Capitalism will outlast terrorism

Reprinted from Cascade Policy Institute’s Fall 2002 Cascade Update newsletter)

One year after the September 11th attack on America, I recalled a 1993 speech that Steve Forbes of Forbes magazine gave at Hillsdale College in Michigan. It’s even more relevant today as we confront an enemy who rejects the very economic system that helps make America great, and the world free.

Forbes defined a market economy as “the only truly moral system of exchange. It encourages individuals to freely devote their energies and impulses to peaceful pursuits, to the satisfaction of others’ wants and needs, and to constructive action for the welfare of all. The basis of capitalism is not greed. You don’t see misers creating Walmarts and Microsofts.” (Terrorists learned to fly jetliners; they could never build them).

Forbes continued, “The market is people. All of us. We decide what to do and what not to do, where to shop and where not to shop, what to buy and what not to buy. So when central planners trash ‘market forces,’ they are really trashing us.”

“Letting individuals make their own decisions is what capitalism is all about. When people are free to make their own decisions, they have a stake in their economy, and when they have a stake in their economy, they have a stake in serving others, and when they have a stake in serving others, they have a stake in fighting for freedom.”

“Capitalism is the real enemy of tyranny. It stands not for accumulated wealth or greed but for human innovation, imagination, and risk-taking. It cannot be measured in mathematical models or quantified in statistical terms, which is why central planners and politicians always underestimate it.”

The terrorists also underestimate capitalism. The Twin Towers were full of capitalists, men and women who made their livings in large part by satisfying the wants and needs of others around the world.

The market is color blind, gender blind, and religion blind. That may be one reason the terrorists hate it. Isolated scandals such as Enron and WorldCom aside, the market is an expression of human nature at its best. The terrorists’ constricted worldview represents human nature at its worst. Men and women crave freedom, and they will fight for freedom above all other political goals. Terrorism may be with us for years, but capitalism and freedom will be with us forever.


Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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  • 3H

    “It stands not for accumulated wealth or greed but for human innovation…”

    Says the man who inherited his wealth and his access to position and power from his father.  

  • valley person

    Freedom must be why Chinese capitalism is so successful. 

    • Steve Buckstein

      Good point, valley.  Think how much more successful Chinese capitalism could be if they had freedom too.

      • valley person

        My point was to expose irony Steve. China is clearly not free, yet has the world’s most successful capitalism measured by sustained growth over the last 20 years. That suggests political freedom and capitalism are not at all linked. 

        I’d add that Sweden is quite free politically, but mostly socialistic economically, again illustrating that capitalism and freedom are not strongly linked in the other direction either.

        Sweden is also quite wealthy, indicating that a mostly socialist economy is not necessarily a poor one.

      • valley person

        My point was to expose irony Steve. China is clearly not free, yet has the world’s most successful capitalism measured by sustained growth over the last 20 years. That suggests political freedom and capitalism are not at all linked. 

        I’d add that Sweden is quite free politically, but mostly socialistic economically, again illustrating that capitalism and freedom are not strongly linked in the other direction either.

        Sweden is also quite wealthy, indicating that a mostly socialist economy is not necessarily a poor one.

        • valley person, let me expose some irony too. The cases of China and Sweden undermine your position, that is if you grasped a detailed knowledge of their economic history.You are revealing a strong grasp of stereotypes about China
          and Sweden that have developed over decades, the kind one gets from limiting
          oneself to cable-news-level analysis. You don’t seem to grasp the realities
          that these countries face today.

           

          Regarding China, it is important to remember that even a
          dead cat, when dropped from a high enough distance will bounce. China has had high
          RATES of growth, because it had dug itself into such a hole following Maoist
          central planning. I have lived in China. I speak Mandarin, and can assure you
          China remains a poor country. A sad turn of events for a fine people, but their
          dramatic turnaround reflects a movement in the right direction, not a
          counterfactual to the fruits of a free society.

           

          In 2011, China’s economy is on the brink of a major economic
          downturn. 2011 is to China what 1988 was to Japan. Thankfully they are not
          facing Maoist famine this time. They are facing their first post-socialist
          recession.

           

          To understand this, I suppose you need to understand something
          about the business cycle. Recessions are caused by central banks to fight
          inflation. China is currently experiencing 6% inflation according to government
          statistics. That means it’s probably 10%. China does not have an independent
          central bank. Chinese policy makers are losing sleep at night as they come to
          realize the gravity of the choice ahead of them. They can either allow
          hyper-inflation to spiral (the Juan Peron solution) or they can throw the
          economy into a deep recession (the Paul Volker solution). Either outcome is
          likely to fan the flame of social unrest, ultimately ending the Party’s
          monopoly on power.

           

          Sweden faced this same dilemma in 1990, but it had an
          independent central bank that would not allow inflation to persist. Its GDP
          contracted suddenly by 5% and failed to rebound. Under the weight of far higher
          unemployment than we would accept here in the US, the SPD government of Ingvar Carlsson fell
          in 1991. The Moderate Party came to power in October 4, 1991. Its prime
          minister Carl Bildt,
          governed Sweden with all the confidence and swagger of Chris Christie in New
          Jersey. He did not care if he would be reelected. Indeed his goal was to enact
          reforms that would be so radical they would guarantee he was voted out of
          office when they faced elections in 1994. By the end of his one term the Sweden
          you are referring to ceased to exist.

           

          Sweden
          is now, in many ways more free than the United States. While its entitlement
          spending remains slightly more generous that ours, it has full school
          choice in k-12 education and a privatized post office, two things unthinkable
          here, but represent the Sweden of today, not the Sweden of 1970. The fact that
          you don’t know details like this makes me wonder where you get your information.

          • valley person

            Thanks for the tutorial, though I fail to see any irony in your analysis. Perhaps in some respects Sweden is freer than the US. They certainly are much freer from poverty. But Sweden’s government spends 52% of GD, compared to  39% in the US. This places them near the top in that category. If we spent that much in the US on government, we would call it a mostly socialist economy no? I would gladly take full school choice along with Sweden’s welfare state. Would you?

            As for China, yes, they may hit a wall. They certainly are overdue. Nevertheless they just experienced 20 years of very high economic growth based on capitalism, but without any political freedom, which calls into question Forbes central premise that capitalism is the enemy of tyranny. It clearly isn’t. It gets along quite well with tyranny and always has. Did so in Chile, Singapore, South Korea, and does so today in China. (And we won’t even go into the banana republics. Capitalists made a mint off of tyranny there). 

            On your cause of recessions, you are only partly right. Recessions, especially the biggest ones, are also caused by private investment bubbles that go pop. There is a long list of these in the historic record, and they happened with regularity long before we had central banks.

          • Before I address your response, let me ask you and anyone else out there
            why the format of my last comment is so wacked out? It has double spaces and
            strange places to start a new line when I did not do so!

            Regarding your response, before you can see the irony, you need to see
            what is missing from your argument. You have yet to mention a tyranny. To call Deng China, Pinotchet Chile, Park South Korea, and Lee Singapore tyrannies is to engage in a great deal of equivocation.

            None of these countries were democratic, but they were not tyrannies either.
            Not all non-democratic countries are tyrannies. It is also possible to get a tyrannical
            outcome from a democratic process.

            Forbes was using the word “tyranny” the way a political scientist might
            use the word totalitarian. Your examples of market liberalizing undemocratic
            countries are all authoritarian – big difference. An authoritarian regime
            violently defends its monopoly on the political process. A totalitarian regime
            violently defends its political monopoly as well, but goes beyond that,
            controlling every intimate detail of its citizens’ lives. It is important to
            remember that Forbes delivered this speech in 1993. This is a post cold war
            speech, referencing the end of Marxist Lenninist Socialism.

            With enough analytical precision, you will begin to realize that Forbes’
            central premise was actually tautological. Of course capitalism is the enemy of
            tyranny; tyrannical regimes try to dominate the full spectrum of its society’s  social relations. Capitalism undermines that kind
            of centralized social power.

            The irony that I was bringing out, that you fail to see, is that your
            two initial examples, Sweden and China, have improved the quality of their
            citizens’ lives by adopting Neoliberal market reforms. The extent to which
            China has done so is fairly well known. Sweden somehow maintains its pre-1990s image of
            a robust social democracy which it no longer is. 

            Swedish government
            expenditures are 52% of GDP yes, but the US is not far behind with nearly 40%.
            Cuba’s is 78% – that’s what socialism looks like. Sweden used to be in the 70s
            too, but they faced an acute collapse that lead to the sudden, deep, and
            radical reforms by the Carl Bildt government. The current 13% gap in relative
            spending between the US and Sweden is primarily caused by health care, whose
            costs are spiraling out of control. This has brought the Moderate Party back to
            power and the government of Frederik Reinfeldt is in the process of dismantling
            one of the most storied systems of socialized medicine before it destroys his
            country’s fiscal health. These facts should be familiar to anyone who reads the
            Financial Times (heck even the New York Times), but I doubt they get even honorable
            mention on the Rachel Maddow Show.

            Trading school choice (and privatized a privatized Post Office, amongst
            many other remarkable reforms) in exchange for current Swedish social policy,
            if it were possible, would be a trade I would be willing to make too. I always
            love finding agreement with my interlocutors here in the blogosphere.

            Regarding the business cycle, central banks are the ones who pop those private
            investment bubbles with a credit contraction. Ironically they then fight the
            very recession they just caused with low interest rates that set the stage for
            the next bubble. Investment bubbles do not always pop on their own. They fuel
            inflation which monetizes private sector debt, leading to problems of another
            sort. 

          • Steve Buckstein

            Eric, are you using a word processing program to compose your comments? That may be the cause of your formatting issues.

          • valley person

            Your distinction between authoritarian and totalitarian is not convincing. It seems a matter of degree rather than intent. The thousands who died under Pinochet, to name just one, did not experience any more freedom than those who died under Stalin. In any case my point is merely that political freedom is not coincident with capitalism. I provided examples. And conversely there are multiple European social democracies that many if not most American conservatives call “socialist” that have very large, very intrusive public sectors and yet they are as free politically  as the united states.

            OK, Forbes point was apparently about the breakup of the eastern bloc. But interestingly, some of that bloc, notably Russia itself, is now quite capitalistic but not very free politically. I doubt he anticipated that event. And as noted, China is still nearly totalitarian yet also quite capitalistic.

            Cuba appears to be moving fairly quickly towards a more mixed economy. A few years ago their economy was 90% public sector. Now it is 78%. I would bet it gets to 60% within 5 years.

            My long running argument here at Catalyst, in opposition to most of what gets posted here, is that in the modern, advanced, technocratic world we live in a mixed socialist-capitalist economy, say 40%-60% government share of GDP, is a necessity to maintain dynamic growth and social stability. Modern economies require a well educated populace, a first rate transport network, healthy people, research institutions, clean water, clean air, and so forth. All of this and more cannot be provided by the free market.

            Sweden’s expenditures on health care are about 9% of GDP. This is far below what the US spends, and has been stable for 30 years, so I’m not sure how it is destroying that nation’s fiscal health. Sweden is in the very top tier of health care systems in the world, so I suppose they could cut back a it. But full on dismantling? I doubt it.

            I don’t read the Financial Times. I do read the New York Times. I just searched their site for articles on Swedish Health Care and found zero in 2011. Lots of articles on Julian Assange. I assume the Rachel Maddow remark is to suggest that is my source of “news?” Sorry to disappoint you.  I rarely watch cable “news”.

            Back to recessions and central banks. The US had what was called the “free banking era from 1837-1862. During that time we had 6 recorded recessions, including one fairly major financial panic in 1857. And I don’t think the Netherlands had a central bank when the tulip bubble burst, but I could be wrong. Recessions, most of them anyway, are part of the business cycle. Central Banks may “cause” some of them to happen sooner than they would otherwise when they throttle back on the money supply as things get overheated, but a big part of their job is to prevent too much inflation of the currency. 

          • The distinction between authoritarian and totalitarian is not my own. It was crafted by an Italian socialist named Giovanni Amendola in his1924 testimony against Mussolini during the “Matteotti Crisis.” It has since developed into an established concept in comparative politics. 

            “As a matter of degree,” there is a tremendous amount of variance in the quality of one’s life between residence in an authoritarian regime where the secret police will kidnap, torture, and rape your wife if you are a political dissident or in a totalitarian regime were IN ADDITION TO the secret police kidnapping, torturing, and raping your wife for political dissent, it also tells you where to live, work, and travel. Simply saying that it sucks to be killed as a political prisoner in either type of regime seems to be a weak argument for rejecting this bedrock concept when stacked up against the social scientific scholarship on the level of Hannah Arendt The Origins of Totalitarianism 1958, John A. Armstrong, The Politics of Totalitarianism 1961, Carl Friedrich and Z. K. Brzezinski (yes that Brzeznzski), Totalitarian Dictatorship and Autocracy 1967, Leonard Schapiro Totalitarianism 1972, Michel Foucault The Birth of Biopolitics 1979, Juan Linz and Alfred Stepan, Problems Of Democratic Transition And Consolidation: Southern Europe, South America, And Post-Communist Europe 1996, and Marcello Keller, “Why is Music so Ideological, Why Do Totalitarian States Take It So Seriously: A Personal View from History, and the Social Sciences”, Journal of Musicological Research, XXVI 2007. 

            I am comfortable agreeing that there is no necessary correlation between political freedom (a poor locution, better to say political participation) and capitalism (another term I find misleading, better to say economic freedom). That assertion is not found in either of the two Steves’ argument. Being influenced by established political science, they were making the claim that totalitarian regimes (forbes) and totalitarian movements (buckstein) are natural enemies to economic freedom. One of the works I pointed out above, Problems of Democratic Transition by Linz and Stepan, hammers home the concept that totalitarian regimes will eventual become authoritarian regimes before they will be democratic. It was published in 1996 and without naming his name, they predicted the rise of a Vladimir Putin. Authoritarian regimes can become democracies. With the exception for China, every one you have mentioned already has.  

            So again, political participation does not necessarily lead to economic liberalization. I also do not think there is solid evidence to support the very popular view that authoritarian regimes that benefit from economic liberalization will eventually develop greater political participation. But Forbes’ and Buckstein’s point that totalitarian regimes are natural enemies to economic liberty is pretty much true by both definition and humanity’s short experience with this nearly historical social arrangement. 

            I am comfortable asserting that Zimbabwe and North Korea must first cease to be totalitarian before they can enact any meaningful market reforms. China did. The last vestiges of totalitarianism faded from China 30 years ago and it seems to have been a necessary conditions for Deng Xiao Ping’s reforms to begin working. 

            Cuba has made little to no economic reforms. Their desperation has prompted the attraction of a foreign tourism industry that is allowed to operate under a separate set of rules from the domestic state-owned industries. Foreign-owned resorts and hotels, though operating as a separate economy, get calculated into Cuba’s GDP numbers. Indeed, the value of one Canadian hotel can exceed the market value of an entire Cuban economic sector. 

            There is a Cuban immigrant who practices medicine in Hillsdale, Michigan (where forbes was speaking) who told me his story. Trained as a cardiologist, he described a blind date where he was set up with a really ambitious young woman. Halfway through the date she lost interest in him when she discovered he was only a doctor. “My friend told me you were a bell hop at a hotel” she complained. Bell hops get paid real money, in hard currency, and not peanuts like everyone else, doctor or no. He promptly sought out a job at a hotel and saved his money to afford to bribe his way out of the country. Cuba is still totalitarian and it cannot handle broader market reforms. The best it can do is set up hotels for foreigners in gated communities, and the Cuban government tries as hard as they can to prevent a few hotels from crowding out their entire economy. 

            Good luck with your mixed economy project. I would only suggest it is harder to draw empirical evidence from a top down methodology. Seeking an optimum percentage of government spending to GDP ignores the quality of the programs that make up those numbers. Unlike southern Europe and the United States, northern Europeans have weak public sector unionization. They value public goods so much that they squeeze the maximum amount of productivity for the minimum amount compensation. The way in which doctors in France will go on strike is unthinkably scandalous in Sweden. It would be like the US Marine Corps going on strike in the US for greater pay and workplace safety. Expenditures of the same percentage of GDP in Germany and Sweden yield much higher outcomes than the same expenditures in France and Italy – let alone Greece.

            It might be more fruitful to focus on a more rigorous analysis of specific policies and their alternatives. Spending the same amount of money on programs with good incentive structures as on those with perverse incentives may meet your magic number, but do not maintain that dynamic growth and stability you are looking for. 

            Like the Swedes, you accept school choice. That’s great, but your method puts you in a strange position. The Swedes love the fact that they have been able to spend LESS on education due to the cost savings that come with the competition. Your method would suddenly become concerned that government expendenture as a percentage of GDP has dropped. 

            If you were only to focus on defending that optimal expenditure number, you will not have much room to maneuver when faced with the fact that the northern Europeans have been working really hard to reduce that ratio, and they have been very proud at the better quality of life outcomes they have than their southern neighbors who have been doing the opposite and getting the opposite results. I recall you read my article about Randy Leonard and the Clean and Safe District. The US is probably more like southern Europe than the efficient Lutherans of the north. 

            There are so many opportunities to spend more and more in pursuit of  “a well educated populace, a first rate transport network, healthy people, research institutions, clean water, clean air, and so forth” which do not increase those desired outcomes, but merely transfer money from tax payers to stake holders. If one forgets there are negative externalities that come with the revenue collection to fund these programs, I suppose one would then be comfortable ignoring opportunities to save money. 

            In this case, the Swedes are not with you. Reducing government expenditures as a percentage of GDP has been their central policy focus for twenty years. Indeed it kind of puts you in the funny position of wanting the US to be more like Sweden while the Swedes want to be less like “Sweden.” In case you missed it, two prominent Swedish economists, Andreas Bergh and Magnus Henrikson, released a study earlier this year confirming that a reduction of governments’ spending to GDP of 10% yields an increase in annual GDP growth of .5% – 1% (not too shabby). This study was a big deal in Sweden. I suppose one would have to be a real nerd to have heard about it here in the US, but here is a link to an English translation:
            http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1734206&download=yes

            This has put healthcare on the chopping block. For Europe healthcare expenditures of 9% of GDP is slightly above average. The waiting periods, denial of care, and other trade-offs they are willing to accept as a political culture demand low costs in return. Their costs have not been steady at 9%. I hear that all the time. It comes from a WHO study in 2005 that phrases it just like you did, that it has been stable for 30 years. This is not the case. It was 9.3% in 1982, but those expenditures were a political outrage because it had been only 6.8% in 1970. Controlling health care costs was the number one political issue of that decade. The Bildt government could never get it back down to 1970s levels. The best they could do was 8% in 1994. After privatizing education, pensions (they have private accounts!), the post office, and all their other sweeping reforms, healthcare remained largely unreformed when they were voted out of office in 1994 as planned. While out of office, health care costs began rising again reaching 9.3% by the time of the WHO study. 

            This was such a salient issue, it helped the Moderate Party come back to power in 2006. The Reinfeldt government has been more incrementalist, and they were reelected last year. Now, in the wake of a sovereign debt crisis in southern Europe, they are tackling healthcare with a gusto. Because their society is aging faster than ours, their concern is a sudden spike in healthcare costs. I know the NYT has a terrible search function, but I remember some great reporting on this election, as well as lots of favorable comparisons to the Bildt government’s response to their deep recession and our own (spending cuts rather than stimulus bills). 

            Swedes being a fairly smart people, they know better than to copy our healthcare system. We have the worst of all worlds. We are a private system that our regulatory policy insulates from competition, while funneling a steady pipeline of spending increases for our elderly backed by the taxing power of the IRS. If we had tried to design a system that would inflate prices, it is hard to imagine a better alternative. I am no progressive, but when it comes to controlling costs, if your political culture can accept the denial of care to seniors, then a single payer system like Sweden’s will control costs better than ours can. 

            Fortunately there is a better alternative out there: Switzerland. Die Sweitz have a private system that receives subsidies in what we would call “block grants” but is structured to promote competition – not unlike medicare part D which was the only entitlement program ever to grow less than its CBO projection. 

            Sound familiar? Can you say “the Ryan plan?” No matter who is sworn in as president of the United States in 2013, the Swiss model is coming to the USA. Obama will promise the base of his party no cuts, but he will sell them out upon reelection – with Roger Altman as his Secretary of the Treasury!

            Central banking has been with us for centuries. Independent central banks, executing a monetary policy with floating exchange rates for fiat currencies are a much more recent innovation. It is difficult to compare a modern industrial recession with a nineteenth century banking panic. They are similar. Two centuries ago, financial panics were not proceeded by inflation the way 20th century recessions were. We had a fractional reserve system then, we have a securitized system now. 

            The era of “free-banking” was not devoid of monetary policy. It was devoid of CENTRALIZED MONETARY POLICY which was replaced by state level policy. Andrew Jackson did not renew the charter for the Bank of the United States in 1836, but he had already ceased using it to make deposits for the US treasury shortly after being sworn in as president. The Michigan Act allowed for open chartering of banks SUBJECT TO STATE REGULATION. In a fractional reserve system, monetary policy was easy for states to handle in those days because the state governors could simply manipulate the required reserve ratio – nothing like what the FOMC has to do today, let alone quantitative easing! 

            As we would expect, those six recessions you refer to were local. During that period, states with sound money policies were spared from the national recession that we experience today. The panic of 1857 is a good example. The failure of the Ohio Life Insurance and Trust Company created a contagion that affected the rest of the midwest, but not the entire country. Many southern bank notes were pegged to the currency of their export market, following the sound monetary policy of the British Chancellor of the Exchequer. A couple of other states, like New York, had experienced state level panics years before. Learning there is no free lunch when it comes to credit expansion, they had harder currencies that were inoculated from participating in the midwest’s little recession. It was Indiana that fared the worse. Had we allowed this to proceed, we could be enjoying this kind of stability today. Imagine a 20th century that had this low rate of economic disruption. How more prosperous would we be today if we only had local recessions in a few states over the course of  every generation?
            The tulip bubble was so long ago, one would think there is no way to compare it to our real estate bubble of the past decade, but remarkably we can. The Bank of Amsterdam was founded in 1609. In this case, the bank was not prepared to reduce its money supply in proportion to the exogenous shock of a sudden increase in the supply of gold. Spain’s military build-up financed with its vast gold reserves devalued the bank’s specie and this credit expansion found an asset class to inflate.  promote full employment. This is where the instability comes from; the fed will eventually

          • valley person

            Back in the day, the argument was that totalitarian communism was different than mere authoritarianism, and a big part of the argument was that totalitarian regimes would never ever give up power without bloodshed. Only guess what? The east bloc collapsed without a shot being fired. And totalitarian regimes never were as controlling in reality as they were on paper. Black markets thrived.  People chose where to live, what job to take, whether to go to college or not. There were periods of brutal repression followed by periods of relaxation. Bottom line, and with due respect to Arendt et al, experience suggests they over stated their case, as you do.

            I remain utterly unconvinced that capitalism, or free markets if you prefer, are the opposite of totalitarianism. The opposite of totalitarianism is democracy, and in a democracy people can choose the degree of socialist economy that suits them.

            My 40-60 formula by the way, is not analytical. Its just observational. Look at the figures for the OED. If there were one member thriving at say 20% or 80%, I’d like to know about it. The idea is not to spend a set proportion and call it good. Of course any society wants to optimize its public spending. That should go without saying.

            The Swiss health system, as I understand it,  requires everyone to purchase health insurance through exchanges of not for profit insurance providers. And they cannot turn anyone away. That sounds more like Obamacare than Ryan care. And the purchase requirement is of course what the right wing is all exercised about.

            The Swiss also have price controls on medicine and other procedures. Not very free market. They subsidize insurance cost to individuals. Again, like in Obamacare. I’d be fine with importing the Swiss system here, it would be much better than Obamacare, but you have to admit its more expensive than the Swedish system.

            On Europe, yes they are constantly adjusting the dials. Denmark has I think the highest level of government spending, yet is thriving. Nations with the lowest levels, like Great Britain, are not. Ireland, which went whole hog for capitalism, thrived for a short time and has now crashed very hard. I don’t draw any particular conclusion from all this other than what I said: 40-60 seems the correct range.

            On Cuba, their reforms have gone beyond the tourist hotels. They allow private market farming, allow people to run home based cafes and restaurants, and are experimenting with other private options. Its too little too late perhaps, but its moving in a freer direction.

            All recessions are somewhat local. North Dakota today has 3% unemployment. Texas brags about all the jobs it’s adding. In a more decentralized system, which the 19th century was, one would expect more variable results. 

            As for central banks, if they have been with us for centuries, then I’d say they are a proven institution and every nation has decided its pretty important to maintain. The central bankers did not encourage people to buy beanie babies, or to invest with madoff, or to over invest in housing, or commercial real estate in the 80s, or Asian currencies in the 90s. Capitalists chase profits, and no one thinks they will be the last fool to rush in the door. Gold buyers today are the latest in a long line. Once enough people figure out we are in for a long period of deflation, not inflation, gold will come crashing down and will take a lot of false wealth with it. There are only so many teeth to fill.

          • OK, I am going to take Steve’s advice and type directly into this interface rather than cutting and pasting from MS Word. I always end up making embarrassing typos this way, but somehow my last paragraph in my previous post got mutilated, missing its last few sentences.
            The mere speculation that “totalitarian regimes would never ever give up power without bloodshed” was peripheral to this core concept from comparative politics.  Serious political scientist don’t dogmatically hold their breath for speculation like that. Having said that, there was a great deal of bloodshed for many years to suppress political dissent. That there was less in the very end does not in any way provide any counterfactual to the truth value of the totalitarian/authoritarian distinction.
            The fact that totalitarian regimes struggle to enforce their many policies does not undermine this analytical framework either. Indeed the weakness of totalitarian regimes compared to the relative strength of their authoritarian counterparts is a fact that would be difficult to gleam without this concept. Black markets and corruption allow totalitarian regimes to survive for a couple of generations, particularly centrally planned socialist ones. This way in which they undermine the rule of law is why totalitarian regimes cannot transition directly to democracy without first becoming authoritarian according to Juan Linz and Alfred Stepan. Their prediction in 1996, proved very astute. 

            The limited freedoms of choice you refer to do not apply to everyone. The privileged cadres and their families live lives more apart from their fellow men than the upper classes of liberal regimes. In socialist totalitarian regimes in particular, the will to power proves to be a more unequal distribution mechanism for society’s resources than the will to profit. 

            “There were periods of brutal repression followed by periods of relaxation” indeed. Only the era of Stalin can make the era of Khrushchev seem lax. Only the cultural revolution can make the gang of four seem laid back. Authoritarian regimes don’t even reach the level of repression of totalitarian times of permissiveness. It is for this very reason that totalitarian regimes are so perishable, but authoritarian regimes can last indefinitely. 

            By rejecting such a core concept from political science, you end up robbing yourself of any analytical precision. Totalitarian regimes and democratic regimes are no doubt opposite to each other in an obvious way, but if that is as far as you are willing to inquire as a student of comparative politics, then you are forgoing a lot of useful knowledge. One is no less likely to go to jail for political dissident in Lee Kuan Yew’s Singapore than Nikita Kruschev’s Soviet Union, but without the totalitarian / authoritarian framework you do not have any means of explaining why it is so much better to live in Singapore. The higher quality of life in authoritarian regimes is so empirically demonstrable over their totalitarian counterparts that the mere fact that they are both similarly undemocratic is less interesting than why they are so different. 
            For your 40-60 formula to be fully observational, you have to observe its trends too. The trend away from 60 towards 40 is something far more interesting than romantic attempts of nostalgia for a 1970s Sweden that proved to be unsustainable. This second decade of the 21st century is playing out for your mixed economies like the second to last decade of the 20th century played out for centrally planned socialist economies. You had enough of an apologetic spin in your description of freedom through the black market and laxity in totalitarian regimes, that I cannot help but wonder if a younger you had a more optimistic outlook for the revolutionary socialists’ centrally planned economies say 4 decades ago. Did their decline help form your embrace of the 60-40 mixed economy? If Swedish trends continue, watch what happens when 40 becomes the new 60. “If there were one member thriving at say 20% or 80%, I’d like to know about it.” Indeed there are more than one, because there are more than one economy out there freer than the United States. Their government spending to GDP is closer to 20%. Switzerland is 32, Hong Kong is 18, and Singapore is 17. Switzerland and Hong Kong nearly tie us in per capita GDP. Singapore beats us by a wide margin. Then there are those dynamic emerging markets than are still much poorer than we are, but we seem obsessed over how they will overtake us. They are well under 40 and its hard to say they aren’t thriving. China has a much lower per capita GDP than we do, but since you seemed to be touting them earlier for their growth, perhaps I should mention that the Chinese “communist” party has kept government spending down at 21% of GDP; even the “raj” in India is only 27! Indonesia is at 19, Chile 21, Macau 15, South Korea 30, South Africa 27, Taiwan 18, Turkey 23, and “communist” Vietnam 27. Not only are so many of our most dynamic economies below your 40% government expenditure floor, what really should give your idea pause is the asymmetry of it all. There are indeed no thriving countries at 80%, but the most economic progress being made in 2011 is by countries under your 40%. Those over 40% are actually struggling these days, but the BRICS are under 40%!  The Swiss healthcare sector is a freer market than our own. I did not say it was perfect. I said it was better than ours, indeed it is better than the Swede’s single payer system as well. It has a mandate, but to conservatives who think a mandate is evil only because Obama was for it, I point out that the mandate is a means to preventing free-riding in a healthcare system that will not deny emergency care to those who cannot pay. Mandated care requires mandated coverage. The problem with Obamacare is the constitutional question of having the federal government setting the mandate rather than the states. In the US we have a private system that is a subsidized cartel. The Swiss also have a private, for-profit system that has transparent pricing competition, unregulated plan structure (besides age, gender, and preexisting condition non-discrimination provisions), allow indemnification, and its subsidies are block granted and means tested. What you are calling price controls are not the Nixon type, there is a means tested “public option” that negotiates lower pharmaceutical prices (A no-brainer thing neither Bush’s Medicare part D nor Obamacare do).  Obamacare is not real reform, in a sense it is more of the same. It’s health exchanges don’t deregulate plan options, it bans indemnification, and it raises medicaid eligibility. The only two things it has in common with Switzerland are the two mandates on preexisting conditions and coverage. Both its public and private expenditures are significantly less than both the US and Sweden systems:http://voices.washingtonpost.com/ezra-klein/assets_c/2009/10/oecd_2007_health_gdp_public_private.html The economizing it is structured to cause will be unpopular to medicaid and medicare stakeholders. I can see a Romney/Rubio ticket campaigning on a Swiss plan alternative to Obamacare. Obama will demonize the block grants, the means testing, and the indemnification the same way he demonized Hillary over the coverage mandate in 2008. Then after the election he will fold like a cheap suit, enacting them.  That we have high commodity prices thanks to QE 1,2 has aided both North Dakota and Texas, yet they feel the effects of the recession. We have a national recession right now. Slight regional variance aside, it is nothing like the era of free banking where there was entirely no correlation among state economies. Only a handful of states experienced a recession at a time while the other state economies grew. Even Friedman and Schwartz’s Monetary History of the United States accepts this fact, even though they are the founding parents of the Monetary school. Fluctuation in investments in any particular asset class happen independent of the business cycle all the time. Investing trends come and go, but they should not be confused with the systemic mispricing of risk, that funnels the “safe money” of investors with low risk tolerance to search for yield. I am not going to dogmatically claim that it is impossible for this to happen without a central bank expanding the money supply. The very moment Bernanke mentioned the word “dual mandate” in Jackson Hole a couple of weeks ago, my quotron turned green. Even without eliminating central banking, if we just removed the dual mandate, managing our currency like the Bundesbank veterans manage the ECB, then we could reduce the frequency and magnatude of our recessions. 

          • valley person

            Life was better in Uganda under Idi Amin than in Hungary under the Soviet system? I don’t think so. It was better under Samoza in Nicaragua than in Cuba? For the rich certainly.  But for most everyone else, probably not.

            The “analysis” about the unmitigated evil of communism in particular, was within a cold war context. America thought it was engaged in an existential struggle with a “system” rather than merely a geopolitical struggle with a well armed counter empire. To make us all willing to die for this cause, we talked ourselves into the enemy being far more devious and scary than it really was. Are you old enough to remember “better red than dead?” Think about that for a minute. We were willing to incinerate ourselves and the planet in the mistaken belief that if we ever succumbed to the communists, it would be a fate worse than death. And not just worse than death for ourselves. We were ready to condemn every future generation to death in advance.

            So I’m sorry Eric, I just don’t buy it. Totalitarian systems are basically authoritarian governments with an ideology behind them. But they all are doomed to fail from their internal contradictions. They are not sustainable in a modern world that needs innovation.  Totalitarians and authoritarians both get out competed. And even if there is no one left to compete, they rot from the inside. 

            So if I am guilty of “robbing myself of analytical precision,” I can live with that.

            The trend is not necessarily away from 60 and towards 40. In America’s case, it is more likely going up from 40 and towards 60, an inevitable result of our aging population, a deteriorating infrastructure built by previous generations, and the increasing expense of maintaining an empire.

            If Romney campaigned on a Swiss plan he would never win the Republican nomination. The Republican position is that mandatory purchase of insurance is not constitutional. No room for compromise.

            The Swiss health system, in addition to the 2 mandates, also has a requirement that policies meet certain standards, and  it provides subsidies to individual purchasers. Both of these factors are in Obamacare. And I agree, its probably a better system than ours.

            Singapore? Why not use China? They also spend around 20% of GDP on government services. In both cases the people have no opportunity to pass legislation that would spend public money to improve social services. In Switzerland the people vote on everything. So if they are at 32%, then good for them. They can be the exception that proves my rule.

            All the other countries you list are in early recovery from authoritarian regimes. Over time, their social service spending, particularly on education, will probably increase. But maybe not. Maybe we will decline to their level not only in government spending but also in wage rates. We seem to be one election away from that future.

            The Bundesbank veterans are managing the ECB into the destruction of the Euro. I’m not sure that is such a great model.

          • After three very weak arguments you appear to finally accept the established political scientific concept of the Totalitarian / Authoritarian distinction when you admit “Totalitarian systems are basically authoritarian governments with an ideology behind them.” You have now passed comparative politics 101. 

            Let’s review those arguments: 1) it sucks to be a political dissident in both totalitarian and authoritarian regimes. Therefore  the totalitarian / authoritarian distinction is false! 2) Some popular commentators claimed that totalitarian regimes would end in bloodshed. They did not end in bloodshed. Therefore the totalitarian / authoritarian distinction is false! 3) And now I suppose we have – social scientific scholarship on totalitarian regimes happened during the cold war. Therefore the totalitarian / authoritarian distinction is False!
            I believe I mentioned already this concept was developed before the cold war. It originated in socialist circles to describe how fascism differed from bourgeois democracy. It then was applied to Stalinism by social democrats. I spend a lot of time with progressives in this city. I am a pledger with Jobs with Justice and hang out with the ISO kids at PSU when they host an interesting topic. I have never seen a progressive interlocutor of mine dig such a deep and hopeless hole arguing against such an established concept. Anyone who ultimately cries uncle with a sour grapes comment like “So if I am guilty of ‘robbing myself of analytical precision,’ I can live with that” is basically uttering the intellectual version of “better dead that red.”

            There is another way in which you conceded my point. You used the framework. Somehow you knew that Hungary and Cuba were totalitarian while Uganda and Nicaragua were merely authoritarian. 

            Of course you are also trying to compare 2nd world totalitarians with 3rd world authoritarians to make there appear to be lipstick on those pigs. A more credible comparison for Cuba would be the Dominican Republic under Joaquin Balaguer and for Hungary you’re going to need a postwar European authoritarian, plenty to choose from, but none of which drag their societies to the depths of misery that the Hungarians did. 

            The inequality of their post revolutionary societies were even more pronounced than the reactionary ones that preceded them. There is a name for rich people in Cuba; they’re called cadres. Remember the pics the Cuban government released of Elian Gonzolez’s home when he was reunited with his father? The working people of Cuba don’t live in villas like that. The working people of Cuba, like that cardiologist, have to carry luggage for western tourists for tips to enjoy the finer things in life!There are several devastating points that I made that you inadequately addressed. You cannot seem to account for why Singapore is one of the greatest places to live. It out innovates and out competes nearly every democracy in the world. Could it be that it’s because they have even freer markets than the US and western Europe? So they don’t have an “opportunity to pass legislation that would spend public money to improve social services.” The people of Greece do, are they better off? The Swiss have the most laissez-fair economy of any democracy and enjoy per capita GDP that is the envy of the world. Your top-down model assumes it would be impossible with government expenditures below 40% of GDP, but since they are democratic you claim they are the exception that proves your rule? It seems any outcome of governance would be acceptable for you as long as it came from a democratic process. That position would be a tough sell in Singapore. “Why should we live like you poor people in Oregon?” a Singapore janitor might ask you. You challenged me to find one single country with a government expenditure to GDP ratio of 80% or 20% that is thriving with all the confidence that there could never be such a thing. Turns our the only countries that are thriving right now are near 20% (so parry this devastating counterfactual asside by suggesting they are “recovering” from authoritarian regimes – recovering from what? Their economies were thriving long before their democratic transition, but you have a tougher question to answer: why are they thriving? Why are their 80% equivalents not thriving? Why the asymmetry? So you hope the 20 percenters who were not supposed to be thriving will eventually enact more social spending and join the list of non thriving nations?), your northern European 60/40s are running from 60, countries like the US, Portugal, Italy, Ireland, Greece, and Spain who are running the other way are not thriving. How’s that top down methodology working for ya? It is a contrarian call to make, but I think Romney will win the Republican nomination. Like 2008 all over again, the movement conservatives will divide the base vote and Romney will win pluralities from his monopoly of the moderate “country club” Republican faction. On the top of the ticket of a tea party dominated party, he will run as a moderate, trying to paint Obama as the ideologue.Having an alternative healthcare plan that most establishment, non-Republican economists admire will help him debate against Obamacare when Obamacare is a national version of the MA plan he presided over. His plan will not have a national mandate, but will likely have means tested subsidies. The good news is, whomever wins will sign into law a budget that will block grant and means test medicaid and medicare. Despite campaigning against it, Obama will too. Obama has let his base down in his first term many times, he will forget all about them upon reelection. He will go down in history as the president that saved us from the global sovereign debt crisis. If he’s not reelected Romney will do the same thing. It’s amazing how little policy variance bourgeois democracy delivers eh?Regarding the Swiss healthcare system, it is important to remember that Switzerland does not even have a federal government. As a confederation, its national health policy is merely a coordination of local canton plans. There are a few cantons, such as Bern, that would place some restrictions on local plans if they could. They cannot because the national law allows individuals to buy plans chartered in other cantons. This is explicitly forbidden by Obamacare, gutting the true potential of its exchanges. The Swiss simply do not regulate their healthcare like we do. Our state health insurance boards draft long lists of what all plans must pay for. The Swiss allow very cheap plans that don’t cover much. You just cannot control costs without economization like this. Switzerland, also allows indemnification, something no US state health insurance board allows and Obamacare explicitly forbids. The requirements set by the Swiss national law can be counted on one hand: nondiscrimination by gender, age, and preexisting conditions – coming to a western democracy near you! “The Bundesbank veterans are managing the ECB into the destruction of the Euro. I’m not sure that is such a great model.” Really? name me a Bundesbank veteran still on the ECB board. You really need to read the Financial Times! Start with this:http://www.ft.com/intl/cms/s/0/790ba3ba-daec-11e0-a58b-00144feabdc0.html#axzz1Xgp7SRmr

          • valley person

            Sure, I accept the distinction that totalitarian has ideology behind it. I also said essentially: so what? You can have quite brutal authoritarianism, and fairly benign totalitarianism, and we have had both historically.

            Rather than having you caricature my arguments, I’ll re-state my own thanks. My argument is, in summary:

            1) Economic liberty, i.e. Forbes capitalism, is not the antithesis of totalitarianism, or authoritarianism. Your distinction on China escapes me. Yes they have let the boot up off of the neck somewhat. So did Hungary before the wall fell. So did the Czech republic for a while. So did Poland. Meanwhile Finland and Sweden were quite socialist yet very free politically. In the real world, not the theoretical one, we have examples of nations with capitalism and (relatively mild) totalitarianism, capitalism and authoritarianism, socialism with democracy, and capitalism with democracy. There are probably models we haven’t even thought of yet. 

            2) You say “some popular commentators” predicted communism would end in bloodshed. No Eric. It goes way way beyond a few commentators. Our people were brainwashed into believing that to become communist was to become hopeless, so “better dead” period. All dead. From now to eternity possibly. A few commentators could not have achieved that level of commitment.

            3) The distinction between totalitarian and authoritarian is not completely false, it is just terribly exaggerated. Every reasonably long term 2 bit dictator had secret police every bit as intrusive as the KGB. All they lacked was a structure that would outlast them or their immediate heirs. And come to think of it, what is Cuba without an heir to Castro? Nothing more than a short term (historically) authoritarian regime. What is North Korea without a suitable heir to their madman? Answer: probably South Korea in a decade or less.

            4) Do you think the Hungarians were more oppressed than the Spanish Republicans under Franco, or the Argentinians under their military dictatorship? Perhaps, but not by much.

            5) Singapore may be a great place to live if you don’t mind being caned for spitting on the street, and you don’t mind having no say in your governance. You can certainly be a wealthy and happy capitalist there, so I guess that proves both our points.

            Are people in Greece better off than those in Singapore? Why yes, I would say they are indeed better off. They are a free and relatively prosperous people who are presently going through some tough times, which they will emerge from. Same for the Irish, who spent less than the Greeks, did capitalism up in a big way, and crashed just as hard.

            The wealth of the Swiss is primarily due to their having stayed out of Europes wars and making themselves available to all comers, no matter how nefarious, as a safe haven for ill gotten gains. That and they are industrious people. As for their free market, they have the highest tarrifs on imported farm products of any European nation. Go figure.

            If the Swiss can be happy and prosperous with their level of government spending, and this is what they themselves choose, then great. They spend 1/3 of what we do per capita on the military, so that is a good start. The Danes and Dutch are also quite happy and prosperous with much higher levels of government spending than us or the Swiss.

            The countries that are thriving while spending 20% of GDP on government are primarily nations that are playing catch up. They have taken lower wage manufacturing from wealthy nations, and are using that as a base to move up. I don’t see it as a counter factual to my theory, because my theory posits a modern, developed , democratic nation as the basis, not those playing catch up.

            Your theory on Romney is interesting. My bet would be on Perry. He personifies the Republican party today. Romney is yesterday’s Republican.

             Medicaid by the way, is already quite means tested. You don’t need new legislation for that. Means testing Medicare or SSI would save little, and would simply dump the cost onto the individual. It wouldn’t contain costs at all.

            Policy differences are growing, not shrinking. You have one team that is willing to help organized labor, and one that wants to strangle it. One team that passed a universal health insurance program, and one that is content to let people die in the streets. One team wants to address global warming, the other insists there is no such thing. Drill baby drill. But on high finance, you are probably correct. Neither team will mess much with the bankers. Nor will either team mess with our military these days.

            As for the Financial Times. Meh. Include me out.

            I think we have officially beat this to death. Thanks for the spirited and mostly respectful debate.

             

          • OK my friend, I will leave you with the last word. 

            On one condition, would you tell me how you upload your replies in a clean format with spaces between paragraphs? I am still getting sloppy results. First I was pasting them from a word document, then I typed them directly onto the page – still broken up. 

          • 3H

            Try using some html coding.  If you use “” between each paragraph.. you should get a nice clean break.

            Like this.. if it worked

          • 3H

            Huh…  that should be “” without the quotation marks.

          • valley person

            I just type into the space provided and create a space between each paragraph. No tricks. No cutting and pasting from elsewhere. I’m a technophobe.

            And feel free to add a last word. You earned it.

          • While I might misdiagnose, you seem to show symptoms of a common Weltanschauung that plagues many of my progressive friends. Like an elderly evangelical christian who has lived his whole life thinking the “end times” are just around the corner, many progressives who went to college in the 70s have had to continually renew their faith that we actually live in “late capitalism.” 

            As undergraduates, they were inspired by revolutionary socialism. For the next two decades that followed a little spin was needed to digest the growing evidence that life in the eastern bloc was not so grand – this is just cold war propaganda they concluded. 

            In that dizzy time from 1989 to 1991 they converted to social democracy, embracing the 2nd International like it had never gone out of style. Sweden became the new elixir, but unfortunately for their intellectual journey, the Swedish economy was in imminent collapse as well. 

            Sweden’s postwar experiment in social democracy failed after a few unsustainable decades, but it lives on in the American popular progressive imagination. While the American left was rediscovering the Frankfurt School in the 1990s, Sweden was privatizing government services and incorporating tough-love provisions into its social safety net.  

            Sweden’s inspiration does not come from the US; it comes from Switzerland. These countries have much in common. Both remained neutral in the 2nd world war, develop large banking systems that took advantage of their tax dodging neighbors, and are homogeneous societies.

            Sweden’s reforms today are different than the 1990s. Now Sweden is bracing itself for the bursting of the greatest financial bubble of all time. We are moving into a financial storm far worse than 2008. The global sovereign debt bubble is more than a mere correction in the bond market. It is nothing less than the 1989 moment for the European welfare state. 

            This is going to take some time for you to digest I am sure. The first response is always denial. That is the only friendly way I can describe your Baghdad-Bob-like description of Greece as “a relatively prosperous people who are presently going through some hard times.” If the ECB did not support their economy, Greece would be facing famine. Their position is far worse than even Argentina in 2002.The fact that Portugal, Italy, Ireland, and Spain are about to “go through some hard times” too presents the threat of spillover effects to prudent, Lutheran, northern Europe. 

            Your seemingly singular obsession over political participation smothers your consideration of the actual substance of a regime’s policies. This puts one in the awkward position of valuing a tyranny of the majority coming from a democratic regime over a liberal society that is governed by an autocracy. 

            There is a good precedent for this. Two former British colonies, Singapore and India obtained independence around the same time. Both were poor countries possessing a very dangerous mix of ethnic tension. Democratic India governed in an illiberal fashion; autocratic Singapore did not. It is great to live in Singapore if you are rich, but it has always been great to live in India if you are rich too. The difference in these societies is felt by the poor. It is better to be poor in Singapore than poor in India.

            Regarding the compatibility of tyranny and capitalism, Forbes and Buckstein were using the more common use of that term which has been influenced by Aristotle’s famous regime theory. In book III of The Politics, Aristotle identifies six regimes that make up the combination of what he called the qualitative and quantitative aspects of governance. There are two qualitative aspects: regimes that govern in the interests of all and regimes that govern in the interests of less than all. (we say the same thing today with the term “equal protection of the law”). There are three quantitative aspects: the rule of one, the rule of the few, and the rule of the many. 

            English translations of Aristotle have standardized the terms he uses for these six regimes and they have influenced our political discourse. Regimes that are ruled by one and govern in the interests of all he called “autarchy.” Regimes that are ruled by one and govern in the interests of less than all he called “tyranny.” When Forbes and Buckstein argued that tyranny is incompatible with capitalism, your showing instances where autarchic regimes have liberalized their economies has proven unfruitful and gets you tautologically debating terms rather than substance.

            Here are Aristotle’s other four regime permutations. Regimes that are ruled by few and govern in the interests of all he called “aristocracy.” Regimes that are ruled by few, but govern in the interests of less than all he called “oligarchy.” Regimes ruled by the many that govern in the interest of all he called “republics.” Regimes that are ruled by the many but govern in the interests of less than all he called “democracy.” If that seems a strange use of the term democracy for an American, it is perfectly understandable to the people of India. 

          • Golfer

            I am glad you would take what Sweden has to offer. When are you leaving?

    • think how successful Chinese capitalism could be if they had started it in the 1950s rather than the 1980s. 

      • valley person

        What does that have to do with the discussion? Sure, they would have prospered sooner had they adopted market reforms sooner. it doesn’t change the example that capitalism and totalitarianism are quite compatible.  

        • I had written this as a response to your earlier statement: “Freedom must be why Chinese capitalism is so successful.” 

          I have already called you out on your equivocative use of the the word freedom in the thread above. China has not been totalitarian for a long time. If you ever travel to China go to the Beijing Language and Cultural University in the Haidian District. There are two large dorm room towers for foreign students. On the top floor of each tower is a North Korean student “unit.” They live on the top floor so than no other foreign student will be on their floor to “pollute their minds.” They have their own separate classes from which they march in single file to and from their dorm room. They are all wearing the same clothes and have the same Kim Jong il pin on their lapel. If you can understand Chinese, like I can, you can hear visiting parents of Chinese students point to the North Koreans and tell their children “that’s the way we were.” That is a political scientist’s moment, to watch authoritarians looking down on totalitarians like they are Neanderthals. 

          • valley person

            China is still totalitarian. They just let the boot up off the neck on capitalism. The boot is firmly in place on civil liberties. North Korea has pressed the boot further down.

            In fact, how can you equate Chia to authoritarian regimes when they are changing leaders every few years now with no fuss, no inherited power? With the communist party still firmly in control of every lever of government? What has really changed there other than adopting capitalism? 

          • the real valley person

            This is responding to your above, but placed here for paragraph readability reasons.

            While I went to undergraduate school in the 70s, I did not absorb much political philosophy then, so am not among those you characterize  as inspired by revolutionary socialism. I missed the whole Che thing. I come from an urban blue collar, quite conservative political background. I moved left over the years after college based more on experienced reality than on what I studied in college. I saw what the civil rights activists accomplished, I saw what environmental legislation accomplished, and I saw the meaness of Reaganomics. My readings then gradually caught up with my experience, rather than the other way around.

            Your description of Aristotle meshes with observed reality. I’ve seen “radical democracy” used to oppress minorities. Certainly that was true in the Chicago I grew up in. And in fact the Swiss used democracy to opress women for years, didn’t they? The Tea Party to me is nothing more than an angry mob bent on destruction, and I can only hope they collapse before they ever gain a working majority.

            On sovereign debt and Greece and the rest, I’m no international financial expert, but I do expect this will be the shoe that fails to drop since it is self inflicted. The ECB has the financial and political capacity to resolve this crisis. That they have yet to do so is a failure of nerve and imagination. Sooner rather than later, they will realize the magnitude of the risk of dominoes, and issue the “Euro bonds” necessary to get the laggards over the hump, like our federal reserve did for us (pretty much).
            At least one hopes.

            With inflation near zero, we and the Europeans don’t suffer from too much money in circulation. We suffer from too little demand resulting in low capacity utilization and very low to no growth. Its a hard lesson that has to be learned by every other generation. With US bonds selling at below 2%, and given our ridiculous debt and politics, one has to wonder what sovereign debt crisis?

            OK…I violated the last word pledge. Still, its your fault for changing the subject. I’ll try harder this time. 

          • the real valley person

            This is responding to your above, but placed here for paragraph readability reasons.

            While I went to undergraduate school in the 70s, I did not absorb much political philosophy then, so am not among those you characterize  as inspired by revolutionary socialism. I missed the whole Che thing. I come from an urban blue collar, quite conservative political background. I moved left over the years after college based more on experienced reality than on what I studied in college. I saw what the civil rights activists accomplished, I saw what environmental legislation accomplished, and I saw the meaness of Reaganomics. My readings then gradually caught up with my experience, rather than the other way around.

            Your description of Aristotle meshes with observed reality. I’ve seen “radical democracy” used to oppress minorities. Certainly that was true in the Chicago I grew up in. And in fact the Swiss used democracy to opress women for years, didn’t they? The Tea Party to me is nothing more than an angry mob bent on destruction, and I can only hope they collapse before they ever gain a working majority.

            On sovereign debt and Greece and the rest, I’m no international financial expert, but I do expect this will be the shoe that fails to drop since it is self inflicted. The ECB has the financial and political capacity to resolve this crisis. That they have yet to do so is a failure of nerve and imagination. Sooner rather than later, they will realize the magnitude of the risk of dominoes, and issue the “Euro bonds” necessary to get the laggards over the hump, like our federal reserve did for us (pretty much).
            At least one hopes.

            With inflation near zero, we and the Europeans don’t suffer from too much money in circulation. We suffer from too little demand resulting in low capacity utilization and very low to no growth. Its a hard lesson that has to be learned by every other generation. With US bonds selling at below 2%, and given our ridiculous debt and politics, one has to wonder what sovereign debt crisis?

            OK…I violated the last word pledge. Still, its your fault for changing the subject. I’ll try harder this time. 

  • Rupert in Springfield

    I think the point here is for Capitalism to thrive, you need some amount freedom. The More freedom, the more capitalism will thrive. Conversely the more Capitalism thrives, the more freedom thrives. People become accustomed to it and are not very interested in giving it up.

    Few would argue that China is not a primary example of this today.

    • valley person

      China is clearly not a primary example of capitalism being dependent on freedom. It is the example of the opposite. China has zero political freedom, yet a lot of capitalism. And it is thriving, with growth rates far outstripping freer nations. Chile also boomed during the Pinochet years. Singapore has also done very well with no political freedom. 

      Maybe you and Steve and Eric are arguing that economic freedom is more important than political freedom.  Is that your central point?

  • 3H

    “Forbes defined a market economy as “the only truly moral system of exchange. It encourages individuals to freely devote their energies and impulses to peaceful pursuits, to the satisfaction of others’ wants and needs, and to constructive action for the welfare of all.”

    A market economy is neither moral.. nor immoral.  A market economy is completely, and totally, amoral.  It encourages individuals to devote their energies to economic pursuits, not peaceful pursuits. There is nothing in a market economy that requires and even commands that the results be beneficial or constructive to the welfare of all.  A market economy governs our economic relationships.  The same market economy that determines the types and prices of the coffee I buy at a Starbucks also governs and determines how, where and for how much children will be sold into prostitution and slavery.  The same market economy that gives me the choice of what tennis shoe I wear, also allows those shoes to be made in sweat shops overseas.  It wasn’t the the market economy that ended abusive child labor in this country, it was regulations and restrictions on the market economy that did that.  A market economy cannot determine right and wrong, legal and illegal, or moral and immoral.  

    Forbes wants to look at only the tip of the iceberg and ignore everything else below the water level.

  • Anonymous

    Forbes’s and Buckstein’s thoughts show that capitalism is great for the winners, and they always say so loudly and clearly. But it’s not so great for the losers — and there are always losers under capitalism. They just don’t write many op-eds, or inherit magazines, get funded to run think tanks, or run for office. 

    Someday the world will evolve an economic system that promotes freedom, innovation, economic security, and fairness. It will probably have parts of capitalism, surely many parts of socialism, and who knows what else. Until then we will continue to have the ugly, usually unseen side of capitalism where a few lead lives of unimaginable affluence while billions do without basic needs. If an outside visitor discovered humanity and looked at how we allow many people to live, they would conclude we are insane.

    • Steve Buckstein

      David, when you conclude that capitalism is great for the winners and not so great for the losers, I will refer you to Eric’s comment above where he points out that it’s better to be poor in Singapore than in India.

      • 3H

        Both politically and economically?  Or just economically?  

        • Steve Buckstein

          I’m frankly not sure which country poor people would rather be in from a political standpoint. From an economic standpoint, I assume that the more prosperous country (in this case Singapore) is a better place to be poor.

        • Steve Buckstein

          I’m frankly not sure which country poor people would rather be in from a political standpoint. From an economic standpoint, I assume that the more prosperous country (in this case Singapore) is a better place to be poor.

          • 3H

            But.. you are arguing in this post that free markets and political freedom are inextricably joined.   Now the argument seems to be it is better to be “less” poor in an authoritarian country than it is to be “more” poor in a more politically open country. 

            Which do you think is better if you have to choose?   Be less poor, but have fewer political rights, or to be more poor, but have greater political freedom?

          • Steve Buckstein

            3H, I think the answer is subjective. You might value political rights over economic freedom while someone else might value the opposite.

          • 3H

            But I was asking you which you would prefer Steve.  Since we seem to have arrived at a point that it is possible to be more poor but with more political rights.  Which would you personally prefer – political freedom over being more poor… or being less poor but with fewer freedoms?

          • Steve Buckstein

            Personally, I would prefer to have it all. Absent that, I’m more than willing to use some of my economic assets to help secure more personal and political freedoms for everyone.

          • 3H

            But.. if you can’t have it all Steve.  Quite a few people don’t you know.   If you had to choose  which way would you go?

      • Anonymous

        Steve, it’s better not to be poor anywhere. I think we should aim for a higher bar.

        • Steve Buckstein

          David, on that we can fully agree. The question then, of course, is which economic and political systems make your “higher bar” more obtainable. On that we may disagree.

          • the real valley person

            The answer is, in a mixed system, with relatively free but strategically regulated markets, public social insurance, political & civil liberties.  If in doubt, go down the list of nations that have all of the above in varying degrees.

          • Steve Buckstein

            valley, is there one definitive list?  I think there may be many, with different interpretations of all the terms you allude to. 

            For example, your “strategically regulated markets” might be my unjustified government intrusions into the marketplace.

          • the real valley person

            “is there one definitive list?”

            You can start with the OED and perhaps add a few. http://www.oecd.org/document/58/0,3746,en_2649_201185_1889402_1_1_1_1,00.html

            ” For example, your “strategically regulated markets” might be my unjustified government intrusions into the marketplace.”

            Exactly right. And every wealthy nation on earth has regulated markets to varying degrees, so what does that say about your position versus mine? It says to me you hold your position ideologically, not practically. If it were practical to have zero market regulation, someone would have figured that out by now and proved how well it works no?

            Unregulated markets are a theoretical construct, not reality. Each market that once was unregulated became so to solve observed problems, like pollution, poisoned food, and financial speculation that has brought down entire economies. The adult conversation is whether any particular regulation does more harm than good, not whether it is an “unjustified intrusion” that violates a Randian principle. 

            Somalia may be the only nation with zero government intrusion into the market place. Not an aspirational model.

          • Steve Buckstein

            I was asking for a list that ranked countries by your criteria. The OECD list may be intersting, but not very user friendly for this discussion.

            I’m not arguing here for no regulation of markets. Just that your definition is open to much interpretation from many angles.  We won’t settle such debates here, so I’ll simply conclude by agreeing with you that Somalia is not my aspirational model either.

          • the real valley person

            So you agree some regulation of markets is ok, but we may disagree on whether a particular regulation is appropriate? Great. That is a reasonable, practical  basis for debate. I misread you perhaps.

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