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Asheville Citizen-Times

Don't confuse capitalism with government

Chuck Kelly • May 20, 2010

In his column, “Capitalism vs. capitalists,” Jonah Goldberg suggested that “the trouble of socialism is socialism. The trouble of capitalism is capitalists.” Actually, the trouble of both is government.

Capitalism — an economic system in which private individuals own and control the means of producing goods and services — did not cause the Great Depression, the 1980s savings and loan debacle, or our present economic meltdown. Bad government regulatory, fiscal and monetary policies created those events. In the same way, capitalism didn't create the greatest economy and the most powerful country the world has ever known. Good government policies did.

A Yiddish proverb: a half-truth is a whole lie. The statement that capitalism and its free markets gave the U.S. the greatest economy the world has ever known is a lie. It's a classic example of a definition fallacy (overly broad). It's a lie because it suggests that government had nothing to do with our economy's success. As a matter of historical fact, government had everything to do with our economy's success.

The complete truth is that capitalism and its free markets — as defined, monitored and protected by government — made the U.S. economy a success. Of course, even that statement isn't complete. You also would have to include our democratic system of government, an effective and comprehensive public school system, a reasonably educated electorate, and a free and investigative news media that exposed the skullduggery in both government and private industry.

Underlying all that is the American public's respect for the classic ethical standards of rights, justice and utility. Rights relate to the individual: the right to the opportunity to make a decent living, for example. Or to have full, accurate information about important social problems.

Justice goes further and relates to relationships between individuals, such as equal wages to every person in a work group doing the same kind and quality of job. Or, in a negative sense, equal punishment for equivalent crimes against society.
Utility goes still further, and involves the greatest good for the greatest number. The city council shouldn't pave a road from the center of town to the mayor's house in the country when poor neighborhoods still have unimproved roads.

It took all these factors to give the U.S. its great economy: underlying values, a democracy, an educated public, an investigative press and sensibly regulated markets. Those who claim that “government is the problem” and that we owe our success to unrestricted markets are simply wrong.

The cure for bad government isn't no-government or smaller government. The only cure for bad government is to replace it with good government. Those who claim otherwise are either profiting from bad government, or from government's absence or inaction. (Actually, government failure to take necessary actions is a sign of bad government.)

There are two basic philosophical views about how government should manage an economy. The first view is that a good economy is one in which individuals can rise from any level of society and achieve unlimited wealth. Since even individuals born into poverty can achieve unlimited wealth through hard work, intelligence, or even luck, a government need not concern itself with how well entire classes of citizens are faring.

Those who subscribe to this view are those who already have a head start in the race to the top: inheritors of great wealth, those with excellent educations, fortunate persons with powerful mentors, people with connections and so on. You could even include those in the dominant race, religion or national origin in a given society, even though they don't have an abundance of those qualities.

The second view holds that a good economy is one in which individuals can increase their wealth through hard work and creativity, but not so much that there isn't enough wealth left to be shared by others who work hard and make solid contributions to society, but are not as successful in accumulating money.

Subscribers to this view believe that government should concern itself, not only with an individual's right to improve his station in life, but also with the welfare of entire classes of its citizens: investors, workers, retirees, religious or ethnic minorities, the uneducated and unsophisticated, the victims of capricious fate (natural disasters and accidents) and so on.

This second view is not only a superior moral philosophical stand, it's a prescription for the long-term health and survival of a nation.

Chuck Kelly is a retired management consultant living in Burnsville and is author of “The Destructive Achiever: Power and Ethics in the American Corporation” and “Farewell Fantasyland: Time for Political and Economic Reality.” He can be reached at