Sunday, June 21, 2009

Rationing and Capitalism

In this article Chuck tells us about this The New York Times article which claims that socialized medicine will lead to health care rationing which according to NYT is "an inescapable part of economic life." It confuses rationing in our daily lives with the government mandated one. How is my buying stuff with my own money the same as a bureaucrat doing that with my money; and supposedly knowing what is best for me. It all starts with this one statement "access to medical care is a fundamental right."

How do we reach this point of deciding that anybody has a right to a good or a service being offered by another person. Right in this context means that the goods/services can be had forcibly and that the person who thinks that he has the right will decide if he wants to pay anything for it. Now, how is that person supposed to indulge in that long honored American tradition of "making money?" Well he can't - he is forced to accept whatever is offered to him. Pretty much like slaves who live on whatever the master deems acceptable. How did the bastion of freedom, individual rights, and the land of pursuit of happiness reach this point where enslaving another person is considered - in fact advocated openly in so called respectable media?

The mainstream media plays an important role in mobilizing the public opinion against Capitalism. The freedom to work, private property, money, division of labor, are all denounced and are blamed for all the problems of the society. These are the very things missing under Socialism and that has been the cause of the collapse of various Socialist countries in recent times. The environmentalism, animal-rights, are nothing but attacks on Capitalism in various forms.

Profit which indicates to what extent a person has succeeded in creating surplus over and above the resources with which he started to begin with, has become a dirty word. What is a businessman supposed to do? Feel ashamed that he created a profitable business? It's not a coincidence that the most profitable companies in America like Coca-cola, Microsoft, Walmart, are some of the most hated ones. They have consistently been the target of anti-trust regulators. The very concept of anti-trust is that if you are very successful you become a target. This very immoral law is undefined and it is up to the government to decide based on unknown parameters if you have broken the law.

I remember reading in Fortune magazine about a decade ago an article where the author suggested taking over Microsoft's patents. I was flabbergasted. Penalizing a company for it's success? In effect nationalizing the company. I was furious and wrote a letter to the magazine. I suggested the author be sent to India to see the result of his suggestion that had already been implemented. The patent system in India was in a primitive state then and the effects of nationalization had rotted the system to it's core. Fortune printed that letter but it was the last time I read that magazine.

In fact everything from inflation, depression, monopolies, just about everything which can be is blamed on Capitalism. It is another matter that in a perfect Capitalist system none of these things would exist. This where government steps in to protect the society from the evil, profiteering, greedy, businessmen. This where the "planned" society begins. It starts the avalanche of laws, regulations, codes, rules, to manage every aspect of the lives of people - supposedly to liberate them from the clutches of the Capitalists. Thus begins the task of freeing people from the free-markets.

The laws range from progressive income taxes, wealth taxes, labor laws, sales taxes (in India), licensing norms, public schooling, public transportation, and the list goes on. To manage all this - hordes of bureaucrats are needed along with hordes of inspectors and other state employees. Laws to regulate food, water, air, open spaces, closed spaces, vacant properties, occupied properties, laws to create laws, are constantly written and re-written even before people get used to the previous ones. I am talking mostly about India but in last few years I have realised distressingly a lot of these laws exist in America. In last decade India has moved closer towards free-markets and America away from it.

One of the key aspects of Capitalism has always been under attack, it's the capital or the money. One of the champions of this policy has been Krugman of NYT. The inflation of money supply as propagated by Keynes has been a consistent feature of governmental control. The removal of gold standard led to removing any restraints on politicians and the beginning of boom and bust economies across the world. In 2002 Paul Krugman advocated the creation of housing bubble and once the economy suffered from it, guess who is around to give advice to governments on how to tackle it - Paul Krugman. America did very well before the creation of Federal reserve, in fact prospered at unprecedented rates.

Here is what Reisman said in his book:

The ability to create money has also been demanded because it is vital in enabling additional government expenditures to be financed by means of budget deficits and thus in fostering the delusion that the government can provide benefits for which citizens do not pay. And when, as is inevitable, the policy of inflation results in rising prices, capital decumulation, and the destruction of credit, people demand price and wage controls, and then, in response to the shortages and chaos that result, the government's total control over the economic system, in the form of rationing and allocation.
We have seen the above result in country after country and yet in this conflict of economics versus altruism and self-interest versus self-sacrifice - it is altruism and self-sacrifice which keep coming out on top. Here in India rationing has been a way of life for a long time. Even though a ration card has lost some of its importance, it has been kept relevant for majority of the masses. The ration card is supposed to be the visa to the Socialist paradise. In reality a lot of food-stuff meant to be distributed through the government controlled fair-price shops is diverted to the black-markets. The corruption is rampant and all public officials and the shop owners associated with the scheme benefit from it.

Last year under right to information law, a major scam was uncovered when one women was discovered to have 901 cards in her name. Everything which is rationed is scarce and is available in the black market at a premium. Kerosene oil is one of the items and majority of it's supply is diverted and used by government licensed gas stations to adulterate petrol and diesel. This causes huge damage to the engines and ends up with vehicles producing far more pollution. So, for people interested in environment I would suggest backing the free-market system.

Capitalism has resulted in rising productivity and improved standards of living and Socialism has caused nothing but economic chaos and totalitarian dictatorship. I'll end by quoting Ayn Rand:

Capitalism has created the highest standard of living ever known on earth. The evidence is incontrovertible. The contrast between West and East Berlin is the latest demonstration, like a laboratory experiment for all to see. Yet those who are loudest in proclaiming their desire to eliminate poverty are loudest in denouncing capitalism. Man’s well-being is not their goal.

“Theory and Practice,” Capitalism: The Unknown Ideal


JG said...

Good post, Rajesh (could read your frustration in between the lines!).

Careful now -Krugman holds a nobel laureate in economics!! There was a distinct reason why winning Pulitzer prizes never interested me!

You may want to polish/edit the piece for typos.
Common mistake by writers is to mix up it's and its -it's is contraction for it is and its is possesive neutral gender noun.

My two cents of editing expertise -do not mean to patronize in any way.

Rajesh said...

Thanks JG,
I never thought I could write so much.
Your editing expertise is most welcome. Although I can only fix the typo if I knew where to look for one, and I am glad you think that I would know what a possesive neutral gender noun is :)
I guess i'll have to get something to teach myself grammer to stop torturing people. And then I can also start commenting on Burgess Laughlin's blog (have you seen his posting rules? I almost forgot whatever english I know) and the Objectivism forum.
But thanks anyway.

JG said...

speaking of healthcare -you may want to investigate this out: Glen Beck (FOX Network) on his show today talked about Wade Rathke, fired last year as CEO of ACORN. He now is evidently re-establishing ACORN under a new name, which I think is called Universal Community Organisers and is setting up shop and planning to make a stir for universal healthcare there (in India), believe it or not!!! (ACORN is in my view a very shady organisation with a huge labryinth that has cross-connections all over and accused of voter fraud in several states in this past Obama win elections.)

George said...

I googled "rationing" and "capitalism" and poof - your post pops up. I read it with the hope of reading an accurate and honest discussion on the subject - but once again, I've been disappointed.

My frustration, stems from a hope that people who claim a belief actually understand what that belief stand for.

In your case, my expectations were immediately raised when I read "Objectivism and Ayn Rand" - these are not the references of an illiterate person.

But alas, your post falls short in its first paragraph when you selectively qualify rationing according to its mechanism.

Laissez-faire capitalism, which you purport to believe in, is defined as a socio-economic system whereby scarce goods are RATIONED in markets by pricing mechanism.

Adam Smith wrote two famous books: The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. Most “capitalists” only reference the latter although the former is a much more important and influential work. I have found that most people who purport to be “capitalist” have never actually read either work.

Smith’s “invisible hand” capitalism of rationing through democratic market mechanism where participants act in their own self interest was discussed within the context of society’s ability to form and make “MORAL JUDGEMENTS” – so in spite of man's natural inclinations toward self-interest, Smith proposes a theory of sympathy in which the act of observing others makes people aware of themselves and the morality of their own behavior. This is fundamentally different than the more recent theology of laissez-faire capitalism – government enforced economic Darwinism.

Ayn Rand was an atheist and anarchist. Although neither are beliefs of mine, I do not impute any negative connotation on Rand’s (or Milton Friedman or Alan Greenspan) beliefs simply by their name.

An honest assessment of the past decade would lead a rational man to the conclusion that Wall Street Gordon Gekkos run amok as Rand profess was both socially wrong – bringing the economy to the edge of oblivion and practically wrong in necessitating a bailout by the resource of last resort the government.

If a society agrees to be governed as a constitutional republic for the benefit of all of the people and with consideration for the general welfare – governance and controls must be in place (via Statute Law) to prevent attacks and war – economic, social, health as well as military.

Back to my original point of frustration – until mainstream / joe six pack “capitalist” actually understand what they profess and the mechanisms by which their (MY) beliefs work – then a logical conversation can not occur.

In the future, please do some homework before spewing someone else’s mantra.