Whither Capitalism? Only When There is No Government

David Brooks recently published a very telling and interesting piece in the New York Times titled “The Larger Struggle” that went viral both on the Internet and in various print media, and I’m going to, among other things, try taking a stab at just why.

Brooks’ essential premise is that, while the end of the Cold War may have decided once and for all that “capitalism” (at least, Brooks’ definition of just what that is) is indeed superior to all other economic models – namely, communism, socialism, and fascism – it has very much to be decided on a world scale just which version of “capitalism” is preferable: Democratic capitalism or state capitalism. According to Brooks’ way of assessing things, so-called “nations” like the U.S., Denmark, Canada, and Japan generally practice the former, whereas the governments of China, Russia, Iran, and Venezuela traditionally hold with the latter. According to Brooks, in the first scenario, governments merely intervene in the marketplace when it becomes “necessary” to “level the playing field” – where under state capitalism, and Brooks quotes from Ian Bremmer’s “The End of the Free Market,” governments use market forces to “create wealth that can be used as political officials see fit.”

What Brooks misses, of course, is that both scenarios are essentially the same. They differ only in matter of degree. While state capitalism, so called, may involve direct participation in the marketplace by government – as in a fascist state – is there any effective difference when, in a so-called democracy, governments levy taxes, impose regulations and restrictions, create inflation through fiat currency creation, and distort markets by both sanctioning and subsidizing certain businesses and industries at the expense of others? If this is Brooks’ – or anyone’s – idea of true capitalism, then what are communism, socialism, and fascism? How do these totalitarian economic systems vary to any meaningful degree?

By definition, capitalism is the entirely private production and ownership of goods and services provided on a for-profit basis, and regulated only by the laws of supply and demand. Governments, by their very existence and fundamental nature, distort this process of self-regulation. They also inherently introduce the element of violent coercive force – a trait absent from peaceful, voluntary market activity.

But Brooks worries about places where “places where decentralized power devolves into gangsterism.” As if strong central governments don’t engage in criminal behavior and bullyism? He also asserts that, “State capitalism taps into deep nationalist passions and offers psychic security for people who detest the hurly-burly of modern capitalism.” All he has really done here is to point out how illogically those of both leftist and right-wing advocacy of governmental intervention in markets cling to their irrational doctrines as though they were defending a kind of religious zeal against an onslaught of heathens. Indeed, from the standpoinmt of their world view, this is perhaps not such a bad analogy.

Those who in any way proselytize for the forces of free markets must understand that no market is ever free until people are – i.e., when governments are no more. This is the only condition under which any form of real capitalism can exist and flourish. This is the only way that goods, services – and people – can enjoy the full bounty and blessings of liberty.

Anarchy and Democracy
Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory