Tuesday, September 08, 2009

Capitalism is Evil?

Michael Moore contends that Capitalism is Evil.

The fact that he is making a movie, which he will sell to his anti-Capitalist fans, who work for Capitalists (unless they work for the government), and make millions of dollars while denouncing Capitalism is hypocritical at best. Then he argues for democracy, which shows another round of ignorance since the US is based on a Republican system of governance.

I agree with Michael Moore that the bailouts were stupid, but there is a difference in what he is calling Capitalism and what we currently have. Corporate Cronyism and Fascism, which are the underlying themes of his new movie, are not Capitalism at all.

Capitalism allows people to compete to provide the best product or service at a price that people are willing to pay. The capitalist usually earns a small margin of the purchase price as compensation after he/she pays for the cost of production, labor, and other overhead. EVERYONE gets paid before the capitalist. The capitalist takes the risk of uncertain payoff and could lose the entirety of his/her investment of time or money.

Corporatism/Fascism is an offloading of risk or cost onto third parties who had no initial interest. The bank bailouts are a good example of shifting risk from banks that took excessive risk to taxpayers, became insolvent, and were allowed to continue taking bad risks. Now taxpayers are paying higher prices in terms of interest costs and are also paying a higher spread between deposit rates and lending rates. In a capitalist system, the bad banks would have failed, interest rates would have risen to compensate depositors for allowing banks to invest their money in loans, and the banks that did prepare well for the crisis would have bought the assets of failed banks at attractive rates of return.

Healthcare is another great example of corpoate legislation and the cost/risk transfer to third parties, i.e. consumers. Initially, practitioners created a flat rate monthly payment in return for guaranteed service. Politically connected businessmen lobbied for favors that would protect them from competition. Then government got involved through medicare and medicaid. It became unaffordable for new companies to start and compete against big, politically connected, legislatively favored companies or loss-making government entities who have no incentive to return capital to shareholders.

Capitalism is the most moral and ethical mode of providing goods and services that people want and need simply because it involves no force, no coercion, and no theft. Every other mode of good/service delivery, socialism, fascism, communism, despotism, involves some sort of force, coercion, theft, and slavery. Capitalism involves two or more consenting parties transacting for the good of themselves. Sorry Michael Moore, but unless you think people should be subject to the threat of force, which you argue against in your movies, you are completely wrong. Capitalism is inherently good and just. It's just that right now we don't have Capitalism and we need to return to it.

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