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April 2017 Policy Study, Number 17-8


A Commentary on American Public Policy


Part 1



There is a major battle raging in this nation today to which most of us pay scant attention.  So little heed do we grant that many, if not most, fail even to perceive the battle.  We know this nation was birthed with an economy in a capitalistic tradition.  We know that it prospered beyond all others by employing this economic system based on capitalism.


Paramount in the understanding of the economic system was the acknowledgement of an unquestioned right to private property and the guarantee of the same.  We refer to ourselves as a capitalistic country.  Most of us are reasonably satisfied with the return for our efforts capitalism produces.  When we are not, we are free to explore new opportunities which might better reward us.  We also compare our returns against those received by peoples toiling in non-capitalist countries, after which we generally conclude that while capitalism may not be perfect, it seems to provide a better return than any other economic system devised so far.  We retire in the evening with a sense that all is well, unconcerned for its continuation and believing it can be no other way.


There are other economic systems to be sure.  There are also those in this nation who would move us toward those systems, and they are working diligently to do just that.  And there are others whose actions contribute to this move who do so unknowingly.  Sometimes they do so actively, such as when they offer support for a progressive income tax, and sometimes passively, as when they quietly acquiesce to the same.  Karl Marx called this unknowing support of socialism “bourgeois socialism.”


Discussion in this portion of this essay will center on capitalism and socialism, which is currently the strongest challenger.  Before we go on to define, or more probably describe, the attributes of each system in particular, we need to take a short look at economics in general.


Economics has been described as the “dismal science.”  Indeed, from what I can see of how many economists approach the subject, the moniker may be somewhat justified; but it doesn’t have to be.  We won’t get all hung up on a whole bunch of technical economic terms in this discussion because, quite frankly, I don’t know very many.


My personal method of investigating economics is a bit roundabout:  through the prism of human behavior.  I am an extremely average individual, and this characteristic can be put to good use.  Question:  how will I react to a given economic stimulus?  To be of value, the answer must be brutally truthful.  It cannot be based upon any high-minded or noble qualities I would like to think I possess and would act upon no matter the consequences, but rather upon how I will act in reality when the chips are down and the going gets rough.  As much as one would like to believe in the noble qualities of man, and he has many, the truth is that human nature fairly dictates that by far the vast majority of us, under trying circumstances, will act in our own best self-interest and that of our immediate family.  To proceed on a contradictory premise is to proceed on a false premise.


The upshot is this:  if I am average, and if I am brutally honest with myself, then it is possible to determine how I will behave given a specific economic stimulus.  From this determination, it is further possible to develop a reasonable sense of how the majority of our fellow men will behave as well.  The real trick is not in accepting the premise, but in being harshly honest with ourselves.  If we are, our understanding of the respective economic systems will benefit immensely.


Before we get to the main discussion, the author would like to make it clear that this essay is in no way meant to impugn the motives of those who hold socialistic beliefs.  It is to show that, for all the good intentions of those who hold that belief, socialism and its inevitable successor, communism, produce results that are quite the contrary of those intended, the reason being that the principles of Socialism are at war with normal human behavior.  Whether you approve of what you observe in normal human behavior is not the question.  Normal human behavior is what it is.  It is the reality.


Socialism is determined to make everyone altruistic and egalitarian when the natural tendencies of human behavior are toward self-preservation and, yes, selfishness. Therein resides the conflict.  The socialist sets out to correct this situation through the enforcement of public policy designed to overcome this “minor” stumbling block.  When these policies are less than effective in producing the desired results, as too many experiments around the globe have shown they will be, sterner measures are invoked.  These policies become more and more severe until they must be imposed by force of arms and fenced borders.


Capitalism, by contrast, accepts human behavior as it is, warts and all.  The most common and succinct definition of capitalism is “supply and demand.”  If we are to look at capitalism through the prism of human behavior, however, we need to adjust our perspective.  My personal preference for a useful definition of capitalism is, “Capitalism is human desire (greed, if you wish) counterbalanced by economic reality (fear of loss).”  The most telling difference between socialism and capitalism is that in the former an exchange of objects of value is governed by force in that the exchange may well be involuntary, while in the latter any exchange is truly voluntary and based on an assumption, by both parties to the exchange, that said exchange is an advantage to both.  The proof of this assumption is that if one or both of them perceived the exchange to be a disadvantage, they would simply refrain from making it.


In fact, capitalism exploits natural human behavior, surprisingly enough, to the benefit of all.  Listen to what Adam Smith had to say in his now classic tome, The Wealth of Nations:


As every individual, therefore, endeavours (sic) as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours (sic) to render the annual revenue of the society as great as he can.  He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it.  By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.  Nor is it always the worse for the society that it was no part of it.  By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.  (Emphasis added).  (Book IV, Chapter II).




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