On Brooks on Socialism and Capitalism

by Don Boudreaux on December 9, 2019

in Competition, Complexity & Emergence, Hubris and humility, Myths and Fallacies, Reality Is Not Optional, The Economy

David Brooks’s recent criticism of socialism and applause for capitalism contains much that is good. Indeed, much of it is very good (if not original to Brooks), such as:

I came to realize that capitalism is really good at doing the one thing socialism is really bad at: creating a learning process to help people figure stuff out. If you want to run a rental car company, capitalism has a whole bevy of market and price signals and feedback loops that tell you what kind of cars people want to rent, where to put your locations, how many cars to order. It has a competitive profit-driven process to motivate you to learn and innovate, every single day.

Socialist planned economies — the common ownership of the means of production — interfere with price and other market signals in a million ways. They suppress or eliminate profit motives that drive people to learn and improve.

Yet reading Brooks’s essay left me somewhat less than satisfied.

My dissatisfaction comes only mildly from Brooks’s stated choice of ‘economic heroes.’ Alexander Hamilton?! Teddy Roosevelt?! Hamilton was infatuated with mercantilist fallacies while T.R. was a textbook “man of system.” Each man, in my opinion, is vastly overrated. (Oh, and by the way, T.R.’s aggressive use of antitrust was sand in the gears of capitalist dynamism rather than, as Brooks believes and as potted histories assert, a lubricant of those gears. The “giant corporations” on which T.R. sicced antitrust regulators were themselves the result of dynamic, competitive, and innovative entrepreneurship.)

Most of my dissatisfaction with Brooks’s essay comes from his sop to unjustified even-handedness, as here:

But capitalism, like all human systems, is always unbalanced one way or another. Over the last generation, capitalism has produced the greatest reduction in global income inequality in history. The downside is that low-skill workers in the U.S. are now competing with workers in Vietnam, India and Malaysia. The reduction of inequality among nations has led to the increase of inequality within rich nations, like the United States.

If some feature Y found in system X is common to all systems, it is misleading to talk or to write of Y as being a feature of system X. Greater clarity of thought is promoted by identifying Y as being a feature of the larger category of which system X is a member.

In the case of capitalism being “unbalanced,” if all systems that we humans use, or could possibly use, to provide for our material sustenance are “unbalanced,” it is, at best, trite to note that the capitalist economy exhibits some unbalancedness. Noting such a thing is, in practice, merely to note that a common feature of the human condition has not been eliminated by capitalism. Under capitalism things are “unbalanced,” and under capitalism hearts are broken when lovers separate, and under capitalism using a plot of land to grow peas prevents that plot of land from being used as the site of an amusement park, and under capitalism we humans continue to be unable to fly by twirling our tongues. Well, as they say, duh.

(A entirely separate question – one, perhaps, for another post –  is raised by the ambiguity of the term “unbalanced” as Brooks rather lazily uses it.)

And to Brooks’s specific example of lack of balance – namely, “low-skill workers in the U.S. are now competing with workers in Vietnam, India and Malaysia” – such competition is avoidable only by forcibly grinding all economic change to a halt. Only when consumers are prohibited from changing the ways they spend their money – and only when each worker is locked for life, by government diktat or by oppressive tradition, into his or her particular job – and only when the manner of performing each of those jobs is prevented from changing – will no worker face the prospect of competition from some alternative means of performing the tasks that workers are employed to perform.

When goods, services, and resources are scarce – as they will be always this side of paradise – to improve anyone’s material well-being even in the slightest requires changing the pattern of resource use. To improve greatly the material well-being of many people requires even greater changes in the pattern of resource use. And to change the pattern of resource use means to select among different available options for using resources – a reality that implies competition among alternative ways of using resources.

If improvement in the material well-being of even just one person is desired, competition in practice is unavoidable.

The selection of the overall ‘new’ pattern of resource use can be done consciously. The results of this selection will reflect the necessarily very limited information, knowledge, foresight, and abilities of the officials charged with making this selection.

Alternatively, changes in the pattern of resource use can be generated by decentralized, rivalrous market processes – with each person as consumer, entrepreneur, investor, and worker spending his or her own resources as he or she sees fit in light of that person’s own preferences and information, and guided by the resulting market prices.

If you trust the likes of Donald Trump, Elizabeth Warren, Marco Rubio, Jeremy Corbyn, Viktor Orbán, or Vladimir Putin choosing the way your labor and resources are used, opt for some economic scheme that relies on the conscious allocation of resources. If you have no such trust, opt for markets as free, as innovative, and as open as possible.

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