Occupy Portland: Don’t replace one set of thieves with another

{Note: This commentary was written before Mayor Adams ordered Occupy Portland to vacate the two downtown Portland parks it’s been camping in by tonight at midnight. The focus below is not on the camp, but on the ideas apparently held by the occupiers.}

The recent Occupy Wall Street/Occupy Portland movement has focused attention on a number of perceived ills in our society. Fortunately, a new book, written before the movement began but distributed in the middle of it, can shed light on why many of the “occupiers” blame the wrong people for their troubles and risk replacing one set of thieves with another.

The Morality of Capitalism is a short book of essays written by entrepreneurs, philosophers, and economists. Each brings his own perspective to the subject. The editor, Dr. Tom Palmer, may have anticipated the Occupy movement, because he included in the book’s Introduction a timely discussion of free-market capitalism versus crony capitalism. It’s a discussion that the occupiers would do well to read.

Tom Palmer is on a book tour, which included a forum sponsored by Cascade Policy Institute in Portland on November 3. Just a few blocks from city and federal parks “occupied” by a mix of protesters, homeless, and street youth, he shared his insights on the movement and where it goes wrong.

He thinks the occupiers yearn for a world before modernity. The creative destruction involved in progress and innovation scares them. Here is a summarized example Palmer used that younger audience members may not have related to, because the innovation it involves largely happened before they were born:

Not too many years ago people went to school to become typewriter repairmen. Every town had a typewriter repair shop and you could earn a respectable living repairing them all your life. Then, personal computers were invented and typewriters virtually disappeared, putting the repairmen out of work. What happened to them? They all starved (just kidding). No, they retrained for other, more useful jobs and we all benefitted from the computer revolution. The typewriter repairmen didn’t die — the way things had been done died.

Palmer places blame for the recent economic crisis at the feet of government enterprises, including The Federal Reserve System, mortgage facilitators Fannie Mae and Freddie Mac, and The Bank for International Settlements.

He explains that free-market capitalism involves profit and loss, but cronyism is only about profit. Losses are pushed off onto the taxpayers. Cronies are friends of those with political power. They seek protection from market forces. They urge their political friends to outlaw their competitors and to bail them out with taxpayer funds when their risky schemes go wrong. Those now occupying Wall Street and Portland parks may have identified the cronies, but they mistake them for those who bear the ultimate blame.

One of Palmer’s more colorful descriptions may resonate with the occupiers. He postulated that most nations were established by pirates―stationary pirates who, rather than periodically attacking ships and looting them, now could loot smaller amounts from their subjects all the time.

Another very powerful insight might make the occupiers stop and think about their assumption that the rich got that way by stealing from the rest of us, thus making us poor. Palmer pointed out that poverty has no cause. Wealth has causes. Poverty is the absence of wealth. In the Introduction to The Morality of Capitalism, he states:

In many countries, if someone is rich, there is a very good chance that he (rarely she) holds political power or is a close relative, friend, or supporter—in a word, a “crony”—of those who do hold power, and that that person’s wealth came, not from being a producer of valued goods, but from enjoying the privileges that the state can confer on some at the expense of others.

In a country with a primarily free-market capitalist system, the rich got that way by providing value to others. They created, made, and/or sold goods or services that lots of us value and are willing to pay for. We value those goods or services more than the money we voluntarily give up to acquire them. Both sides of these transactions benefit.

Boiled down, the essential difference between free-market capitalism and every other economic system is that capitalism involves voluntary transactions between willing buyers and willing sellers. It is this voluntary feature that makes capitalism moral.

Occupiers don’t seem to have grasped this important concept. Too many of them seem hell-bent on trying “…to redirect crony capitalism in the protesters’ preferred direction, stealing For them rather than From them.”* Theft, whichever direction it goes, is still theft.

* Gary Galles, “Protesters’ gripe is with crony capitalism,” October 12, 2011.

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