Another non-argument for the failure of capitalism — VOICES for REASON

Picking up on a press release from the Center for Economic and Policy Research, New York Times columnist Floyd Norris recently reported that the rate of unemployment in the U.S. is now equal to and may soon surpass that of Western Europe. Norris echoes the main thrust of the press release: “the current economic crisis . . . has turned the case for the U.S. model almost entirely on its head.” The CEPR authors imply that the European model of “large welfare states and high levels of labor-market regulation” should be the economic standard to which nations aspire.

Leaving aside the question of the validity of the data (unemployment data is notoriously politicized and difficult to acquire), it is telling that neither Norris nor the CEPR authors clearly identify what they take the U.S. model to be. There is only an assertion of “inherent” “flexibility” in the U.S. economic system, which Norris explains as meaning “it is easier to both hire and fire workers [in the U.S.] than in many European countries.”

The accepted premise, of course, is that the U.S. model is free market capitalism. But, as Ayn Rand argues, capitalism means a “full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.” This is not the system we have in America.

Even with unemployment benefits, minimum wage laws, overtime pay requirements, federally-mandated holidays, work visa restrictions and government-backed unions, perhaps the U.S. does have more “flexibility” in hiring and firing employees with respect to Europe. But the ease (relative to Europe) with which businesses may employ or let go workers does not make ours a free economy.

What we have in fact is “a mixed economy, i.e., a mixture of capitalism and statism, of freedom and controls.” For example: The “U.S. model” today includes massive social welfare programs—Medicaid, Medicare, Social Security—and a web of business-shackling regulations like Sarbanes-Oxley, not to mention a Federal Reserve that has wreaked havoc. Such institutions have no place under the system of capitalism.

In insinuating that capitalism has failed, Norris and the CEPR authors are peddling a common and insidious fallacy. It reminds me of this insight by Ayn Rand:

One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary. (“The Lessons of Vietnam–Part II,” The Ayn Rand Letter, Vol. III, No. 25)

The economic problems we face today have come about not because freedom is a failed model, but because we have been abandoning it.