Wasn’t sure I was ever going to post this given it’s length, but the issue needs to be settled. The title is not a paradoxical statement as is often purported.

Definitions are an interesting barrier to proper communication. In making argument, setting the rules by which exchange occurs is critical.  An argument between two parties using words where each user differs in definition only complicates and distracts the direction of the argument. Thus, it is essential that the definition of the issue in argument is clear so that productive conversation is the result.  This course put in question many of the terms used on a daily basis with little thought or effort.  Words like: ‘greed, morality, capitalism, money, duty, and obligation’ are often used with no regard to the bearing or definition of those words.  Where does duty come from? Whose morals do we hold in high regard? What is greed? What is capitalism?

Merriam-Webster defines capitalism as: “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”  While this definition sounds good to many, bad to some, and complicated to others, I would like to substitute my own based on my readings this semester on the subject of capitalism: “an economic system based on freedom of exchange. This freedom of exchange being exemplified by purely voluntary exchange reinforced by a legal system which provides for individual protection from coercion and a court system in which reparations for injustice and damage can be sought fairly.” Capitalism is made out to be a complicated thing with many variances depending on whom you ask.  Many feel that capitalism is a system in which employers are free to exploit their workers. If employees are not forced to work for an employer, then how can they be exploited?  The definition of the word ‘exploit’ is also important. By Merriam-Webster, to exploit means two things: “to make productive use of, or utilize exploiting your talents, or to exploit your opponent’s weakness. 2: to make use of meanly or unfairly for one’s own advantage.”  If we take the word literally, what is wrong with exploiting people? Does an employer force that worker to work? In the modern context, of course the worker isn’t forced to do anything. Then the argument is purported that the worker merely has no choice.  Do talent agents not exploit the abilities and good looks of models and actors? Does a restaurant manager exploit the particular skills waiters and waitresses possess in order to make a profit?  What is unfair? Should unfair be illegal? What allowed for the unfairness? Supposed exigencies begin to get very complicated when the rhetorical argument is disassembled by asking for the definitions of the words used to describe them.  Naively, I do not feel that many people would be opposed to the idea of an economic system where no one is forced to do anything.  When you apply the term capitalism, moods begin to swing.

Coercion is certainly not a new verb in the realm of economics. Adam Smith, Friedrich Hayek, Milton Friedman, all cover in great detail and with no uncertain words the topic of coercion with regard to the state.  “Coercive redistribution and diversity in the interests of its constituent groups are essential features of the modern welfare state. Disagreement over perceived consequences of social policy creates the demand for publicly justified “objective” evaluations. If there were no coercion, redistribution and intervention would be voluntary activities and there would be no need for public justification for voluntary trades.” −James J. Heckman (winner of the 2000 Nobel Prize in Economics) Heckman makes a concise argument of both the political and economic problem with state –coerced—intervention into the market.  Simply, Heckman argues that the market is the best representative of charity and welfare initiatives as the interests of those aims are as diverse as someone like Hayek would certainly espouse.  Furthering the ideals of the market in fostering a growing economy, Adam Smith is famously quoted on the topic of self-interest: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”  Adam Smith touches on another important topic within the realm of capitalism. Echoing John Locke to an extent, Smith argues that self-interest is what drives the economy. Regardless of what the state does, generally speaking, consumers and suppliers will behave in their best interests.  All of the aforementioned thinkers would agree that self-interest is purely natural and is good for a productive economy.

Coercion is the tool government encapsulates. To secure freedom there must be a mechanism which protects individual liberties, property, and life. Without this there would be a perverse free market as criminals would rule supreme. By the lack of a governing body, individuals could coerce, intimidate, or oppress other individuals by the use of force. To be free a certain level of freedom is sacrificed to form a governing body which secures basic freedoms.  By this we give up the freedom to do as we please, so that others may not do as they please to us.  The golden rule is nearly the foundation of simple government: “Do unto others as you would have them do unto you.”  The ideas of freedom, equality, justice, etc. are all very popular rhetorically; however, politics and convictions often corrupt those seemingly simple ideas and make them wholly something else. Many politicians in Washington, including our own Isakson and Chambliss, speak highly of free markets yet are unwavering in their support for agriculture subsidies, government assisted loan programs, and other planned market initiatives.   This is where the waters are really muddied as the idea of freedom is twisted.  When it comes to the major parties in the U.S., both essentially want their own versions of socialism. The disparity lies only in what is to be socialized within the realm of each party’s agenda.   Neither party wants to touch the entitlement programs, which are socialist by their very nature. Both parties are reluctant to address the absurd tax code, and neither party is largely for freeing any market.  Getting rid of near-century-old public policy is a daunting task. The U.S. government has been involved in many forms of market manipulation since Alexander Hamilton’s Report on Manufacturing during George Washington’s presidency.  This begs the question: what is the role of government?

Should the government facilitate an economy in which the businesses and other enterprise entities are coerced to a social or moral calling?  If we believe in the democratic ideal will people not vote with their wallets and their feet? If we don’t like a business practice why do we voluntary give them our labor and/or capital?  A business which performs bad labor practices wouldn’t be operating for very long if the workers quit working as is their right to do so. Many espouse in conversation about the idea of the ‘greater good’ and ‘social responsibility.’ The conversation has really reminded me of the perverse nature of the general population of the alternate America that Ayn Rand wrote about in her book, Atlas Shrugged.

We must ask ourselves: What are morals? What is money? What is society? Is there a role for the government to uphold society? And just as James Madison frames his argument in Federalist #51, I ask: who is this angel whom will govern us so justly if it is the government whom is given the task to preserve our well-being? In organizing an economic system, what style of economy supports the ideals of the people? Is it the one that praises profit, a mixed system like in the United States, or one that abhors profit? This is a very simple way to categorize the only possible ways to organize an economy.  To some, the idea of a literal free-market with no taxes on business and as little regulation as possible is a daunting idea where many on either side of the political spectrum begin to waver on their opinion. Where does this obligation to support the laborer or society come from? A system based on voluntary exchange is the key to economic success and equality under the law. It is not reasonable to expect equal outcomes under any economic system. No government institution can guarantee equality of intellect, equality of physical capability, equal outcomes, or equality of opportunity.  History has been absolutely clear in proving that the freest societies have the largest amount of capital formation and highest standard of living.  I think most people would agree forcing anyone to do anything is wrong. However in practice this opinion begins to falter. A question was asked several times this semester as to whether coercion is necessary if the majority of people believed that there was an ideal to be provided for.  If the welfare of the public were the interest of the individual or a business how much of their interest would be left to the production of a good or service which individuals will voluntarily purchase?

The recent financial crisis has certainly reinvigorated the discussion of capitalism and its future.  Again, we are back to the definition of capitalism and whether the term is subjective or objective in its practice. Do banks have an obligation to help those who cannot afford their homes? Was that written into the legal contract in mortgages which both parties signed? Is there a legal system in which individuals can petition the government for compensation against fraud or harm from both the public and private sector? Is this legal system just and equitable? It is too easy to quake the foundations of simple arguments against the current system even as imperfect as it may be.

What is wrong with profit? Consumers were not forced to get home loans over the last few decades, but banks were certainly forced to loan to consumers they otherwise would not have loaned to.  Often forgotten in argument about the financial collapse is the Community Reinvestment Act of 1977. Banks were forced to loan to low income families and minorities regardless of income or ability to pay.  There wasn’t much voluntary about the banks/lenders loaning to people. They were forced to by the government. Did financial institutions steal that money? Or did the government force them to engage in actions they would not have otherwise?  The end result was loss for the home buyer, loss for investors in the financial institutions, small town banks, and losses for the taxpayers who ultimately bailed out big banks. Under a free market system, if people didn’t like the idea of profits, or at least one particular company making too much profit they could just quit buying that good or service.

If an individual agreed to pay X dollars per month to an institution for payment to another individual for a property, how does that institution forgive the individual for not paying the statement? How long do you think a financial institution of any sort would last under a system where the borrowing of money is not considered a serious committal action?  If you loaned a friend $500 and agreed they would pay it back in 6 weeks, how do you feel when they don’t pay you back? Are they your friend anymore? In what regard do you hold them thereafter? Does this not upset your own financial standing? A logical analogy is all it takes to level the argument to a digestible level.

My vision and the vision of many free market economists is an economy constructed on this idea of voluntary exchange. I work for you because we agree to a wage, and you pay me because if you don’t I take you to a court of law and sue the ever-living out of you. Governments cost money. One of the sources of much disagreement is the funding of government. What is the most equitable way to tax an economy?  Is taxation to be used for a social agenda, or used to provide capital for the legitimate functions of government by obtaining that capital by the least economically impacting manner? I would propose the latter. Funding government historically requires an executive authority to coerce payment from actors in the economy.  The most efficient tax is a head tax: a lump sum taken from each household. Alternatively and more realistic, is a consumption tax which would tax purchases of new goods to fund the government. Each is radically different from the current progressive behemoth the United States currently operates. Inequitable taxes based in a social agenda only serve to distort the cost of government and create a permanent voting block of free riders.

Some would argue that the government, businesses, and society at large have a responsibility for the general population.  Why? The general population is physically able, aren’t they? By providing the defense of property rights and a legal system in which anyone can seek reparations from fraud either privately or publicly the “wage earners” are provided for, in my opinion. But some would propose that businesses need regulation and laws under which they should have to adhere in order to promote the socioeconomic welfare. Why?  If a company treats its workers unfairly the public has plenty of venues in which to learn of this and ultimately would quit buying goods produced by firms with undesirable practices. It’s hard to do business when consumers quit buying your product or service. Vote with your wallet. We vote each and every day on which corporations and businesses we deem vital and essential by buying their products and services. No one forces us to buy a coffee for the sake of the public good. We buy a coffee from the multi-billion dollar industry because we value it. Is coffee necessary? Why doesn’t the public at large subsist on rice, beans, and water until every mouth on the planet has enough food? We could certainly do that and eventually the surplus capital could feed many more people. This all points back to my earlier argument on self-interest.

This simple idea of government is sometimes misunderstood by the mainstream political parties. On Friday a local candidate running for State Senate district 68 called Libertarians anarchists. In arguing for smaller government, the ‘small government’ party of the Republicans can manage to call the other ‘small government’ party, anarchists? Some ideas are so far outside of the mainstream that many completely dismiss logical argument for good governance. I deem a government necessary for defense and securing individual liberty.  “Individuals are the smallest group of minorities on earth, you cannot believe in minority rights unless you first and foremost believe in individual rights,” as Ayn Rand is famously quoted.  Libertarians especially have never espoused that there is no need government. Libertarians and other free market minded thinkers simply argue that government has a few key functions: defense of life, property, and a legal system in which laws are executed justly and consumers and/or factions can litigate against fraud and abuse from both the public and private sectors. That’s it. What else does the government need to do? Why does the government need to facilitate trade between private individuals? Do governments operate the boats between the U.S. and France?  No, corporations do.  People agree to voluntary exchange of capital for goods and services at their own volition. Even if we suddenly didn’t have government people wouldn’t quit working as if the sky turned dark and fire fell from  heaven.

Why do we tax greedy businesses? And what is greed? Merriam-Webster defines greed as:   “a selfish and excessive desire for more of something (as money) than is needed.”  At least four words in the definition are subjective descriptions that construct an even more subjective word.  Businesses are generally still allowed to set prices according to what is marketable.  If three similar industries were operating under the same taxes they are all going to pass that cost on to the consumer because each will still want to make a profit and each will compete for the lowest price in order to attract more customers than the competing firm. Where do businesses get the money with which they pay taxes? Much of the tax levied on the business is borne by the diminished potential wage growth of the laborer, and the increased cost of the consumer item or service.  Sure, some of the cost will be borne by the business, dependent upon the elasticity of the good or service, but not much usually. It is merely politically popular to convince constituents that the government has now leveraged those greedy businesses with taxes even though prices will rise and wage growth will fall. Regardless of the tax code a business will compete in the market the best they can with an obligation to its shareholders and investors to produce wealth.

Many arguments are made against capital formation on the part of businesses. How do you stop them from passing on the tax burden? And what obligation does anyone have to create a job for anyone? There is no moral obligation to help anyone else, especially at your own expense. The problem with arguing about the morality of the labor market is that morality is ultimately subjective. Profits, money, and greed are good things, contrary to popular opinion. This takes us back again to defining greed. What is greed anyway? Was Mao not greedy? Was Hitler not greedy? Bill Gates? Was he greedy?  Is political greed any different than economic greed?  Greed only describes what one desires. Greed is not necessarily a precursor to wealth or success.  We aren’t naturally interested in the welfare of others. Some may call this greed, but greed comes in many forms: political, economic, emotional, and so on. Self-interest is a positive thing. We are all self-interested as a core element of our being.

Where are the angels who shall govern men? Mao, Hitler, Otto von Bismarck, Stalin, Gorbachev, Lenin, are all examples of well-meaning individuals who had bad results. Humans are inherently flawed and therefore are flawed at dictating the lives of others; an action which I consider to be immoral. Bill Gates has given away vast portions of his wealth, and has promised to give away it all before he dies. Should he have been forced by the government to give it away? Would that money be better used by investing in domestic and foreign businesses? I think so. I’m sure Gates’ money was thoughtfully given away but I think it would have been much better for him to grow his business and provide capital and opportunity for more people. Many on the left allege that selfishness is wrong and exploitative. It must be understood that charity is often an act of suppressing personal guilt which is a result of achievement. Being charitable makes people feel good about themselves. Is donating to charity not selfish in a sense? How is selfishness harmful? Does the market not have to voluntarily provide the capital to support greed and selfishness? Greed is not a word which encapsulates what one possesses, but merely what one desires. If wealth is acquired by no act of coercion it is not immoral. The definition of greed is a word which everyone needs to reconsider. My point here is that altruism, or the social welfare, by nature isn’t something that can be coerced by a government through transfer payments. The sacrificial nature is wholly negated as coercion becomes the driving force of the welfare state.  If the public good is so popular, why must we coerce anyone to direct initiative on behalf of the ‘public good?’

Whenever unemployment is high, the wealthy get blamed for shipping jobs overseas or downsizing to make their businesses more profitable in a time of economic retraction.  So a perfect economy always has full employment? Wages grow by X% per year? How do you define perfection or define this ideal economy? In reality the market is going to do what it was intended eventually. When intervening in the economy — as governments have been doing for centuries — ultimately the market catches up and makes us pay for inefficiency. Directing capital where it would not have otherwise gone is neither efficient nor moral. I purport that businesses have no obligations to society, period. And if they did, how do we enforce these obligations? If businesses at large felt as if there were an obligation why is coercion necessary?  Are businesses not merely representative of a collection of individuals working together for economic action? Again, humans are fundamentally self-interested; businesses and corporations are merely an organized collection of individuals doing business for their own self-interest. This is a good thing and this is how the world works and always has worked. The market always exists. It is not possible to completely control the day to day actions or predict the future or ideal day to day actions of the world at large. Planned economies can thwart the intentions and actions of private initiatives for only so long. Eventually the fabled invisible hand will correct the market as we did in the 1970’s after decades of central planning, 4 years ago with the collapse of the extra-propped up financial and housing markets, and will see again and again as long as the government has reckless protectionist Keynesian policies.

Individuals will support themselves and, in the event they can’t, their families, friends, churches, and non-profits will exist to fill that vacuum. Correlation doesn’t necessarily define causation, but the American government has been fighting poverty in a big way for the better part of a century and we still have record poverty, increasing numbers of people on food stamps, record low homeownership, and a rising wealth gap between the oldest and youngest generations. Intervention into economic and social well-being has proven only to be destructive and perverse in portraying an accurate sense of what poverty and economic success really mean.  Provide for the defense and equal protection under the law to all individuals. All I’m saying is that these public welfare clauses that are trumpeted are excellent and good for humanity but should not be actions which are coerced by the government. If people want to feed the hungry they will — and do–.

It is not the government’s job to invest in the people of the United States of America, as politicians argue with great frequency. Removing capital from the productive sector of the economic pie and injecting it into another does not grow the size of the economic pie. It is free enterprise that has provided the most prosperity in the most efficient manner possible. America is a prime example; we went from being a colony of protestant and Irish rejects, to becoming the most powerful nation in the world in the matter of a hundred years. Britain lost that top spot by its unhealthy combination of global imperialism and socialist policies that weakened the country to the state it is in today. It is a natural fact that some people will work harder than others. Sure there are natural talents, gifts, and genetics that set people apart.  But barring any mental or physical disability anyone can make it to the top.  There isn’t room for everyone at the top, but there are only so many people willing to work hard enough to get to the top.  Some government program isn’t going to make you the next Bill Gates, LeBron James, or the next real estate mogul.  Did the government help Apple produce the IPod? Did the government create the multi-billion dollar industry of Hollywood and other entertainment? Did the government permit Wal-Mart or Home Depot to make one of the most successful capitalist businesses in the world?  All of the things that make this country great come from the people who live in this country, not its governing body. And there is the big difference: either believe in freedom and economic liberty, or believe that the world is a cruel place without a government program to alleviate your ailments. “In any compromise between food and poison, it is only death that can win. In any compromise between good and evil, it is only evil that can profit.” – Ayn Rand.