Two Kinds of Capitalism

Ayn Rand is thoroughly despised in leftist circles. The leftists are justifiably incensed because Rand tirelessly criticized government control of the economy, while the coercive power of the government is the primary instrument leftists rely upon to achieve their Utopian dreams.

One does not have to agree with every aspect of Rand’s philosophy. Decent people can reasonably disagree with her on many of her positions. But it is impossible to deny the force of her arguments against government’s interference in the economy. Countries that don’t understand her point are doomed to be poor. Indians suffer because they are incapable of understanding the evil consequences of government — even well-meaning — control of the economy.

One can reasonably ask why is it that government control of the economy is invariably bad. After all, isn’t the economy like a huge, complicated machine, and therefore it requires proper guidance and control? Without control, the economy would be chaotic, wouldn’t it?

The short answer to the first question is that the economy is that, first, the economy is not a machine; it’s an organism. And, second, it is too complicated an organism to be properly understood by any person or collective, and therefore it is highly likely that any interference will damage it rather than improve it.

The short answer to the second question follows from the fact that since the economy is an organism, it has evolved to be stable. That stability arises from feedback mechanisms within it that keep it in dynamic equilibrium. Like all organisms, it is self-regulating and therefore benign neglect is the best strategy.

But then why do governments routinely interfere and control the economy? That’s primarily because the people in government and their cronies benefit from it. People are self-interested, and those who have the power to coerce others invariably use that power immorally.

Here we have to be careful to not summarily judge self-interest to be bad. Individual self-interest motivates people to do what they can, but end up doing good for others that they rarely intend. That’s beneficial self-interest. It’s the self-interest of those who have power over others that it becomes a malignant force.

I don’t have the slightest fear of the self-interests of people who have acquired their wealth by creating wealth for society; I only fear the self-interest of the people who have the power of guns to force others to do their bidding — namely the politicians and bureaucrats.



Categories: Economics

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2 replies

  1. “I don’t think anybody after this is going to be saying that there’s “no such thing as a community,” as Mrs. Thatcher did. I don’t think anybody after this is going to be saying as a blanket statement the government is the problem, not the solution. We are seeing that there are ways in which we are all in this most extreme tragedy, that there are ways in which we’re all bound together”.

    I could not resist sharing this here

    Like

    • Thanks for linking to that article, Tanay. Larry Summers opposed the Geithner bailouts after the CDO scam in 2009. At the time, I believe Summers was leaning libertarian like Greenspan and co. When the tsunami hit, he felt the perpetrators had to feel the heat and government keep out instead of bailing the banks out. Now he says this:

      “We are seeing that there are ways in which we are all in this most extreme tragedy, that there are ways in which we’re all bound together and that is going to lead to a substantial change in public philosophy.
      So I think just as the 1929 Depression was a final act with respect to a variety of things that had been in process, and just as there were a whole variety of elements that brought us to 1979 and 1980 and the oil-price lines and inflationary chaos of the late 1970s catalyzed a change in public philosophy,* I think this is going to be seen as a vivid part of signaling a change in public philosophy that was already underway*.

      Like

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