place.

For a historian, Edgerton’s knowledge of history is suspect. After reading his discussion of the use of assault rifles for the mass murder of Vietnamese villagers, I wondered whether he had ever read Julius Caesar’s account of his conquest of Gaul. Parts of the book seem to have more to do with proving the author’s political correctness than with innovation. There is a lengthy aside on the war in Iraq, including a brief discussion of torture. Yet it is only in the twentieth century that torture has become socially disapproved of, and the “innovations” in torture seem more oriented toward concealment than effectiveness. I seriously doubt that modern torture is a technological improvement over the medieval period. Similarly, following a long and quite interesting examination of meatpacking, the discussion turns to genocide.

The Shock of the Old has some interesting things to say, but don’t make it the only book you read on technology and innovation.

David Levine is John H. Biggs Distinguished Professor, Department of Economics, Washington University in St. Louis.

Illiberal Justice: John Rawls vs. the American Political Tradition

by David Lewis Schaefer
University of Missouri Press • 2007 • 367 pages •
$49.95 cloth; $24.95 paperback
Reviewed by Tibor R. Machan

Illiberal Justice is a book that administers a philosophical drubbing to the late Harvard political theorist John Rawls. Rawls’s egalitarian ideas, especially that inequalities can only be justified if they can be shown to help the poorest people, have been cited as justification for much of the redistributionism of the American left. For that reason, an attack on his thinking is interesting.

David Lewis Schaefer, professor of political science at Holy Cross, gives us a serious but flawed critique of Rawls. It essentially offers up political theorist Harry Jaffa’s version of the American political tradition against the intuitionist house of cards that Rawls built in his career of defending his highly abstract idea of egalitarian justice.

Schaefer deploys a powerful array of serious, indeed fatal, objections to Rawls’s project (and by implication against the egalitarian ethos it sustains). He demonstrates inconsistencies in Rawls’s position, as when he shows that the educational policies Rawls favored could just as easily retard the well-being of millions as benefit them. Schaefer observes that “there is no way of knowing in advance whether the genetically least advantaged (‘the less intelligent’) will profit most by having more spent on their education rather than on the training of the more talented whose professional and economic success can ultimately enhance the well-being of their less able peers.”

That’s a point well taken, and if one wishes to see Rawls’s justice-as-fairness thesis torn to shreds good and hard, one could do much worse than read Illiberal Justice. But one must be on guard throughout not to become lured into the opposite line of thinking—only here and there made explicit by Schaefer—one that makes the American political tradition into a vehicle for conservative “soulcraft” (to use George Will’s phrase).

Underneath all the complaints about Rawls’s bad arguments and ideas we find a stern, even angry, insistence that governments need to keep us on the straight and narrow and that we must not succumb to the appeal of a strict reading of the Founders. Schaefer means a libertarian reading—one that denies that it is the task of government to deal with whatever moral problems exist in society. While he often contrasts Rawls’s highly abstract contractual analysis of justice and what kind of polity it suggests with the Founders’ Lockean natural-rights approach, Schaefer doesn’t give us a good idea of how he reads Locke or the Declaration of Independence. What is having “unalienable” rights to our lives and liberties supposed to mean if majorities and elite representatives may play fast and loose with them?

For me, the wildest feature of Illiberal Justice is the author’s insistence that Rawls is a libertarian. I suppose this is a ploy to fend off any suggestion that what is wrong with Rawls is that he fails to appreciate and defend the classical-liberal school of political thought, a school Straussians such as Schaefer support with reluctance. He pursues this line through thick and thin, and it seems to be motivated by the desire to rebut an interpretation of the American Founders as libertarians. Heaven help us if we were to take seriously the Declaration’s idea that everyone has an unalienable, individual right to life, liberty, and the pursuit of happiness! That would bar legislation against gays, something that appears to stand first and foremost on Schaefer’s public-policy agenda.

At one point Schaefer lashes out at the Supreme Court for daring to “rewrite the Bill of Rights into a vehicle of moral libertarianism.” His ignorance is showing here since libertarianism is not a moral but a political doctrine, concerned with the principles that govern human interaction and the administrators of law and public policy, not a system of standards distinguishing right from wrong in all spheres.

It’s also worth noting that Schaefer repeatedly links Rawls with Robert Nozick, despite the fact that the two were adversaries on numerous crucial fronts, especially on the scope of equality in community life.

There are many fine nuggets of criticism in this book. I wish Schaefer had contained himself and stuck to his announced project to “challenge the claims that [Rawls’s work] is a proper model of philosophical inquiry and that its effects on the American constitutional order promise to be salutary.” While Illiberal Justice performs a solid job of demolition as far as Rawls’s efforts are concerned, the more positive parts of the book are seriously wanting.

Tibor Machan holds the R.C. Hoiles Chair in Business Ethics and Free Enterprise at Chapman University and is the author of, among other books, Individuals and Their Rights.

Leaving Women Behind: Modern Families, Outdated Laws

by Kimberly A. Strassel, Celeste Colgan, and John C. Goodman
Rowman & Littlefield • 2007 • 215 pages •
$16.95 paperback
Reviewed by Karen Y. Palasek

Leaving Women Behind: Modern Families, Outdated Laws makes a convincing case that tax and labor law has been disadvantageous to women—especially married women and married women with children—as compared to men. The authors identify a host of specific areas in which this is true, but some readers may think the accompanying remedies rely too much on government and not enough on the market.

The book takes as its premise that working women, particularly working women with children, need federal relief from outdated laws that favor single-income families and penalize working mothers—laws such as the 1938 Fair Labor Standards Act that creates what the authors call “the 40-hour straightjacket.” The law simply does not reflect current labor-market realities. The authors cite the significant increase in labor-force participation by working women with children since 1950. Unfortunately, to their detriment, the legal environment has remained static.

The argument that existing law penalizes women with families is persuasively developed in light of the treatment of child-care expenses, rigidities in the employment contract, and a host of other concerns. The authors also bring to light the hefty regulatory onus attached to at-home work, including the tax treatment of savings and investment, retirement funds, Social Security and survivors’ benefits, and health-care coverage.

In examining the problems facing working women, the book points out that labor regulations have been written with full-time workers and single-earner households in mind. Removing obstacles to part-time work (which would benefit many women, but also some men) will require regulatory change. The authors suggest, for example, allowing employers to offer wage compensation in lieu of mandatory (and possibly redundant) fringe benefits like health coverage. That would improve the attractiveness of part-time work. The need for such deregulation to improve flexibility in labor negotiations is an important theme of the book.

For retired, divorced, or widowed women, the current tax treatment of retirement and spousal benefits is especially problematic. The chief issues involve low returns for Social Security to the second (usually female) income earner, the loss of Social Security benefits for some divorced women, and the fact that tax incentives cause workers to underinsure for old age and overinsure for the present. (This last problem is not the exclusive province of working women.) Those problems reinforce the book’s main argument that current law favors single-earner households and should be changed for both fairness and efficiency.

The remedies proposed in this volume would erase many of the inequities faced by women. But equally important—and this is a point not emphasized in the text—these tax and regulatory changes would usually benefit the entire family as well.

Leaving Women Behind presents each chapter as a stand-alone summary of a single issue, followed by the authors’ suggested reforms. The chapter on “Women as Workers,” for example, discusses part-time work and flexible schedules. Those discussions do a fairly good job of identifying problems and possible solutions, but fail to identify many important or likely sources of opposition to reform. The book would have been strengthened if the authors had spent some time considering the likely objections to reform from labor unions and taxing authorities, and how coalitions might be built to overcome them.

I have a few other reservations. The authors don’t specify whether their reforms would require employers to offer flexible work and benefits schedules, or whether these would be a matter of market choice and competitive employment behavior. I wish that they had stated that all their reforms should be to permit increased flexibility, but not mandate any changes. Also, because family demands cause women to enter and exit the work force far more frequently than do men, another flexibility reform would call for privatized unemployment insurance (UI), tailored to avoid the benefits penalty now facing working women. Not dealing with the problems created by our mandatory UI system is a significant oversight. In fact, the authors advocate changes to make it easier for part-time workers to qualify for unemployment benefits, but we ought to be moving away from the redistributive UI system and into voluntary mechanisms to handle income interruptions.

Despite recognizable obstacles to implementing its various reform plans, Leaving Women Behind takes an optimistic view. Government regulation has made a terrible mess of the labor market, and working women are the main (but certainly not the only) losers. The book presents an informative and appealing, if incomplete, case for a deregulatory agenda.

Karen Palasek is director of academic programs at the John Locke Foundation.

  • George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.