In “A Tale of Two American Colonies” (http://www.vcstar.com/news/2010/nov/24/a-tale-of-two-american-colonies/), Gary Galles displays a näive confusion between capitalism and entrepreneurship. Individual enterprise (growing corn) does not equal capitalism (supplying funds). His confusion stems from an inability to distinguish between a monetary tool (capitalism) and an achievement motive (survival and success).
Galles adds fog rather than clarity with the myth of rugged individualism: Just give them 3 acres and some seed and they will produce abundance. He blends the “individualist” fable with harvest stories of four centuries ago and, by calling that capitalism, claims to explain America’s economic ascendancy, when our history shows that not individuals but a unified group under great leadership at critical times consistently brings success (the Declaration of Independence, the Revolution, the Constitution, WWII, scientific research, space travel, advances in education).
Galles draws fragile conclusions from 400-year-old sources whose biases are unknown. He fawns over capitalism, but capitalism created the indentured servitude that he blames for the disasters he cites. “The fruits of people’s efforts went to others,” causing early failure in the colonies? But that is capitalism: I fund the business and you pay me some of the “fruits of your efforts,” known as “shareholder profits.” To eliminate profit from the equation is a form of Communism. So, what message is Galles sending?
“Each man was given 3 acres in exchange for a tax of corn,” says Galles, and one month’s communal labor. So, then, no capital changed hands for the land. It was granted in exchange for goods (corn) and labor. That’s called socialist (communist?) barter. Settlers then “exported” corn to the natives. Since Native Americans didn’t usually carry pounds sterling or pieces-of-eight, we conclude the natives paid in trade goods, i.e. barter. This is not capitalism.
A chronology (famine followed by feast) does not equal cause-and-effect. Galles is searching for virtues in distant stories from non-objective sources to support beliefs he already holds. He’s not fact-finding or observing or perceiving, but rummaging around in anecdotes to defend perspectives to which he is already emotionally bound.
Galles also ascribes America’s success to private property rights. Are these the property rights that entitled white men to vote, but not women? The property rights of slave owners in the colonies and, later, the states? The rights our governments ignored in the treaties with North America’s native people? The same private property rights the Land Barons of the West and the Robber Barons of the East gained through unrestricted capitalism, and then used to pilfer taxpayers’ land and break the unions? Private property “rights” are what capitalists abused, and still abuse, in stealing and coercing from aboriginal groups around the globe. Unregulated capitalism breeds greed while turning a blind eye to human injustice and exploitation, rural, urban, in the West, East, etc.
Galles impugns the laws and regulatory rules that “throttle” capitalism, arguing that capitalism brings us the greatest good for the greatest number of workers (the cry of Socialism and Communism, too). He calls (unregulated) capitalism the best system in the world, no doubt in history, to “reward each person’s productivity.”
Mr. Galles, try reading “The Emperor’s New Clothes” again. The U.S. is the largest, least-regulated, most free-booting bastion of capitalism on Earth, and it just came within a hair’s-breadth of ruining the world’s economy. Millions of people are out of work, losing their homes, struggling for food, going deep in debt for education, can’t pay medical bills or buy health insurance, and Galles blithely burbles about “the greatest system in history.” It’s a relief to see he’s an economist, not a historian.
Australia is more regulated, and more socialist, than we are—they barely felt the recession. Australia, New Zealand, and countries all over Europe (though some in difficult financial holes from doing business with Wall Street’s capitalists) have better medical care at lower cost than we do, cheaper (if not fully tax-funded) higher education, better pensions, longer life-expectancies. And they use less oil. OK, yes, they have smaller TVs, fewer SUVs, more recycling legislation, stricter eco-laws, less plastic surgery (except Brasil), cheaper medicines, fewer drive-by shootings, less legislative corruption, less drug-based crime and corruption – fewer of the gifts of unregulated capitalism and rugged individualism that Galles regales.
By Bureau of Labor statistics, financial sector jobs increased 50% since 1980. Profits in the sector were under 15% of all business profits in 1985; in 2006, they were over 30%. Of all the great advancements since 1985, in IT, medicine, education, materials’ science, telecommunications, and so on, the greatest profits were made in an industry that, in the words of The New Yorker’s John Cassidy, “doesn’t design, build, or sell a single tangible thing.”
Look how far American capitalism, even as Galles sees it, has strayed from its functions. For years, bank profits from lending and credit have dwindled as profits from the banks’ own trading in stocks, bonds, and derivatives have mushroomed. To Q3 2010, Cassidy says, 36% of revenues at Morgan Stanley, and much more of their profits, came from market trading, not capitalizing America’s recovery. In other words, banks are not helping small and large American business, they are helping themselves. Why is the stock market strong when America is weak? That’s why.
I return to my comments at the top of this letter. Capitalism is a tool, not a motive. People don’t achieve things because they’re inspired by capitalism. They are inspired by role models, imagination, responsibility, fear, greed, love, passion, megalomania, emotions and desires and analyses of all sorts. Those are their motives (“enterprise” and “entrepreneur” have the same origins). If they have enough fire in some part of their bellies, they may take the tools of capitalism and use them to accomplish big financial things: Gates, Soros, Ford, Buffett, Barnum, Carnegie, Enron-Lay, d’Medici, Madoff, Lehman Brothers, Greenspan, Merrill Lynch, Milken, Boesky, Zuckerberg. These people and institutions created big things, but not all great things. Good things—great things—accomplished through capitalism have less to do with the “virtues” of capitalism than with the virtues of the person.
This is something Galles seems unable to grasp. He idolizes the “system,” but the system has no ethics, no discrimination, no human perception. Capitalism has no clothes. Our focus should be the “clothes”—the success and ultimate well-being—of human beings, not the ultimate well-being of banking systems. Unbridled, unregulated capitalism is an invitation for the Goldman Sachses, the Madoffs, the Lays, and the Boeskys of the world to scheme and stab and contrive to bleed health from the economic system that is supposed to provide fair access to capital and proportionate return from effort to its participants. But the game is rigged by the strong and corrupt—if Galles doesn’t recognize that, he better learn to cut hair. If the monetary tools don’t ultimately serve, in Galles’s terms, “each person’s productivity” because the game is rigged, then the only way to fight that rigging, that corruption, is with legislation and regulations.
I’m both a capitalist and an entrepreneur. And I recognize the difference. But most people in America are neither. They’re busy learning their professions, their jobs, having kids, trying to buy a house, going to school, and working their asses off in the process. They’re good people, every bit as good as Buffett and Gates (who would agree), and better Americans than Madoff and Lay and the Wall Street slime-suits that screwed this country and walked away with hundreds of millions, i.e. Galles’s capitalists, people for whom there is no punishment sufficient in Danté’s Inferno (a Cassidy rumor: in 2009, over 1000 Goldman employees got $1 mil+ bonuses). Normal, common, working Americans need protection from the rapacious and cunning and evil people who will wring our “capitalist system” for every ounce of blood they can get. Anyone who is too blind or näive or pigheaded to see that must have slept through the Milken-Boesky-Shapiro episode, the Enron collapse, the Madoff crimes, and this thing we now call the Great Recession.
Capitalism in Perspective
In “A Tale of Two American Colonies” (http://www.vcstar.com/news/2010/nov/24/a-tale-of-two-american-colonies/), Gary Galles displays a näive confusion between capitalism and entrepreneurship. Individual enterprise (growing corn) does not equal capitalism (supplying funds). His confusion stems from an inability to distinguish between a monetary tool (capitalism) and an achievement motive (survival and success).
Galles adds fog rather than clarity with the myth of rugged individualism: Just give them 3 acres and some seed and they will produce abundance. He blends the “individualist” fable with harvest stories of four centuries ago and, by calling that capitalism, claims to explain America’s economic ascendancy, when our history shows that not individuals but a unified group under great leadership at critical times consistently brings success (the Declaration of Independence, the Revolution, the Constitution, WWII, scientific research, space travel, advances in education).
Galles draws fragile conclusions from 400-year-old sources whose biases are unknown. He fawns over capitalism, but capitalism created the indentured servitude that he blames for the disasters he cites. “The fruits of people’s efforts went to others,” causing early failure in the colonies? But that is capitalism: I fund the business and you pay me some of the “fruits of your efforts,” known as “shareholder profits.” To eliminate profit from the equation is a form of Communism. So, what message is Galles sending?
“Each man was given 3 acres in exchange for a tax of corn,” says Galles, and one month’s communal labor. So, then, no capital changed hands for the land. It was granted in exchange for goods (corn) and labor. That’s called socialist (communist?) barter. Settlers then “exported” corn to the natives. Since Native Americans didn’t usually carry pounds sterling or pieces-of-eight, we conclude the natives paid in trade goods, i.e. barter. This is not capitalism.
A chronology (famine followed by feast) does not equal cause-and-effect. Galles is searching for virtues in distant stories from non-objective sources to support beliefs he already holds. He’s not fact-finding or observing or perceiving, but rummaging around in anecdotes to defend perspectives to which he is already emotionally bound.
Galles also ascribes America’s success to private property rights. Are these the property rights that entitled white men to vote, but not women? The property rights of slave owners in the colonies and, later, the states? The rights our governments ignored in the treaties with North America’s native people? The same private property rights the Land Barons of the West and the Robber Barons of the East gained through unrestricted capitalism, and then used to pilfer taxpayers’ land and break the unions? Private property “rights” are what capitalists abused, and still abuse, in stealing and coercing from aboriginal groups around the globe. Unregulated capitalism breeds greed while turning a blind eye to human injustice and exploitation, rural, urban, in the West, East, etc.
Galles impugns the laws and regulatory rules that “throttle” capitalism, arguing that capitalism brings us the greatest good for the greatest number of workers (the cry of Socialism and Communism, too). He calls (unregulated) capitalism the best system in the world, no doubt in history, to “reward each person’s productivity.”
Mr. Galles, try reading “The Emperor’s New Clothes” again. The U.S. is the largest, least-regulated, most free-booting bastion of capitalism on Earth, and it just came within a hair’s-breadth of ruining the world’s economy. Millions of people are out of work, losing their homes, struggling for food, going deep in debt for education, can’t pay medical bills or buy health insurance, and Galles blithely burbles about “the greatest system in history.” It’s a relief to see he’s an economist, not a historian.
Australia is more regulated, and more socialist, than we are—they barely felt the recession. Australia, New Zealand, and countries all over Europe (though some in difficult financial holes from doing business with Wall Street’s capitalists) have better medical care at lower cost than we do, cheaper (if not fully tax-funded) higher education, better pensions, longer life-expectancies. And they use less oil. OK, yes, they have smaller TVs, fewer SUVs, more recycling legislation, stricter eco-laws, less plastic surgery (except Brasil), cheaper medicines, fewer drive-by shootings, less legislative corruption, less drug-based crime and corruption – fewer of the gifts of unregulated capitalism and rugged individualism that Galles regales.
By Bureau of Labor statistics, financial sector jobs increased 50% since 1980. Profits in the sector were under 15% of all business profits in 1985; in 2006, they were over 30%. Of all the great advancements since 1985, in IT, medicine, education, materials’ science, telecommunications, and so on, the greatest profits were made in an industry that, in the words of The New Yorker’s John Cassidy, “doesn’t design, build, or sell a single tangible thing.”
Look how far American capitalism, even as Galles sees it, has strayed from its functions. For years, bank profits from lending and credit have dwindled as profits from the banks’ own trading in stocks, bonds, and derivatives have mushroomed. To Q3 2010, Cassidy says, 36% of revenues at Morgan Stanley, and much more of their profits, came from market trading, not capitalizing America’s recovery. In other words, banks are not helping small and large American business, they are helping themselves. Why is the stock market strong when America is weak? That’s why.
I return to my comments at the top of this letter. Capitalism is a tool, not a motive. People don’t achieve things because they’re inspired by capitalism. They are inspired by role models, imagination, responsibility, fear, greed, love, passion, megalomania, emotions and desires and analyses of all sorts. Those are their motives (“enterprise” and “entrepreneur” have the same origins). If they have enough fire in some part of their bellies, they may take the tools of capitalism and use them to accomplish big financial things: Gates, Soros, Ford, Buffett, Barnum, Carnegie, Enron-Lay, d’Medici, Madoff, Lehman Brothers, Greenspan, Merrill Lynch, Milken, Boesky, Zuckerberg. These people and institutions created big things, but not all great things. Good things—great things—accomplished through capitalism have less to do with the “virtues” of capitalism than with the virtues of the person.
This is something Galles seems unable to grasp. He idolizes the “system,” but the system has no ethics, no discrimination, no human perception. Capitalism has no clothes. Our focus should be the “clothes”—the success and ultimate well-being—of human beings, not the ultimate well-being of banking systems. Unbridled, unregulated capitalism is an invitation for the Goldman Sachses, the Madoffs, the Lays, and the Boeskys of the world to scheme and stab and contrive to bleed health from the economic system that is supposed to provide fair access to capital and proportionate return from effort to its participants. But the game is rigged by the strong and corrupt—if Galles doesn’t recognize that, he better learn to cut hair. If the monetary tools don’t ultimately serve, in Galles’s terms, “each person’s productivity” because the game is rigged, then the only way to fight that rigging, that corruption, is with legislation and regulations.
I’m both a capitalist and an entrepreneur. And I recognize the difference. But most people in America are neither. They’re busy learning their professions, their jobs, having kids, trying to buy a house, going to school, and working their asses off in the process. They’re good people, every bit as good as Buffett and Gates (who would agree), and better Americans than Madoff and Lay and the Wall Street slime-suits that screwed this country and walked away with hundreds of millions, i.e. Galles’s capitalists, people for whom there is no punishment sufficient in Danté’s Inferno (a Cassidy rumor: in 2009, over 1000 Goldman employees got $1 mil+ bonuses). Normal, common, working Americans need protection from the rapacious and cunning and evil people who will wring our “capitalist system” for every ounce of blood they can get. Anyone who is too blind or näive or pigheaded to see that must have slept through the Milken-Boesky-Shapiro episode, the Enron collapse, the Madoff crimes, and this thing we now call the Great Recession.