It often surprises me to watch presidential candidates debate about how to deal with several problems occurring today in the United States. I am not an American, and I don’t vote for the U.S. presidency. However, through social networking in Facebook and Google+, and what I read in the news daily, it seems that Americans are looking for a good candidate for the presidency.
The right-wing is now divided between the more intelligent conservatives and the Tea Party. I agree with the economist Robert H. Frank when he said that if you use Venn diagrams you will be able to see that the set of issues the Tea Party is angry about and the set of issues the Tea Party is confused about intersect perfectly in one whole circle. When they describe Obama as being a socialist bordering on Nazism and Marxism, they are not really thinking. The fact that Nazi means national-socialism does not mean that the sort of socialism that socialists in general are asking for involve concentration camps. Tea Partiers forget how many Marxists and Communists were persecuted by the Nazi regime, and how Hitler expressed his hate for them in Mein Kampf. Needless to say that not all socialists are Marxists. There are anarcho-syndicalists or libertarian socialists, which involve socialism comprised of free federation of communities of workes without the existence of a state. There are also socialist-democrats (and I count myself as one of them) who essentially advocate for a mixed economy where the free market should have its own place, but regulated by the government, while the government would assume the responsibility of certain essential goods.
Yet, Obama is none of these things. Supposedly, he is a liberal (pro-capitalist, but centrist), although I agree with Bill Maher that he is not even liberal. This means that Tea Party and other people in the right have absolutely no idea what they are talking about. If Obama were a socialist a la Soviet Union, he would have socialized all banks and private enterprises at this stage of his command. He hasn’t. He has only carried out a bad Keynesian approach, which is different from a Marxist approach. Marx wanted to abolish capitalism. Keynes wanted the government to intervene to save capitalism. Much of what Obama has done has been to temporarily assume the shares of some companies and bail out others which are “too big to fail”. I don’t think that this was a good approach to companies responsible for the economic downfall, but ever since Bush, this has been the tendency of the federal government (and most industrialized governments thus far).
On the other hand, for many liberals and progressives, Obama’s term has been an abysmal failure. Progressives elected him because he did talk about change in Washington, D.C., no more business as usual. He wasted a lot of valuable time trying to be “conciliatory” to an anti-conciliatory right-wing, especially when Congress was dominated by the Democratic Party. Before the 2008 elections, I knew he would also be a failure in terms of human rights. Before he was elected president, he voted for FISA. He promised to end the Iraq war and he did, but after three wasted years spending money on it, increasing the national debt exponentially. He promised to close Guantanamo … that never happened. He promised that his administration would be crystal clear regarding Iraq and government affairs in general, yet, the year 2011 is an all-time record of secrecy and censorship regarding freedom of expression (see the statement made by the Electronic Frontier Foundation). To make matters worse, still in the midst of a recession (with a timid sort of recovery), as we speak the President is preparing U.S. forces in the Ormuz Straight in an apparent plan to attack Iran. Suppose the U.S. win, will it stay in the same way that the U.S. stayed in Iraq, draining the U.S. economy and needlessly increase its debt? Obama has also been the president who has most enforced anti-immigration laws (more than Bush or any other Republican administration ever has), especially Hispanic illegal immigrants. And last, but not least, he signed the damnable National Defense Authorization Act of 2012 recently (December 2011) which opens the door to violations of human rights against American citizens. In almost all accounts, from a progressive and even liberal standpoints, Obama’s administration has been significantly worse than Bush’s.
Both the right and the left are looking for new options, and the U.S. is paying close attention to Republican presidential candidates, given that the Democrats are pretty much stuck with Obama. What completely amazes me among all the candidates is the apparent blindness regarding taxes. Even Rick Santorum, a candidate I certainly do not respect (politically at least), stated that for job creation, we need to reduce corporate manufacturing rates to zero percent, and I know of other Republican candidates who would perfectly agree with that plan.
This is insanity!
Since when tax-exemption in any industry has been key for job creation?
Let’s Read Adam Smith Again!
Republicans and conservatives in general are supposedly followers of Adam Smith. I’m a socialist, but I can really, really appreciate Smith’s invisible hand doctrine. There are some forms of selfishness which benefit the public by creating innovation at low cost. If selfish people enter in the business world, in an environment of competition, the market will make sure that the public will have the best quality product at the lowest market price possible. This is perhaps one of the greatest insights in the history of political economy. Yet Smith himself was a lot wiser than his supposed disciples. Not always would the market benefit the public. We should take into account these passages from The Wealth of Nations:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible, indeed, to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. (p. 111)
To widen the market, and to narrow the competitiion, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can only serve to enable dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, as absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order, ough always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it (pp. 213-214).
Yet, for some reason many people on the right, especially those of the Tea Party, readily ignore Smith’s advice. Smith’s position is not that the government should not participate in the economy …. period. On the contrary, when things are unequal, and certain people “of the same trade” conspire and oppress the public, the role of government is precisely to set the laws and regulations in order to prevent that from happening. Smith’s advice that government should not intervene with the economy has more to do with the fact that many people of “the same trade” will seek to go to government so that a certain bill is passed, so that a new law will benefit corporations in detriment of the public. In such cases, government should just stay out of the way, not legislate such policies, and let the “invisible hand” of the market rule.
However, there are some other aspects about Adam Smith’s doctrine which are usually overlooked by many of his supposed fans when they propose tax exemptions as the way of creating jobs. In the third chapter of The Wealth of Nations, Smith talks extensively about division of labor. This chapter is very illuminating.
As we all know, Smith held that the wealth of nations is basically the product of three components:
- Rent of Land
Rent of the land involves the sort of payment for facilities that you need for production (although in The Wealth of Nations Smith uses the term “land” in a broad sense, Smith uses examples of agriculture to convey his point). Salary is the nominal labor price which you pay your workers, while the benefits involve the profit component. Note that Smith did not dismiss taxes. Smith recommended that taxes should be established on luxury, as well as on the rent of land, not over benefits. (See an excellent brief summary on his views on taxes here). Actually, he elaborated extensively (about one third of his work) on how governments should tax. Certainly he, an ethicist, would have never subscribed to the slogan that “all tax is theft”. Yet, I want to differ from Smith regardding the idea that profit should not be taxed, and suppose tax on benefits to use Smith’s own theory to get to the point I want to make.
Notice that, though taxes themselves can serve to regulate the economy (e.g. taxes on luxury), nowhere in Smith’s analysis taxes (or lack of them) play any role whatsoever in creating jobs. That is because in the third chapter of The Wealth of Nations, Smith reveals the most fundamental aspect of job creation …. the size of the market (pp. 10-11, 21-25). When I explain Adam Smith to my students, I always say: “I wish that there were massive sales of philosophy books all over the world, so that we see the fruits of such industry of thinking and rationality. Yet, since the market of the Twilight series is much greater (yuck!), I guarantee you that the number of workers producing Twilight products is greater than those producing philosophy books (grumpy face)”. Since the Twilight market is a lot greater than the Husserl market, then the number of employees needed for the Twilight market will be a lot greater than the Husserl market.
Of course, taxes should not be so high as to strangle an industry. Taxes which require a hundred percent of profits would make any industry fail miserably. Yet, with more moderate taxes, let’s suppose 15% or 30% or so, an industry might persist (depending on the circumstances). Yet, once a right tax rate has been required by the state and the federal government, then the question is whether reducing it will create jobs. The answer is no, for reasons given by Smith himself in that third chapter. I will use a more “down to earth” analogy.
Let’s say that I want to create a business selling toasters in Puerto Rico. I do a market analysis and I find that in order to satisfy the effective demand (the number of people who want my products and can pay for them), I will need to hire 500 workers. I hire these workers, and the production process and sales lead to a net profit of $1,000,000.00 this year (without taxes). Suppose that I need to pay 15% taxes on profit. Then that means, that at the end of the day I will end up with $850,000.00.
Now, what would happen if the government, for whatever reason, wants to lower taxes to provide economic incentives (supposing that my market size remains the same)? Does it create more jobs? Not really. If my market research still shows that all I need is 500 workers, then hiring more workers than that will not give me an economic advantage over my rivals. As Adam Smith pointed out, the quality of production depends greatly on the ratio between those workers who are actually producing and those who are not (p. 8). If I hire more workers than I actually need, then that would be a disadvantage in the market.
On the other hand, it is perfectly conceivable that I could use that money to increase my workers’ salary. Yet, that would not be creating jobs, would it? All I am doing is keeping the same number of employees, but I would be paying them more. On the other hand, due to the competition in the market, if my rivals are not increasing their worker’s salaries, then that would mean that increasing my workers’ salaries would be another disadvantage in the marketplace.
So, what did the tax reduction accomplish? Making me richer … and that’s it. Let’s say that politicians wanted to reduce the tax rate from 15% to 5%, then I would end up with $950,000.00 profit. In other words, I would end up with $100,000.00 more without creating a single more job in the process!
Conclusion for Part 1
What we have seen here is just the beginning of how the right-wing (especially the radicals of the Tea Party) completely misunderstand basic economic concepts and how the economy works. Lower tax rates on corporations, taken on principle and completely decontextualizing the proposal, can be an incentive for industry but in detriment of the public. There is simply no way that a general policy of tax exemption will create jobs, simply because taxes (or lack of them) have no relationship at all with job creation. This is because job creation is directly related to market size (supply & effective demand), not to tax rates.
In other words, the key to creating more jobs is to create a market, and, as John Maynard Keynes pointed out, only government has the means, the motive, and the power to create those markets, and turn things around …. even if that means more government spending and debt! The problem with the federal government today is that it has made little effort in creating these markets through the component of effective demand, spent too much money bailing out corporations which are “too big to fail”, and spent trillions of dollars in a war everyone knew would not be won in the end. I’m sad to say that both Bush and Obama have contributed to this crisis.
This is not all I have to say about the subject, it is only the beginning. I want to talk in later posts about the role of tax exemption in the globalized world, and in the U.S. For now, I leave you with some final thoughts by Bill Maher.
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations. US: The Pennsylvania State University. (It can be downloaded here for free in its entirety in PDF Format).
In my dreams would I have imagined that I would read a book like this, especially during my research regarding applications of Darwinism to social. I know that in some tangential way, Darwin’s theory of evolution was related to the way we create economic systems. Darwinian natural selection has to do with the competition among individuals and groups for scarce resources. Humanity’s economic systems have to do with the distribution of scarce wealth. Also, we have to look at the fact that we inherit much of our behaviors from our ancestral animal behaviors regarding scarce resources. Yet, economic systems are conventional and, in a way, unrelated to nature.
Yet, there is a challenge being made by Robert H. Frank in his new book, The Darwin Economy: Liberty, Competition, and the Common Good. He predicts something rather odd: in a hundred years from now, if you ask professional economists who do they consider the father of their own discipline, instead of Adam Smith, most of them would say “Charles Darwin”.
Yeah, Charles Darwin!
Before you place Frank in a psychiatric facility (at least in your imagination), he invites us to take a look at the way Darwin describes natural selection processes. He reminds us of Darwin’s initial development of multilevel group selection, and how individual interests relate to group interests. For example, how did the gazelle accomplish its current average speed? Classic Darwinian natural selection would tell us that it is the result of species warfare. Nature selects gazelles who have the ability to escape predators using fast speed. In this case, through reproduction, the fastest gazelles pass on genes that will benefit the group. In this case, individual interests and group interests agree completely, since the group on average is better able to escape predators.
The same happens at the economic level. Adam Smith’s “invisible hand” of the market works perfectly in this case, because the competition among individuals or among companies benefit both individuals and groups.
Yet, there are other scenarios. The cover of Frank’s book tells us all about it. Consider the bull elk. They have antlers which function as weapons in order to compete with other males for female. The winner, gets to pass on genes. So, from the point of view of the interest of the individual bull elk, the bigger the antlers, the better! This leads to the prevalence of larger and larger antlers. Yet, the process cannot continue ad infinitum. Having very big antlers is a disadvantage from a group standpoint: large antlers increase the risk of getting stuck among tree branches in densely wooded areas, hence the risk of being eaten by wolves. If those genes are passed along, they would compromise the group. In this case, individual and group interests diverge.
The same thing happens with the economy. Too much competition among individuals or corporations can lead to the sort of negative externality which can be a real problem, even a threat, to the group. In this case, when too much competition happens, and the interests of the individuals and groups diverge, Smith’s “invisible hand” breaks down.
Frank even adds another imaginary, amusing, but interesting statement. If bull elk were to be asked in a referendum whether to reduce their antlers by half, they would overwhelmingly favor it! Of course, such experiment cannot be carried out with actual bull elk, but we can do so with humans. We don’t have antlers, of course, but we are often found in competition, sometimes too much competition. Frank gives the example of an actual experiment being carried out with hockey players. Thomas Schelling, an economist, has pointed out the fact that when hockey players are individually given the choice of using their helmets or not, they usually tend not to wear helmets, yet, when they are asked to vote to implement a rule for the group to wear them or not, they invariably vote in favor of wearing helmets. Why is that? If you make individuals choose whether or not to wear helmets, they will choose not to, because not wearing a helmet increases a player’s advantage. Maybe he can see or hear better than players who are wearing helmets. As a result, those players who use to wear helmets will now choose not to, to gain that advantage. At the end of the day, no one will wear helmets, and everyone would end up having equal advantage. The downside of not wearing helmets, though, is that everyone is at risk of serious head injury. Everyone is worse off. This is similar to the bull elk having horns too big, there is excessive competition. So, when hockey players are asked whether to implement a rule requiring everyone to wear helmets, they will vote in its favor. A simple nod or loose agreement among players is not enough, they need a collective mandate.
The same thing happens to states. During the Cold War there was a huge amount of waste due to the arms race. In this sense, the U.S. and the Soviet Union were incredibly wasteful. In order to control that, they couldn’t control that race just with winks among their representatives and diplomats, but rather by signing treaties to slow the pace of competition or to disarm very harmful weapons. The treaty would include checking on each other’s facilities in order to be certain that this would be carried out. That’s how they could use enough money for education, health care, utilities, and so on, without spending it most or all on the arms race.
Frank argues persuasively that, contrary to what many progressives think, many of the ills of the economy are not produced by the prevalence of monopolies and oligopolies, but rather by too much competition. Libertarians are usually right when they say that government is wasteful. Yet, excessive competition can be incredibly wasteful too, in ways that are many times more harmful than government. Just one example (of the many offered in the book) when rich people celebrate parties for children’s birthdays. Here another element creeps in the competition process, the degree in which people spend on those kinds of parties is not based on absolute position, but on relative position. As a result, if you are a millionaire who celebrates their fifteen years-old birthday with a $5 million party, perhaps your neighbor will want to do it better and spend $6.5 million party for his fifteen-years old. This process will go on indefinitely leading to big waste of money. This is not a hypothetical situation, this really happens! At the end of the day, the children will be just as special, nobody is happier no matter how much money has been spent, so the money is … wasted … literally!
In these cases, Frank does not suggest that we forbid $5 million parties, but rather establish a steep progressive consumption tax that will persuade rich people not to spend too much. The state or federal income obtained through this consumption tax will serve for roads, bridges, security, firefighting, police, and so on. This will benefit both the rich and the poor. Frank argues that if you are a smart rich man, you would love to live in a place with those sorts of rules and laws.
Of course, libertarians and people of the Tea Party will say that all tax is theft, that we should diminish the government. Interesting thought, but, as Frank points out, we need to tax something. If we don’t tax, there can’t be a state, if there is no state then another country will invade … and you’ll end up paying taxes to that country.
Frank shows that in many cases, taxes are a unintrusive way to stir corporations and businesses away from the sort of harmful behavior which arises due to too much competition. The problem that we have now is that we are usually taxing the wrong thing: the payroll tax or the savings tax. Yet, we don’t tax harmful behavior enough. We usually penalize them, but don’t tax them.
The author of The Darwin Economy uses this Darwinian framework to evaluate the economy. Unlike bull elks or gazelles, who can’t communicate and cannot act in ways which are against their nature, we can make better choices. Darwin helps us evaluate these competitive dynamics that occur even in the economy, lets us evaluate the problem, while simultaneously helping economists point out possible ways of solving these problems. Within this framework, Adam Smith’s “invisible hand” insight is just a special case of a broader and more general understanding of competition. There are criticisms to both progressives and libertarians alike.
He applies this reasoning to lots of cases: such as pollution control, employees competition for better salary and safety, housing, alcohol, among many other aspects o the economy. It is also an invitation to many in the right wing to really think about how taxes can be beneficial for society as a whole when done the right way. Tax should not be a forbidden subject, especially in the United States. Let’s scap taxes to all useful activities, and tax to discourage activities, especially those which can cause harm to others: noise, carbon dioxide, road congestion, etc. Have a progressive consumption tax, not an income tax.
This is a fascinating book and I highy recommend it. For me, it has been very illuminating.
Video – Part I
Video – Part II
This article is part of a series of articles on the subject of evolution, ethics and spirituality:
Evolution, Ethics, And Spirituality: Part XVII — Two Big Mistakes in the Twentieth Century (and the Twenty-First?) (2)
(The entire analysis from here on is based on this proposal by the philosopher André Comte-Sponville with some modifications of mine)
Ayn Rand: Religious Zealot
I remember the first time the name "Ayn Rand" appeared to my consciousness. It was in an online Yahoo! forum which no longer exists. A girl (presumably a teenager) was learning philosophy reading a book called Philosophy: Who Needs It? by Ayn Rand. She said that Ayn Rand called Kant an "idiot", which is the reason why he should be rejected. The self-righteous tone of this girl made me wonder about either her understanding of Rand, or about Rand herself.
I went to the bookstore, and found the book in question, and I read it. To my surprise, I saw that this girl did not misunderstand Rand at all, quite the opposite, Rand was aggressive against Kantian ethics (and Kantianism in general). The reason for her hostility against Kant has to do with the fact that he says that the more disinterested is an ethical act, the more valuable it is from an ethical standpoint. In other words, only an act from duty can be more valuable if it is more removed from our inclinations (I have discussed that in this blog post). After I researched more into her way of thinking, I understood why she rejected this view. She was born of a rich Jewish family in Russia, who witnessed the atrocities made by Stalin, and had to flee. When she went to the United States, he then praised capitalism because of its egoistic principles, and professed what she called "ethical egoism", a doctrine which says that a moral being should act in his or her own self-interest. Of course, the best ethicists around the world consider ethical egoism to be inherently unethical, even from an utilitarian standpoint … and even the utilitarian standpoint has a lot of flaws to become an adequate basis for ethics (see Ferrer & Álvarez, 2003, pp. 110-113). Rand’s egoism almost sounds as the way as Dawkins’ selfish gene should act, but even from an ethical standpoint, Richard Dawkins argues that sometimes we should go against our selfish genes.
I have read a lot of Rand (an indigestion of her philosophy would be a more adequate description), and I can say is that if she is a "philosopher" then I’m the king of Antarctica. My specialty is philosophy of science and epistemology, and I raised my eyebrows a lot of times while reading her books, and it became too evident that her conception of logic is too primitive. She says that it is based on Aristotelian logic, but even Aristotle’s Organum is far more sophisticated than her way of looking at logic. It overlooks completely all Medieval advances in logic, needless to say all contemporary advances of mathematical logic. Any philosopher which such an extremely poor understanding of logic should not be called "philosopher" … period. Needless to say I have also studied epistemology of mathematics, and Rand’s view on the subject is so miserable that if her proposals were ever carried out, mathematics would literally fall back to a stage even before Pythagoras. Some issues she raises about science don’t seem to account for recent advances in philosophy which would render her entire epistemological doctrine obsolete (it is not more advanced than seventeenth century epistemology, sometimes I wonder if no more advanced than fourteenth century epistemology). Her understanding of Kant, Marx, Wittgenstein, Bertrand Russell and logical positivism is also miserable, because she practically used strawman arguments all over the place, placing in their mouths things they didn’t say, to then quickly dismiss them as "irrational". Her annoying repetition of the empty statement "existence exists" doesn’t contribute anything to philosophy. All of her positive aspects of her doctrine can be found elsewhere, better elaborated with much more sophisticated reasoning. Even her right wing views can be found elsewhere better supported by evidence and with much more sophisticated reasoning. Again, if she is a philosopher, then I am the bald King of France (to use Bertrand’s Russell’s famous example).
However, what most surprised me was that unlike serious philosophers, I found that some of her books had a card for you to mail and join the Objectivist movement. It almost made me feel as if I this was reading Dianetics and you are invited to fill the free personality test and be recruited by Scientology. This analogy with a cult like Scientology is not far-fetched. Rand made her views into a cult. One trait we can find all over her works is that she uses the word "rational" arbitrarily. It is almost as if she called "rational" all of those things she likes, and "irrational" all of the things she doesn’t. Even some admirers of Ayn Rand, such as Michael Shermer in his Why People Believe in Weird Things?, have noticed this behavior. Shermer, in his book, talks extensively about these aspects of the Objectivist movement, ones initiated by Rand herself (see Shermer, 2002, pp. 114-123; this chapter is reproduced in this website). But the best analysis I have ever seen regarding Objectivism and Rand appears in David S. Wilson’s Evolution for Everyone (Wilson, 2008) in a chapter called "Ayn Rand: a Religious Zealot" (pp. 268-282; he basically reproduces much his arguments here). From an evolutionary standpoint (specifically group selection’s), religions develop their own doctrines (many times diverging from reality) for their practical consequences. Yet, some develop fundamentalist views, and Ayn Rand falls into one particular form called market fundamentalism. Sloan states what is wrong with Rand’s ethical standpoint:
Of course, the fundamentalist beliefs of Rand and the Hutterites differ vastly in what they impel the believer to do. Hutterites are impelled to abandon self-will and objectivists are impelled to pursue their own interests as the highest moral virtue, but both are comforted with the certainty that everyone will benefit in the end.
It is on this basis that I can use the term market fundamentalism, not as an epithet, but as a verifiable fact. Use my 2×2 table to code the way that words such as "market" and "regulation" are used by market fundamentalists and I’ll bet you money that the win-lose and lose-win boxes will remain largely unfilled. That is a manifestly false description of the real world that eliminates the possibility of resolving the hard tradeoffs of life (Wilson, 2010).
Market Fundamentalism: The Golden Calf
The Bible talks about the story of the golden calf. The people of Israel were in the desert, Moses went to Mount Sinai to receive the Torah from Yahweh. Meanwhile, the Israelites have this idea of building a golden calf to represent Yahweh and develop a cult to worship it as if it were the God who brought them out of Egypt. When Moses walked down from Mount Sinai ordered that image destroyed, because Yahweh rejected such practice, which was essentially idolatry … trying to substitute the real Yahweh with a representation of him … as a golden calf (Exod. 32).
André Comte-Sponville criticized Marxism for suspending the inherent economic requirements for functionality and substituting it with ethical logic through the juridical-political stratum. Yet, he warns greatly about the opposite: to suspend many of our ethical responsibilities and judgments to substitute them for economic needs. He calls this the Golden Calf Error, the idolatry of capitalism (Comte-Sponville, 2004, p. 97-102). It is essentially what Ayn Rand advocated for: market fundamentalism. This consists of diminishing the power of the juridical-political stratum to let the market roam free.
The reasons why the Golden Calf Error should be considered a mistake should be evident for everyone, but not many people see why. As we have argued so many times before, the economy is amoral. Since it is amoral, no one should expect for it to be responsible, which is one quality which can only be applied to moral beings. The economy (any economy!) is intrinsically irresponsible, it doesn’t matter how much you try to rationalize it to make show it as responsible.
Yet in recent years we have all been the witnesses of the irresponsibility of the market. I don’t say this to condemn the market a priori, but to say the obvious. We should not expect the market to make responsible decisions. And it is incredible that I often hear some friends of mine who identify themselves as right wing libertarians who recognize that the market is indeed irresponsible, but at the same time ask for less regulations so that the "invisible hand of the market" keeps operating on its own. Well, every time such a thing happens, an irresponsible foul up follows. When they complain, I ask them: "If you know that the market itself is irresponsible, why the heck do you expect it to act responsibly?!"
In fact, one of them loves to watch Jim Cramer’s "Mad Money" TV show. From an ethical standpoint, it is one of the unethical things I have ever watched on TV, CNBC should be fined heavily for it, and Cramer should be in jail. "Mad Money" has made a lot of lives miserable, because it makes people invest everything they have in an irresponsible Wall Street stock market. It shows Wall Street literally as a game! When everything in the stock market went south, the people misled by Cramer and CNBC people lost everything! If you don’t believe me, watch Jon Stewart of the Daily Show tear Jim Cramer (and CNBC and the media in general) to pieces: Part 1, Part 2, Part 3.
And this subject is important, not merely because moralizing the economy itself is dangerous in terms of human rights (as I’ve shown in the case of Marxism), to cancel our ethical concerns on the free market can be just as dangerous. As Naomi Klein has shown in her book, The Shock Doctrine, after the coup-d’état of the socialist government (democratically elected… by the way) of Salvador Allende, the famous Chicago Boys thought that the best thing to do was to give Chile "shock therapy", that is, to build a completely free capitalist country from scratch. What did it had to do for that to be possible? Create a dictatorship! Why a dictatorship? Because a dictatorship would eventually cancel the legitimate ethical concerns people had about the way the market would be run, or propose alternatives to the "program" of the Chicago Boys. It would even cancel the legitimate concerns by people who actually were in favor of capitalism, and didn’t sympathize with Allende’s socialist government. The result? The disappearance of about 3,000 opponents, tortured 32,000 of Chileans, more than a thousand exiled, from 1973 to 1990. At the end of the day, he had to implement some socialist measures in order to calm down the opposition. The similar things happened with right-wing governments in Guatemala, El Salvador, Brazil, Bolivia, Argentina, Panama, among many others in Latin America.
Let’s say, for the sake of the argument, that such measures would have actually worked. Does the fact that it worked make the inherent indignity and human rights violations worthwhile? In other words, the canceling out the of the ethical realm would be a violent act against human dignity, because it would turn humans as mere means for the market, not the other way around. Contrary to what Ayn Rand says, pure capitalism (especially corporate capitalism) is inherently incompatible with ethical virtues and acts.
In essence, to let the "invisible hand of the market be free" is nothing more than another instance of the Funes Syndrome: the argument that if the market were the freest possible, then everything would be better. Market fundamentalism at its best! Capitalism is successful over a Marxist system, because it appeals to human nature, asking it to be greedy, as we were made to be. But to the extent we make such an economic system the "most perfect possible", it degrades human nature.
Needless to say, such economy is self-defeating and unsustainable, but, this is the economic model being adopted world-wide in the new global market!
Comte-Sponville, A. (2004). El capitalismo, ¿es moral? México: Paidós.
Ferrer, J. J. & Álvarez, J. C. (2003). Para fundamentar la bioética: teorías y paradigmas teóricos en la bioética contemporánea. Spain: Desclée de Brower.
Klein, N. (2007). The Shock Doctrine: the rise of disaster capitalism. NY: Metropolitan Books.
Peikoff, L. (1991). Objectivism: the philosophy of Ayn Rand. US: Meridian.
Rand, A. (1982) Philosophy: who needs it? US: Signet.
Rand, A. (1990). Introduction to Objectivist epistemology. US: Meridian.
Shermer, M. (2002). Why people believe in weird things? Pseudoscience, superstition, and other confusions of our time. NY: Henry Holt and Co.
Wilson, D. S. (2008). Evolution for everyone: how Darwin’s theory can change the way we think about our lives. NY: Delta.
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