The Morality of Capitalism
2012-10-27 · Guest: Tom G. Palmer (Cato Institute) · 50:34
the moral foundations of capitalism
Bob Zadek is joined by Dr. Tom G. Palmer of the Cato Institute to discuss the moral foundations of capitalism. They explore how free markets rely on mutual respect and property rights, contrasting capitalism with the “cronyism” and survival-based selfishness found in statist and socialist systems.
Topics: Capitalism, Morality, Greed, Self-Interest, Crony Capitalism, Property Rights, Rule of Law, Federal Reserve, Philanthropy, Environmentalism
Speakers:
- Bob Zadek – Host
- Tom G. Palmer – Senior Fellow at the Cato Institute and Executive VP for International Programs at the Atlas Economic Research Foundation
- Caller (David) – Listener from San Francisco
- Caller (Mark) – Listener from Berkeley
Introduction [00:00]
Bob Zadek: It’s Sunday at noon. Welcome to the Bob Zadek Show, heard every Sunday at noon at NewsTalk 910. Thanks so much for listening. We are the leading libertarian talk radio show in the Bay Area and around the country. 800-345-5639 is the way to share your views with us. We welcome all views. Follow us on television now, CMCM-TV/live-community, if you want the visual libertarian point of view.
We have an election coming up in a few days and while, sure, we have President Obama and Governor Romney running for the presidency, but the subtext, the subtext of this election is a referendum not on the Obama presidency, but most commentators will agree, it’s on the degree to which government should be involved in the lives of Americans. That is, it is a referendum on big government, indeed on government effectiveness in total.
It’s a referendum on, to a substantial degree, on capitalism. This is capitalism running for office. Now, that’s perhaps a bit extreme because Governor Romney is hardly the free-market capitalist we would like to see running for office, but for sure Obama is not the free-market capitalist we would like to see. So to some degree, this is a referendum or an election on capitalism. Therefore, it is appropriate, indeed it is essential for us to understand capitalism. Capitalism has been denigrated quite a bit in this campaign, in this election. Capitalism is running for office, if you will, and I thought it really helpful to explore: what is capitalism? What is the morality of capitalism? To understand capitalism is to understand both the American economy, the American ethos, and the American morality.
And to help me explore this important topic nine days before election, I’m happy to welcome Tom Palmer to the show. Tom is a senior fellow with the Cato Institute, he’s a director at Cato University, and he’s executive vice president for international programs at the Atlas Economic Research Foundation. The Atlas Economic Research Foundation is a non-profit, non-partisan organization which takes no political positions, but which has been created to promote free-market capitalism around the world, and it does an effective job of it. Now Tom, thanks so much for joining me. I know you’re quite busy and we sure are glad to have you on the show.
Tom G. Palmer: Well, thank you, Bob. It’s a pleasure to be here with you.
The Morality of Economic Systems [03:47]
Bob Zadek: Now Tom, we’re talking about, among other things, the morality of capitalism. And about a half hour before airtime, I got a phone call from a regular listener to the show who is not a libertarian, who is a bit progressive—in fact, quite a bit progressive. And he’s a smart fellow, and he called to question the topic. He said, more or less, “Capitalism is an economic system. How could it have a morality? How could one discuss the morality of an economic system? Isn’t an economic system by its very term amoral?”
Tom G. Palmer: Oh, I thoroughly disagree. Think about it from this perspective. If there’s something you’d like to have, whether it’s a house or a car or just a meal, there are a lot of different ways you could go about getting it. One way would just be to go up to the front door of the house with a shotgun and kick the other people out and say, “I’m moving in.” You could do that, forcing another person to cook a meal for you. You could just steal things from other people.
But we don’t do that in a market economy because we have respect for other people. There’s a fundamental moral set of constraints about our behavior so that if you in fact go up to the owner of the house, you say, “That’s a great-looking house. I’d love to live in this house. I’m willing to pay you more money than you value it,” and the person sells it to you, that’s a moral transaction. And it’s based on the respect for the rights of the proper owners. That permeates the economic system of capitalism. It is based on respect for other people. It also tends to reinforce some very important moral virtues.
Think about it from this perspective. A businessperson has to think when selling something: “What would the customer like? What if I were the customer? What sort of things would I like?” And that generates a very different mentality from those found under communism or fascism or other systems in which people frankly don’t really care about other people. Capitalism puts us into a frame of mind where we really have to care about what other people would like. It instantiates and realizes, in effect, the Golden Rule—or at least the Silver Rule, which is to say: don’t do to other people what you wouldn’t want them to do to you. So I think capitalism is permeated with positive moral values.
Bob Zadek: So capitalism really has as a byproduct, if not a governing principle, that unless you pay attention to the needs and the wants of other people, you will not economically succeed. It virtually dictates that in order to succeed, as compared to other systems where—and we can run the comparison—a statist system where, or a socialist system or a fascist system, where to be successful requires other skills, but certainly not concern about the marketplace, concern about others.
Tom G. Palmer: Oh, I think that’s exactly right. And it’s not an accident also that historically it was the cradles of what became capitalism that generated movements for abolition of slavery and for even humanitarian treatment of animals. Think about England, the great anti-slavery movement that emerged out of that country that campaigned and crusaded around the world to free people who didn’t have any immediate connection with them, but people were just horrified that other people were in chains. And the English nation mobilized itself really to eradicate this monstrous principle that had stained all of human history. Similarly, who are the people in the world who are most mad, if you will, about animals and about taking care of animals? The Humane Society—that emerges in England. It changes human character to have to think about other people. We even begin to think about people who aren’t connected to us, people who just suffer in very, very distant places and far from us, and even about animals. I think that capitalism has a very, very positive impact on human character.
Greed and Selfishness [08:10]
Bob Zadek: Now, the rap, of course—those people who favor less free market, a less of a free market environment, always use the word, the two words, which are really have to be explored, and the two words are, and they’re related of course: selfish and greed. And the rap, those people who would argue for a different economic system, they complain that a capitalist system invites or encourages both greed and selfishness, concern about oneself. And that’s endemic to a capitalist or free-market system and less endemic in a socialist or statist system.
Tom G. Palmer: Now, there’s absolutely no evidence for that. And I’ve spent time in socialist countries, in the Soviet Union and Eastern Bloc countries, and trust me, you want to find the most selfish, greedy people in the world? That was where you found them. The only way to survive under those regimes was to have the sharpest elbows to push ahead of the line because under regimes of shortages and rationing, if you don’t have those sharp elbows, if you don’t trample over other people, you die. Your children don’t get the food because you were not aggressive enough in the rationing line. That generates real selfishness and greed.
So this is a totally phony charge in my opinion. There’s no evidence that capitalism enforces greed. This is nonsense. People who make this claim, I always ask, “Say, you’ve just made a claim. How would I know if it’s true or not?” If it’s true by definition, well then you haven’t said anything interesting. But if you really want to show me that there’s more or less greed here or there, let’s go look at it. And what we find is that societies that have high degrees of capitalism, protection of property rights, have much more benevolence, much more charity, private voluntary systems to other people. Go to the socialist countries of the world. Private charity is almost unknown, and the state is callous and hardened against people who don’t have political pull.
So the evidence does not support that claim. What they’re doing is they’re picking out a very important small point and distorting it. And that small point is: yes, people under all systems act often, frequently, out of their self-interest. Okay, I got it. But what’s different about capitalism is in order for me to advance my self-interest, I have to pay attention to yours. Under socialism, it doesn’t matter. If I have power, I’m in the ruling party, I’m in the government, I’m a powerful bureaucrat, your interest is of little interest to me. I’ll just dictate what I want to get. But under capitalism, if I want to advance my interest, I have to ask: how would I induce another person voluntarily to trade with me? So it is true that of course capitalism recognizes people do have self-interest, but they have self-interest under every conceivable system. It’s only under capitalism that self-interest is harnessed, is connected to the interest of other people as well. It’s a win-win relationship rather than a win-lose relationship, which is what characterizes relationships of coercion and power.
Bob Zadek: This is Bob Zadek. I’m talking to Tom Palmer. We are talking about the morality of capitalism and, by implication, the immorality of statism or socialism. 800-345-5639. Back in 90 short seconds.
[Break]
Caller: Cronyism and Bait-and-Switch [13:00]
Bob Zadek: Welcome back to the Bob Zadek Show, every Sunday at noon at NewsTalk 910. We are the leading libertarian talk radio show in the Bay Area and around the country. Thanks so much for listening. 800-345-5639 if you wish to join the conversation. My guest today, Tom Palmer. The subject: the morality of capitalism. Now Tom, I am in the cradle of statism, the cradle of socialism, the San Francisco Bay Area. So not surprising, already the phones are lighting up. And not surprising, my first caller, Tom, for us is David from San Francisco. David, welcome to the show and thanks so much for listening.
Caller (David): Yeah, morning. Actually afternoon now, isn’t it? You know, I was interested in this just as a simple phrase: “bait and switch.” Bait and switch government. So I, you know, as if you look at the founding fathers—Thomas Jefferson, Thomas Paine, Ben Franklin—for his efforts, the idea that it’s easy to get people inspired, but to actually get a government in place that’s going to be able to perform and to perform up to the standards that people want is a very tough thing.
And it’s interesting, you know, you’re talking about socialism, capitalism, communism, and there’s the mom-and-apple-pie phrasing, but then there’s the bait and switch: the cronyism, the con artists, the embezzling, the nepotism, the idea that people put their buddies in and get them special favors as opposed to looking out for everybody. So to call something communism, to call it capitalism, to call it socialism when it’s really a bait and switch…
Bob Zadek: Well, David, don’t—Tom, I’m sure would love to jump in and he will in about a moment—but don’t confuse capitalism with crony capitalism. And all of the phrases you used—nepotism and favors—are all a perversion of capitalism, not capitalism. Tom, go ahead.
Tom G. Palmer: Yeah, I think that the caller’s raised a very, very important point and it needs to be amplified. And that is that government-subsidized bailouts for big banks, billions for Archer Daniels Midland and giant agribusiness companies—that’s certainly not free-market capitalism. That is government interventionism that takes money out of one person’s pocket and puts it into another pocket, and it does so with the force of law. That is to say, with a gun pointed at you if you decide you don’t want to do it.
Free market exchange has no gun pointed at you. If I don’t want to buy that book, if I don’t want to eat at that restaurant, I don’t have to. When government gets involved, though, it comes along and says, “No, no, no, you are going to subsidize this company. You’re going to buy this product and you have no say in the matter. We’re going to force you into it.” So absolutely, there needs to be a very, very clear distinction.
I would mention that I have a book out which you can actually download for free as a PDF, zero price, called The Morality of Capitalism. And the first part of it is a very clear statement of what the caller has just said: that that is a system of privilege and plunder, of cronyism, and that needs to be distinguished from free-market capitalism. The best cure for cronyism is free markets. Namely, get rid of all of those privileges, get rid of the subsidies, get rid of the bailouts. They’re despicable and shameful and fundamentally immoral.
Caller (David): Yeah, any chance to add in just a phrase about the money? You know, when I hear talk about doing libertarianism and basically we’re using the paper, the money that is supposed to represent all of us in the nation. And when somebody can control all of that paper, they’re controlling all of our reputations. And so the idea that money is supposed to represent our reputation—if you’re a good talk show host, if you’re a good ditch digger, then what you amass should represent your reputation. But if somebody steals it, if somebody devalues it, if somebody latches a new interest rate on it, then all of a sudden your reputation can be diminished in a giant slander. So I’m very interested in the idea that civilization has to move forward with all of us working together in concert. And the idea that our reputations can be ruined and everybody’s efforts be diminished is very serious.
The Federal Reserve and Debasement [18:09]
Bob Zadek: Tom, you want to go ahead on reputation?
Tom G. Palmer: Well, just if I’ve understood the point correctly, debasement of the currency through the Federal Reserve is a very serious issue. The Federal Reserve is a state bank. It’s not an institution of the market. It’s a creation of the state. And what we are seeing is a debasement of our currency. And that is an important issue and it is a part of the system of cronyism—special favors that are handed out through state control of the monetary system, through the Federal Reserve, to the cronies, to the buddies who keep politicians in power. And it comes at the expense of all the rest of us in society. I strongly favor the movement to audit the Fed, and what I would really like to do is get rid of the Federal Reserve altogether and not have government privileges for this or that bank or financial institution, and have real free-market money.
Bob Zadek: And I should point out, as most of my listeners know, the Fed is a relatively recent invention—the “Monster of Jekyll Island,” to borrow a title from a book. For the period of time when America enjoyed extraordinary economic growth leading up until 1913, there was no Fed, and somehow we muddled along just fine. So the Fed, of course, was an artificial institution created in great secrecy and without a lot of public debate, and perhaps filling a need that never existed. But that, of course, is a topic for another show.
And just one more comment. David, our last caller, made reference to the founders. And there’s a very—Jefferson, who did not really demonstrate an understanding of economics, did offer a wonderful quote that I’d just like to read. He observed that “agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise.” So Thomas Jefferson knew full well the importance of government leaving business alone, that government paying attention to the very modest needs that government had to fill and leave business alone.
Property Rights and Rule of Law [20:41]
Bob Zadek: Now Tom, on the morality of capitalism. Capitalism, as you use the term, presupposes a legal system, a moral system, as well as a cultural, social system, as well as an economic system. If you could expand on that a bit. What is—and we talked about the morality a bit—but the legal and the social system that all of us take for granted are part and parcel of the capitalist system. I wonder if you could explain.
Tom G. Palmer: Well, I mean, the first point is to have an understanding as a legal foundation in rule of law, in the idea of having property rights that are well-defined, that are legally secured, and that people can transact at relatively low cost. If you go to poor countries around the world that don’t benefit from free-market capitalism, what you find systematically is property rights are not well-defined, so people spend a lot of their time fighting over them, whether it’s water or land or anything else. They’re not defended; the legal system or the police don’t work, and in fact typically the government is the biggest robber and predator around. And then finally, the legal systems are so inefficient, corrupt, and badly managed that doing normal business is very, very difficult because you can’t enforce contracts, it’s very cumbersome to make deals, and so on. So that legal system is an absolutely necessary foundation for free-market capitalism.
But there’s one other element as well that characterizes the enormous increase in wealth and prosperity for average people that characterizes the modern world. And that is a culture that embraces innovation, one that is, as I like to put it, open to the future. One of the features of free-market capitalism that is most notable from a sociological perspective is the constant change, the introduction of new products and new ways of doing business, new kinds of organizations. Joseph Schumpeter, the great Austrian economist, called this “creative destruction.” He said people often are looking at capitalism and business firms as though it’s just administering some kind of static set of institutions to delivering a product in a static way, when in fact the real question is how it’s creating and destroying institutions, products, and ways of life.
And that has so dramatically changed our lives. Just think about your grandparents. Would they have recognized the things we have in the modern world? Cell phones and people tweeting and sending text messages? Go back just a few generations—electric lights were unknown. People still did their reading by whale oil, of all things. The world has changed so dramatically, so rapidly, unlike the hundred thousand years of human life before. These last 200 years have seen more change than all the change in previous millennia.
Bob Zadek: And that change—it’s so profound that people aren’t aware of it. The change is the direct result of a free-market system. That capitalism has encouraged and nurtured that change. So capitalism is not simply a way to acquire property and get rich—and more about rich when we come back—but capitalism is a system that, more than any other system, more than any other political or economic system, improves the well-being of the planet. And when we come back, I’d like to discuss with Tom—Tom mentioned the importance of private property. And you will see just in the past four years how government has compromised the rule of law and the system of property, and why I fear so much the erosion of capitalism. This is Bob Zadek, 800-345-5639. Back in 90 short seconds.
[Break]
The GM Bailout and Erosion of Rights [26:11]
Bob Zadek: Welcome back to the Bob Zadek Show, every Sunday at noon at NewsTalk 910. Call Bob now, 1-800-345-5639. Welcome back to the Bob Zadek Show, every Sunday at noon at NewsTalk 910. Thanks so much for listening. We are the leading libertarian talk radio show in the Bay Area and around the country. 800-345-5639 if you wish to join the conversation. I’m talking today with Tom Palmer. We are talking about the morality of capitalism.
Before the break, Tom mentioned the importance of the rule of law, the importance of the respect for private property, and how those are the cornerstones of a free-market capitalist society. Now, you don’t have to go back very far, only months, to observe the ways that the last four years have seen the erosion of the rule of law, the erosion of property rights, how—and with it, the loss of free-market capitalism, which has improved the quality of our life.
Think back to the GM bailout, which Tom mentioned before the break. In the GM bailout, we saw the government stepping all over the rights of creditors of General Motors, and the government taking charge of the bankruptcy case and going and destroying the property rights of the creditors of General Motors to favor another constituency, which was the UAW and the other unions who would otherwise lose from the GM bankruptcy. The government threw aside the vested property rights of creditors in favor of their pals in Congress.
Think of the EPA, who is given broad powers of confiscation of private property if you are not treating wetlands or alleged wetlands the way that the government proposes. So we see this creep of the government stepping all over property rights, and as you destroy property rights, you call into question the whole economic system. So Tom, it is a constant threat, that is, this cronyism and the erosion of property rights and the violation of the rule of law by government itself.
Tom G. Palmer: Oh, I think that’s quite clear. And the General Motors case was, in my opinion, an example of egregious corruption—authentic, real corruption. They overrode settled and established bankruptcy laws, they eliminated the rights of the creditors to that company in order to hand out goodies to their buddies. And it was, in my opinion, real cronyism and really shameful.
We see this happening all over in sometimes more subtle forms. Look at the bailouts to big companies who are cozy with the White House or with members of Congress. And this happens on both sides of the aisle, by the way. It’s not just Democrats, it’s not just Republicans. The Solyndra case—the president’s good buddy, who was his primary fundraiser, ended up getting over $600 million in loan guarantees. That doesn’t cost anything, does it? Except when the company goes broke and bankrupt. And this was pushed through in order that the vice president could be photographed cutting ribbons at the factory, despite the fact that a lot of people said, “Whoa, whoa, whoa, hold on, wait a minute, this company doesn’t look like it’s going to survive.” “Don’t worry, we’re going to put up the money anyway.” That’s just grotesque in my opinion. Those are violations of fundamental property rights and they’re violations of legal equality before the law. It’s cronyism and it stinks.
Defining Greed [30:51]
Bob Zadek: And Tom, an important point is that in the media, in the media, the association or the indictment of capitalism is done by taking shots at “billionaires,” “corporate CEOs,” “Wall Street bankers.” And in fact, there was an article—in preparing for the show, I just went onto Google and the Google News page, so I didn’t drill down. It was like the top page. It was an article, a blog by a guy who I don’t know named Paul Farrell, and he writes for something called MarketWatch. And I just—it was about capitalism, I just randomly found it.
And Tom, it was laughable. And I’m going to read a quote. There were many quotes that I can read, but one quote in Paul Farrell, who is indicting capitalism and calls it “Capitalism’s Frankenstein Economics.” But his thesis doesn’t matter. But just listen to this one line. Paul Farrell, who has written quite a bit in the media, he says, quote, “Billionaires, corporate CEOs, Wall Street bankers, and other capitalists focus narrowly on closing stock prices, quarterly earnings, and annual bonuses.” Look who he picks as representative of capitalist America: billionaires, corporate CEOs, and Wall Street bankers. Who could be less representative of capitalist America than that crowd?
Tom G. Palmer: Well, that’s hard to say. Undoubtedly there are some Wall Street bankers who are pro-free market and might be a handful of billionaires. There’s lots of billionaires who are anti-market as well. We certainly are aware of the huge amounts of money that are put into the struggle against capitalism by very, very, very… [audio cuts out]
Bob Zadek: I’m sorry, we’ve lost Tom. Tom, go ahead, we lost you for a second.
Tom G. Palmer: Okay, can you hear me?
Bob Zadek: Yes, now we can hear you, thank you.
Tom G. Palmer: I don’t want to be… [audio cuts out]
Bob Zadek: We’re losing Tom, I’m sorry. Tom, we’ll reconnect with you. The point, if we can just reconnect with Tom, the point that I wanted to make on the show is that the fact that somebody is rich doesn’t mean they are a to-be-criticized capitalist. I was reading an article just the other day about Al Gore. When he left government, he was worth, I think the phrase was two or five million dollars, and now, using his influence, he’s now worth a hundred million dollars. That’s hardly representative of capitalist America. Also, Wall Street bankers—we’re going to have a banker on the show next week—Wall Street bankers are one of the most protected-by-government classes in America, and they hardly are representative of capitalism in its purest sense.
Also, in the same article, Paul Farrell, in describing again capitalists, he talks about “most capitalists are,” listen to this, “alpha males, aggressive, short-term thinkers.” And then he says, “while America’s next generation of leaders must have a historical perspective,” whatever that even means. So we have this caricature of American capitalists, this caricature of capitalists who are thieving and gaming the system, and while the caricature is real, it is the caricature of crony capitalists, not pure capitalists.
So the capitalism depicted in the media is so different than the capitalism which Tom described. Also, before the break, I played a clip, the Gordon Gekko clip about greed. And whenever anybody talks about capitalism, they always precede it by the phrase “greedy capitalists.” The word greed is a fascinating word. I started with, I got curious and I started with the definition of greed from nothing other than the Merriam-Webster Student Dictionary. And greed is, dictionary definition, “a selfish desire for food, money, or possessions,” now get this, “over and above one’s needs.” In other words, anybody, according to Merriam-Webster, anybody who wants to acquire anything above your needs—now needs to me means what you need to survive—everybody on the planet naturally seeks to acquire more than they “need.” To be sure, every listener out there wants to acquire as much possessions as they can, not merely what they need for survival. So greed really gets a bad rap because all of us are greedy. If any of us have ever sold anything on eBay or sold a used car on Craigslist, we have done so in a greedy fashion, and that is we want as much as we can possibly get, not enough to satisfy our needs, we want as much as we can. So if any of you out there ever have used the word greedy in a pejorative sense, you are indicting yourself.
Now we have Tom back. Tom, sorry for the glitch on the show.
Tom G. Palmer: That might be due to the hurricane that’s hitting us out here, so hard to tell, but it’s really windy and I wouldn’t be surprised if some lines have gone down.
Bob Zadek: Now Tom, in the media, as I said when we were trying to reconnect with you, the word capitalist is almost always preceded by the word greed. And certainly in a socialist system, in any other system, those in power exhibit the most crass form of greed, and not only that, but their greed manifests itself in interfering with the legitimate property rights of others, whereas in a capitalist system, if you are quote “greedy,” and aren’t we all greedy, we seek to acquire property while respecting the property rights of others and through the lawful exchange of goods and services. So greed is a motivating force for the common good, not a force which prejudices anybody.
Tom G. Palmer: I would take a little bit of issue with that in terms of how people use greed. They normally mean grabbing more than your fair share, pushing someone out of line—that’s greedy behavior. And that’s not what capitalism is about, and I’m sure you’re not in fact like that and I hope I’m not. In fact, what we try to do in a market economy is make money, we make trade-offs when we do so.
But you know, a lot of people earn money in order to be philanthropic. Think about the great philanthropists. They could never have endowed libraries and universities and created great charities if they hadn’t earned a lot of money in the process. So in a lot of cases where people are earning money in order to be able to give it away—think about a big investor like George Soros. He’s someone who’s very critical of capitalism, he’s a very successful investor in financial markets, and he gives away hundreds of millions of dollars. And often these are very helpful to people. He was the one who built the water treatment plant during this terrible war in Sarajevo so people could get clean water without having to go down to the river and get murdered by crazy snipers. That was a wonderful thing he did. He gave a hundred million dollars of his own money to pay Soviet nuclear physicists to do pure research rather than go to North Korea or Libya or Iran and work for crazy people to make bombs. That was pure philanthropy. He wouldn’t have been able to do it if he hadn’t made a lot of money in the process. So I wouldn’t characterize that as greed.
Bob Zadek: I agree. So although the definition would—the difference being not the desire for money, but the methods you use to acquire it. This is Bob Zadek, I’m talking to Tom Palmer, we are talking about the morality of capitalism. 800-345-5639. We’re going to be joined by Albert Einstein when we return. 90 seconds.
[Break]
Capitalism as a Democratic System [38:46]
Bob Zadek: Welcome back to the Bob Zadek Show, every Sunday at noon at NewsTalk 910. Thanks so much for listening. 800-345-5639 is the way to join the conversation. We are talking about the morality of capitalism. How capitalism as an economic system has at its moral cornerstone the respect for the individual, the respect for private property, and it is the most small-d democratic system, democratic economic system that there could ever be because everyone in a capitalist society gets to vote every minute of every day.
You vote with your dollars and you vote with your labors. You vote what products are good and what products are bad. You vote how you choose to spend your day, how you choose to earn your money. You get to vote by determining the value of your services in the hopes that somebody else will agree with you. It is the only system which is small-d democratic.
And just by way of comparison, to take one simple comparison, we have in a—and we have, we are very far from pure free-market capitalism in America today, and moving farther away, hopefully the trend will stop, but just to pick one example which is very much in the news. Through government intervention and through government regulation, government gets to dictate the kind of car you get to buy. So if you want, if you want to buy a car that is powerful and uses a lot of gasoline, and you don’t care about how much it will cost you, that’s how you choose to spend your money—you don’t get that choice. You get government telling you the size car to buy, the qualities the car is going to have. Government will interfere with the market. And of course, from last year’s or the year before show, government will even tell you what kind of a lightbulb you can use in the bathroom fixture in your home.
As opposed to a free-market system, in a free-market system, people get to vote with their dollars, and the vote is tallied every day, and it is a brutal election every single day. And the success of products, the success of businesses rise or fall profoundly if they can win the election, the election with dollars. So the capitalist system relies upon the collective wisdom of 300 million Americans voting every day, versus the collective non-wisdom of a few government officials—not a few, unfortunately, but government officials in Washington and in statehouses who get to vote for you on what products are desirable and what products are good. So capitalism is, Tom, the most small-d democratic system because it respects the wisdom and the freedom of individuals. Tom?
Tom G. Palmer: Yes, sir. Well, I think that that’s exactly right, that it recognizes a simple principle: certainly people are generally better judges of what’s good for them than other people are. Now of course there’s sometimes exceptions to that—I might know what’s better for you, but I have to convince you of that. The overwhelming bulk of the cases, people know better what’s good for them than some other person with power knows.
And when someone has the power to say, “No, I know what’s good for you,” trust me, they always find ways to do what’s really good for them at your expense. Because it turns out they’re self-interested too. Government bureaucrats and politicians always tell us, “Oh no, no, no, we only labor for the public weal.” Well, I tell you, I live in Washington, D.C. You want to find the highest per capita income counties in the United States? Come here. This is where they live. People who are very, very wealthy because they get gigantic government salaries, all the lobbyists who come to Washington, D.C. to be part of the feeding frenzy—they’re not generally really interested in the well-being of other people. Or if they are, it’s way down the list and their own well-being comes first.
Bob Zadek: And what’s fascinating is—it’s not often said quite this way—but I believe that a valid role of government is the providing of objective information. Now, and what I mean by that is, in a free-market society, as Tom said, a businessperson or a provider of goods or services will hope to convince you that their product is perfect for you. In a government-driven statist system, the government will tell you what’s best for you and then go in the airways and try to convince you that they made the right decision. But you don’t have a choice. They’re convincing you after they have dictated, whereas in a free-market system, you get to make the decision, not to have somebody else make the decision for you. So government can provide the information, but they can’t take away the choice. Now, who out there wouldn’t want to have as much by way of choice, informed choice, but choice as possible?
Caller: Externalities and the Environment [45:13]
Bob Zadek: Now, we have another caller, Tom. We have a caller again from Berkeley. Mark in Berkeley, welcome to the show.
Caller (Mark): Hi, Mark from Berkeley here. I just have one comment and I’ll take your responses, if you have any, on the air. And that is what’s good for you may not be good for anyone else—in fact, it may be deleterious to others and particularly the environment. So I think your argument, while it has an appeal, it is, I’ll call it anti-social and potentially very harmful to society.
Bob Zadek: Tom, I know you’d love to answer this, go ahead.
Tom G. Palmer: Well, that’s a very good point. I think that the comment is putting something very, very eloquently. Something may be good for me, doesn’t follow it’s good for other people. And that’s exactly right. That’s one reason why we don’t want one-size-fits-all socialism—that’s what you get, everybody gets the same thing. Under free-market capitalism, I get to choose what I think is better for me, and other people get to choose what’s better for them. I don’t smoke pot, other people choose to, they ought to be able to do that. Of course, it’s illegal because government intervenes into that particular market.
But there’s also an additional issue which the caller alluded to, and that is that there may be spillover effects of behavior of people that you do something pursuing your own interest and it hurts somebody else. Pollution is the classic example of that. Tom, you there?
Tom G. Palmer: Yep, I’m here. I think that was your caller.
Bob Zadek: Yeah, it was. Go ahead, Tom, finish up.
Tom G. Palmer: Okay. And that’s what—that is why we need the rule of law and why we need property rights. If I go and pollute someone else’s front yard or their water supply or poison them in the air, I’ve harmed them just the same as if I’d shot a bullet at the person. And that should be illegal. That’s what property rights is about—is protecting people against being harmed. I have a right not to be poisoned by other people—that’s my property right. When government allows pollution, allows harm to other people, it’s because they’re not enforcing the property rights. That is government’s fundamental responsibility—is to protect our property and our lives.
Bob Zadek: And Tom, the—one last comment, we’re running out of time, but the environment is an important issue and often raised by those people who are opposed to a pure free-market system. What’s the response to those environmentalists who say, “Well, it’s not quite destroying the property rights of your neighbor, but you are destroying the environmental health of the planet,” so there isn’t any identifiable person whose property rights you are interfering with?
Tom G. Palmer: Well, presumably there’s someone’s property rights are being interfered with or it should not be an issue. There’s a great source of information, a website called PERC.org. It’s a wonderful group, they are environmentalists and they are focusing on property rights solutions to environmental problems. That’s really the key.
I should make one other quick point. Some of these issues are addressed in the book I did, The Morality of Capitalism, and people can order it for free. They go to AtlasNetwork.org/morality. You can download a copy as a PDF or you can order a zero-priced copy to be mailed to you. And then think about these issues because, you know, people of goodwill may disagree on things, and that’s why we should have honest and serious discussion about these matters and not demonize each other, which is what typically is a substitute for actual conversation or discussion. So these are important issues.
Bob Zadek: I invite everybody out there who is listening to the show to download Tom’s book and read it. It is highly informative, highly objective, the arguments are persuasively made, the point of view is put out there. It is an essential part of your own personal library. Tom, thanks so much for joining me on the show. I know you’re really busy, you just came back from a multi-country trip over in Eastern Europe. So thank you so much for giving us the time.
Tom G. Palmer: Africa and Russia. It was a great pleasure. Thanks so much for having me on, Bob.
Bob Zadek: Thanks a lot. And to my listeners, next week we’re going to have back yet again Tom McGragh, president and CEO of First National Bank of Daly City. We will discuss banking in America: big banks, small banks, are banks the bastions of free enterprise? Tom will be in the studio. Thanks so much for listening. Next week, an hour and a half show—we get another half hour from the station. I’ll see you in a week.