Tag Archives: capitalism

Collaboration, Adaptation and Risk: Innovate or Die, by Charles Hugh Smith

Important aspects of free markets and capitalism that are seldom mentioned, and never by their critics. From Charles Hugh Smith at oftwominds.com:

Collaboration, innovation and risk are all intrinsic to adaptation. Without adaptation, every system eventually perishes once conditions change.

One feature of capitalism that is rarely discussed is the premium placed on cooperation and collaboration. The Darwinian aspect of competition is widely accepted (and rued) as capitalism’s dominant force, but cooperation and collaboration are just as intrinsic to capitalism as competition. Subcontractors must cooperate to assemble a product, suppliers must cooperate to deliver the various components, distributors must cooperate to get the products to retail outlets, employees and managers must cooperate to reach the goals of the organization, and local governments and communities must cooperate with enterprises to maintain the local economy.

Darwin’s understanding of natural selection is often misapplied. In its basic form, natural selection simply means that the world is constantly changing, and organisms must adapt or they will expire. The same is true of individuals, enterprises, governments, cultures and economies. Darwin wrote:”It is not the strongest of the species that survives, or the most intelligent, but the ones most adaptable to change.”

Ideas, techniques and processes which are better and more productive than previous versions will spread quickly; those who refuse to adapt them will be overtaken by those who do. These new ideas, techniques and processes trigger changes in society and the economy that are often difficult to predict.

To continue reading: Innovate or Die

It Said That? 12/9/14

From an ad for Texas Capital Bank in The Wall Street Journal, 12/9/14:

TEXAS CAPITALISM

When was the last time you saw an ad from any business, much less a bank, that mentioned the word “capitalism?” Texas Capital Bank was touting its ability to provide capital and business expertise to privately held companies, with a regional bottler as an example. There was no mention of serving the community, giving back, paying forward, donations to charity, or any of the myriad other causes cited by so much advertising that tries to convince us that companies are not in business to make money, but rather to give it away. They act is if they are ashamed of their main purpose and motivation. They then wonder why they have so many critics, and why those critics seem to win all the arguments. If you concede your critics’ moral premises, you’ve already lost the argument.

Straight Line Logic is PROUDLY CAPITALISTIC, making money from a readership large enough to support advertising and readers who buy Robert Gore’s novels. It features ads from third parties who want to reach SLL’s quality readers on a quality site. You’ll see no ads touting SLL’s altruism. SLL stands for mutually beneficial voluntary exchange, and if you’d like to engage in same, and check out Robert Gore’s fiction, buy The Golden Pinnacle or The Gordian Knot. Links are on the blogroll.

Cruelly Unrequited Love, by Robert Gore

George loves Cruella, the bad girl who torments him, and spurns Constance, the good girl who loves him. Finally, Cruella goes too far; George sees her for what she is. He recognizes long-suffering Constance’s devotion and they live happily ever after. This trite story line, a romantic comedy staple, is also an apt description of the long-running, cruelly unrequited ideological love for government of much of the black establishment and its unfortunate followers, and their disdain for the ladder that has enabled so many to climb to success in America.

When Ferguson becomes a memory; after all the public figures and their media cronies have “felt their pain”—ritualistically denouncing violence and rioting, but excusing it as an understandable response to racism and oppression, then moving on to whatever grabs the headlines next—perhaps some blacks will see the charade for what it is. Individualism, entrepreneurialism, and capitalism are more demanding and less forgiving than Constance, but unlike Cruella government, they offer a real chance to climb the ladder, with rewards commensurate with effort and ability. The private economy has its imperfections, including racism, but it, not government, has been the American ticket out of poverty and powerlessness for over two centuries.

The federal government was responsible for ending slavery and the Thirteenth, Fourteenth, and Fifteenth Amendments. These were steps towards legal equality for blacks, although racism still existed de jure, most notably with “separate but equal” Jim Crow laws and barriers to voting. That legal edifice began to crumble with the Supreme Court’s 1954 decision in Brown v. Board of Education of Topeka, which overturned Plessy v. Ferguson, the 1896 Supreme Court decision that had allowed state-sponsored segregation—“separate but equal”—in public education. It took time and force of arms before integrated education became a reality. It took marches, demonstrations, and passage of the Civil Rights Act of 1964 before integration became the legal requirement for the rest of government and in private workplaces and private facilities that served the general public. The Voting Rights Act of 1965 and subsequent amendments went a long way towards ending the disenfranchisement of blacks and other minorities.

No law can end racism in people’s hearts and minds, just as no law can end stupidity. However, if you ask government for more than a fair shot—equality before the law—you’re bound to be disappointed. One of the most unlikely historical transformations is that of the party of the ”Solid South”—solid in its opposition to desegregation and civil rights legislation during the 1940s, 50s, and early 60s—to blacks’ new best friends. It began with Lyndon Johnson, who had been a Democratic stalwart in opposition to, but ultimately signed, the Civil Rights Act. As the old saying goes: “With friends like that, who needs enemies?”

Historically, one of the more racist private sector institutions has been labor unions, a bulwark of the Democratic party. Unions raison d’etre is to raise their members wages above what would prevail in a competitive market. Starting with Franklin Roosevelt, Democrats have endeavored to tilt the field towards unions, most notably with closed shop laws. Attracted by higher-than-market wages, more workers want to join unions than the unions can admit. Protected monopoly unions, like protected monopoly businesses, are freer to discriminate and engage in other irrational practices that would put them at a competitive disadvantage in an open and free market. Numerous studies have confirmed that is indeed what those monopolistic entities have done, admitting and hiring a disproportionately low number of blacks and other minorities.

Labor unions have long championed laws and regulations governing pay, hours, and working conditions, not just for union members, but for the entire workforce. Undoubtedly some of that has been motivated by a sincere desire to improve the lot of all workers. However, it also shifts the relative cost calculation between union members and cheaper nonmembers. If a union member costs $20 an hour and a non-member costs $10 before a regulation, the non-member wage is 50 percent of the union wage. If the government imposes regulations costing $5 an hour, the union wage to an employer becomes $25 an hour. The non-union wage becomes $15 an hour, or 60 percent of the union wage, reducing the relative disparity, favoring union workers at the expense of non-union workers.

You can’t climb the ladder of opportunity if the bottom rungs have been knocked out, and that’s what unions and labor legislation have done to blacks. Jobs and workplace experience, not fancy government training programs, are how workers with little or no skills become higher-skilled, more valuable employees. The unemployment rate for blacks from sixteen- to nineteen-years-old is 32.7 percent. Economist Thomas Sowell notes that the rate for sixteen- and seventeen-year-old black males was just under 10 percent in 1948, lower than for white males of the same age. The reason for the difference? Minimum wage laws: in 1948 the minimum wage was so low it was irrelevant; in 2014 it prices unskilled black youth out of the labor market. Sowell writes that the minimum wage has been “a major social disaster…for the young, the poor and especially young and poor blacks.” (Thomas Sowell, “A Defining Moment,” http://townhall.com/columnists/thomassowell/2012/02/07/a_defining_moment/page/full) Those groups are supposedly of special concern to Democrats, but a substantial majority of the party is currently pressing for a large, job-destroying increase in the minimum wage.

Education is the first rung on the opportunity ladder, but here Democrats are captive to their largest base of support, public education unions. For poor blacks, unable to afford alternatives, education is a government monopoly, and its quality is typical of most monopolies. Many blacks and other minorities have embraced charter schools and voucher plans, anything that represents a step up from dead-end public schools. However, every innovation that might compete with public schools has been fought by the education unions. When it comes to better education for poor blacks or the unions, guess who Democrats throw under the bus? President Obama, our first black president, successful in part because of his gold-plated education, runs true to form, kowtowing to the unions.

Perhaps out of guilty consciences, Democrats push hard for minority preferences in university admissions, government contracting, and private economic activity. Such preferences and largess unfortunately, but inevitably, fuel the belief (held by both beneficiaries and non-beneficiaries) that the beneficiaries advancement stems from the law, not competitive merit. They create a minority subset of the privileged class that owes its good fortune to the government, to the detriment of everyone trying to make it in the private sector who pay for that privilege with their taxes and diminished opportunities. And we all know the way Washington works: some of the largess is returned to the politicians and bureaucrats dispensing it, giving them a vested interest in perpetuating the cycle.

It remains as true today as when supposedly heartless cynics argued against New Deal relief measures: giving people money they haven’t earned creates dependency on the government and destroys work incentives. Stymied at every turn trying to improve their situation, for many blacks the welfare state administers the coup de grâce of perpetual poverty. Money without effort is for the asking. Only the stubbornly auto-blinkered believe that self-respect-destructive formula doesn’t have something to do with the social pathologies—crime, drugs, illegitimacy, and prostitution, et al.—rampant in the slums and ghettos.

While government falls all over itself “helping” blacks, many of them fervently wish that it would perform its first duty and protect them from violence and crime. This is the rage we didn’t hear much about during the Ferguson riots: the rage of those who do not rampage; who want to go to their jobs and live their lives peaceably; whose routines are upended, whose businesses and homes are vandalized and burned, who have friends or family wounded or killed in the mayhem, and who are stuck cleaning up the mess and picking up the pieces.

Take all the blacks unjustly killed by white policemen (even assuming it is all such blacks, which it is not) and it would amount to a tiny fraction of the blacks unjustly killed by other blacks in the pathological hell-holes for which government policies bear a large measure of responsibility for consigning them. The success of so many blacks in all fields of private endeavor; the analyses by black intellectuals like Thomas Sowell of governmental ineptitude and destructiveness, and the failure of government, now headed by a black president, to measurably improve the lives of most blacks, has many of the previously enamored casting a more skeptical eye on the insincere blandishments of the Cruella state. Someday, completely disillusioned, they may reject its phony promises altogether.

THE PERFECT CHRISTMAS GIFT FOR LOVERS OF HISTORY, LIBERTY, FAMILY SAGAS, OR THE INDUSTRIAL REVOLUTION!!!

TGP_photo 2 FB

AMAZON

KINDLE

NOOK

Battery Acid and Toilet Paper by Robert Gore

Conduct a global survey between capitalism and collectivism and the latter wins hands down, even backing out the votes of those suffering in collectivist regimes, who would fear stating their true preference. If capitalism were a brand, its owner would be consulting advertising and public relations mavens, deciding if it should be saved or retired. It has been losing shelf space for years to Ism X and Ism Y; perhaps it’s time to remove it entirely.

Of course, capitalism versus collectivism isn’t Coke versus Pepsi; it’s nectar versus battery acid. Perversely, battery acid is winning. One reason is deceptive labeling. Picture impoverished youth in an impoverished tenement in an impoverished country, desperate to change their situation. The causes of their poverty are standard: an overarching state, capricious laws and regulations, corruption, confiscatory taxation, and a crony-take-all economy. However, tenements are fertile grounds for purveyors of change, and no matter what the rabble-rousers are peddling, they blame capitalism for the intolerable situation, although it’s the departures from capitalism that have caused the misery.

Impressionable youth can be forgiven for believing nonsense, but despite their poverty many of them have cell phones and the internet. It is too much to hope that they will Google the historical record, which clinches the case for capitalism against collectivism, but if they want to know what life is like in a collectivist utopia, one search suggests itself: “surpluses and shortages in Venezuela.”

Befitting an egalitarian paradise, essentials—copies of President Nicolás Maduro’s latest speech—are plentiful, while luxury items like toilet paper are nowhere to be found. (Enemies of the state use the former as a rough substitute for the latter.) Other luxuries—milk, gasoline, electricity, water, diapers, soap, beans, tortillas, hard currencies—are also in short supply. In the US, where store shelves are packed with toilet paper in a variety of textures, plies, softnesses, sizes, and package quantities, any politician whose policies produced a shortage wouldn’t win 5 percent of the vote. Maduro won an election last year. In Venezuela, deprivation has been the winning platform, admiration of US plenitude a sure ticket to electoral oblivion, and good riddance to retrograde running dogs who emigrate to capitalist cesspools.

Would that we could swap such emigrants for our celebrities expressing admiration for Venezuela (Sean Penn), Cuba (Beyoncé, Danny Glover, Michael Moore), North Korea (Dennis Rodman) and China (too numerous to list); or trendy fashionistas jauntily displaying their Mao- and Che-wear and accessories; or the intellectuals without intellects raving about Thomas Piketty’s rewarmed Marxism. So what if collectivism has enslaved and murdered billions; it’s cool! If we can’t work that swap, can we get a show of hands from any proudly capitalistic billionaires volunteering to buy one-way airfare for those enamored of such “cool,” so they can enjoy permanent residency in their admirably progressive bastions?

Adam Smith observed that self-love, rather than benevolence, motivates the butcher, baker, and brewer. We give them money in exchange for steak, bread, and brew. They profit; we eat and drink. An admittedly incomplete survey of major religions and philosophies reveals few words of praise for either self-love or profit and numerous condemnations of both. We are extorted to live for a god or gods, families, tribes, villages, cities, provinces, nations, governments, races, the whole world (of which we are citizens, after all), common good, public interest, or environment, but never for ourselves (Ayn Rand is the outlier)

It can be argued that the weight of all this tradition, piety, and profundity crushes the case for capitalism, with its self-love and profit. However, today’s politicians, celebrities, fashionistas, and intellectuals are not traditional, pious, or profound, so their animus towards capitalism must spring from some other source. While one of the joys of psychology is ascribing mental and emotional pathologies to people you don’t like, the suggestion is now advanced—without malice—that the causes of their loathing are rooted in that branch of science.

As we wanna-be psychologists are wont to do, let’s journey back to childhood. The psycho-educational establishment has declared self-esteem an entitlement, but the fact remains that some kids are smarter, more popular, better looking, and more athletic than others. Capitalism rewards productivity and competitive ability in the marketplace. For those who come up short in those attributes, it’s the playground all over again. They might feel badly about themselves and resent, even envy, those who succeed. With their deficient self-esteems, rather than improving themselves, they might advocate a political philosophy that promises to chop down taller trees.

They might also compensate for their deficiencies by seeking the approval of others. The quickest way to make friends in a bar is to buy the drinks. Politically, one does the same thing by promising goodies. Unlike the bar, you don’t even have to spend your own money; your beneficiaries will applaud as you take it from the productive. Not only are you cool, you get to pose as a humanitarian. A few curmudgeons might be unhappy about funding your popularity, but who cares about them? They’re definitely uncool—selfish, stingy, and mean.

Uncool as capitalism may be, a thought experiment helps make the case that it is the only moral economic system. Imagine a world without violence. Humans have evolved and no longer use it; some sort of invention has stopped it; by whatever stroke of fortune, violence is absent, unimaginable even. If nothing can be taken by force, people have to produce or exchange for what they want, or rely on voluntary charity from others. There is only one system that could exist in such a world—capitalism—indeed it would thrive. The main ingredient of all those other brands is violence; the main ingredients of brand capitalism are freedom, production, and mutually beneficial exchange. Reason enough to leave it up on the shelf. After everything else comes up short, shoppers will one day make the switch.

TGP_photo 2 FB

Amazon

Kindle

Nook

He Said That? 10/12/14

From Hernando de Soto, the founder of the Institute for Liberty and Democracy in Lima, Peru, the author of “The Mystery of Capital” and host of the documentary “Unlikely Heroes of the Arab Spring.”

All too often, the way that Westerners think about the world’s poor closes their eyes to reality on the ground. In the Middle East and North Africa, it turns out, legions of aspiring entrepreneurs are doing everything they can, against long odds, to claw their way into the middle class. And that is true across all of the world’s regions, peoples and faiths. Economic aspirations trump the overhyped “cultural gaps” so often invoked to rationalize inaction.

As countries from China to Peru to Botswana have proved in recent years, poor people can adapt quickly when given a framework of modern rules for property and capital. The trick is to start. We must remember that, throughout history, capitalism has been created by those who were once poor.

I can tell you firsthand that terrorist leaders are very different from their recruits. The radical leaders whom I encountered in Peru were generally murderous, coldblooded, tactical planners with unwavering ambitions to seize control of the government. Most of their sympathizers and would-be recruits, by contrast, would rather have been legal economic agents, creating better lives for themselves and their families.

The best way to end terrorist violence is to make sure the twisted calls of terrorist leaders fall on deaf ears.

“The Capitalist Cure For Terrorism,” The Wall Street Journal, 10/11/12-10/12/12

Capitalism is the best anti-poverty and anti-terrorist program ever invented.

 

The Capitalist Cure for Terrorism by Hernando de Soto

This is a fantastic article and offers the most sensible, and in the long term, the only strategy for fighting terrorism: empower millions of capitalists! It worked in Peru, and the author was instrumental in its success. He argues persuasively that it can work in the Middle East and northern Africa.

From Hernando de Soto, in the Wall Street Journal, 10/11/14

As the U.S. moves into a new theater of the war on terror, it will miss its best chance to beat back Islamic State and other radical groups in the Middle East if it doesn’t deploy a crucial but little-used weapon: an aggressive agenda for economic empowerment. Right now, all we hear about are airstrikes and military maneuvers—which is to be expected when facing down thugs bent on mayhem and destruction.

But if the goal is not only to degrade what President Barack Obama rightly calls Islamic State’s “network of death” but to make it impossible for radical leaders to recruit terrorists in the first place, the West must learn a simple lesson: Economic hope is the only way to win the battle for the constituencies on which terrorist groups feed.

I know something about this. A generation ago, much of Latin America was in turmoil. By 1990, a Marxist-Leninist terrorist organization called Sendero Luminoso, or Shining Path, had seized control of most of my home country, Peru, where I served as the president’s principal adviser. Fashionable opinion held that the people rebelling were the impoverished or underemployed wage slaves of Latin America, that capitalism couldn’t work outside the West and that Latin cultures didn’t really understand market economics.

The conventional wisdom proved to be wrong, however. Reforms in Peru gave indigenous entrepreneurs and farmers control over their assets and a new, more accessible legal framework in which to run businesses, make contracts and borrow—spurring an unprecedented rise in living standards.

Read More

Entomology 101, A Review of David Stockman’s The Great Deformation by Robert Gore

by Robert Gore

David Stockman tells the truth and knows what he is talking about. Either virtue disqualifies him for Washington or the major media, so he blogs (davidstockmanscontracorner.com) and writes books. An insider as President Reagan’s budget director and then a partner in private equity powerhouse Blackstone Group, Stockman now loses friends and influences malcontents from his chosen perch on the outside. Ignore his book, The Great Deformation, The Corruption of Capitalism in America, at your peril. It chronicles the deterioration of the welfare-warfare state and reveals the economic, financial, social, and political horror show America has become. This polemic perforates the media’s stock-market fueled happy talk, war propaganda, and endless trivia that divert attention from our dysfunctional economy and corrupt, bankrupt government. Continue reading