MD The Quality of Capitalism?

From: Mark Steven Heyman (
Date: Sun Dec 05 2004 - 19:58:33 GMT

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    Hi all,

    I know some of you MOQers are not at all interested in economics or
    politics, so I've started a new thread for easy filtering.

    A few people here have insisted, repeatedly, that so-called free-
    market capitalism is the highest quality form of socio-economic
    organization. I think that this is an important issue, and would
    like to explore it further.

    To get started, I'd like to post an email exchange between Noam
    Chomsky and one of his readers. Please feel free to attack, defend,
    or just discuss any portion of the exchange. If you want to take
    issue with something NC says, I will gladly forward your message to
    him. He's remarkably good about replying.

    Here's the exchange, question first, then the reply.

    Thanks in advance to anyone who wants to participate. I truly do
    value your opinions, and will welcome any thoughtful comments.

    Mark Steven Heyman (msh)

    >Professor Chomsky,

    >I recently had a couple of arguments with some people
    about Capitalism. They claimed that Capitalism was the
    best and only viable system, I argued that Capitalism
    is a horrible system that is the root of all the
    problems. However, I was at a loss to refute some of
    their claims. Below are some of their main points.
    Maybe you could give me some fuel to beef up my

    >1. Capitalism gives people incentive to produce,
    innovate, work, both monetarily and in class status.
    Other systems do not and cannot produce good incentive.
    (Is there any viable alternative source of incentives?)

    >2. The classic - People vote with their dollars, what
    they like they buy and thus those things are supported.
    (I actually refuted this one somewhat with the example
    of the media, we don't exactly WANT to see all the crap
    on T.V.)

    >3. Great intellectuals like Milton Friedman and Adam
    Smith advocate capitalism, how could I challenge these
    great minds?

    >4. "All other systems that have been tried have
    failed." (Russia, Cuba, this argument is a joke.)

    >5. Capitalism is the only viable system, that's why
    it's the only one that is still functioning.

    >6. The competition inherent in capitalism creates
    innovations and produces things that would not be
    possible in other systems.

    >Thank you so much for all you do.


    I'd suggest that you transfer this to the Parecon
    forum, which is concerned precisely with this question. 
    However, a few comments below -- though, frankly, this
    specific discussion is framed in terms so objectionable
    that I personally doubt that you should even
    participate in it.  Some comments below.

    >1. Capitalism gives people incentive to produce,
    >innovate, work, both monetarily and in class status.
    >Other systems do not and cannot produce good incentive.
    >(Is there any viable alternative source of incentives?)

    Is "capitalism" supposed to be something like the
    system in the US?  Or Japan?  Or...? If not, we are
    proceeding in outer space.  If so, then it is unfair to
    say that the claims are unargued: they appear to be
    instantly refuted even by the most superficial
    examination.  Has great science, art, music, etc., been
    produced by people working for money?  Is that what was
    driving Einstein when he was working on relativity
    theory in the Swiss patent office, or later at the
    Institute for Advanced Study?  Or artists struggling
    for years on crusts of bread in garrets?  Or artisans
    throughout history, and today, trying to create objects
    of beauty and perfection? Or parents devoting time and
    energy to raise their children properly (creating
    "human capital," in the terminology of economists, a
    major factor in economic growth)?  Or in fact just
    about anything worthwhile or constructive?   The
    unargued claims that you are being asked to disprove --
    a framework that makes no sense in the first place --
    are apparently being put forth by people who have
    not had even the slightest experience, direct or
    indirect, with creative work, now and in the past --
    and by "creative" I do not mean only the peaks of human
    creativity, but the lives of most decent people who are
    not utterly pathological.

    Suppose that there is some miraculous difference
    between scientists, artists, artisans, parents, etc.,
    and those seeking to produce marketable goods -- a
    near-lunatic assumption, but let's adopt it for the
    sake of argument.  So take the core of the fabled "new
    economy," for example, what you and I are now using:
    computers and the internet.  How were these developed? 
    Answer, pretty much like most of science, the arts,
    crafts, etc.  All produced in labs, often for decades,
    mostly within the dynamic state sector of the economy,
    with essentially no consumer choice or entrepreneurial
    initiative.  Unless you count the "entrepreneurial
    initiative" of IBM executives who realized that they
    could use public resources, like the MIT Whirlwind and
    Harvard Mark series of computers in the 1950s and the
    work going on in the labs, to learn how to switch from
    punched cards to electronic-based computing, or their
    "entrepreneurial initiative" in relying on government
    procurement (that is, unwitting public subsidy) to
    develop more advanced computers in the 1960s, or the
    initiative of AT&T to rely 100% on government for
    procurement of high quality transistors ten years after
    they were invented (largely using government-produced
    technology, and within a great lab that AT&T,
    theoretically private, was able to maintain at public
    expense by charging monopoly prices, thanks to
    government protection), and so on.  I happened to be in
    the electronics lab where a lot of this was going on at
    the time, but even the most casual acquaintance with
    the history of technology, hence the source of the
    modern economy, reveals that this is completely
    standard: people working very hard, all hours of the
    night, because they find their work fascinating and are
    passionately interested in finding out the answers to
    hard questions, just as artists labor often in penury
    to satisfy their inner creative needs, parents devote
    enormous efforts to "producing human capital" (in the
    familiar ugly terminology), etc.  Most of human life,
    in fact, for anyone who has taken the trouble to
    observe or participate in the world.

    One might add that these were also the standard
    assumptions of the founders of classical liberalism --
    the conceptions that those who you are arguing with are
    supposed to revere: von Humboldt, for example, who took
    it to be obvious that people are born to "inquire and
    create," and it is an infringement on their fundamental
    nature to deprive them of this right -- and further,
    that if an artisan produces a beautiful object on
    command, we may admire what he does but despise what he
    is, because he is not a free creative person acting
    from inner creative need, but a tool of production
    controlled externally.

    The more general question is whether it is even worth
    debating arbitrary claims for which no argument is
    offered, and, furthermore, based on assumptions that
    are so massively refuted by even the most casual
    observation, let alone serious inquiry.

    >2. The classic - People vote with their dollars, what
    >they like they buy and thus those things are supported.
    >(I actually refuted this one somewhat with the example
    >of the media, we don't exactly WANT to see all the crap
    >on T.V.)

    Why do businesses spend hundreds of billions a year on
    advertising?  Is it to develop the free markets of
    doctrine in which informed consumers make rational
    choices?  Or is it to "create wants," to pursue what
    Adam Smith called the basic objective of "merchants and
    manufacturers": to "oppress" and "deceive" the public? 
    All of this seems too obvious even to waste time

    >3. Great intellectuals like Milton Friedman and Adam
    >Smith advocate capitalism, how could I challenge these
    >great minds?

    Let's put aside Friedman, out of politeness, and keep
    to Smith, a very important figure.  He was pre-
    capitalist in his conceptions, and often quite
    interesting.  For example, his basic argument for his
    rather nuanced views about markets: that under
    conditions of liberty they would lead to equality, an
    obvious desideratum.  Or his one use of the term
    "invisible hand" in "Wealth of Nations," in an argument
    for what economic historians call "home bias," in
    effect an argument against what is now called
    "neoliberalism" or "neoclassical economics." Smith
    argued that the English economy, what he cared about,
    would be wrecked if British capitalists were to invest
    abroad and import from abroad, but it would not be a
    problem, because "home bias" would lead them to invest
    at home and use domestically-produced goods, and
    therefore, by an "invisible hand," Britain would be
    saved from the ravages of international markets.  Or
    his argument against division of labor, and insistence
    that in any civilized society, governments would
    intervene to constrain it, because it would turn
    working people into creatures as stupid and ignorant as
    a human creature can be -- essentially on von
    Humboldt's assumptions.

    Yes, Smith is very much worth reading, whether one
    agrees with his interesting work or not.  Reading, not
    worshipping on the basis of concocted mythology.

    >4. "All other systems that have been tried have
    >failed." (Russia, Cuba, this arguement is a joke.)

    Yes, a joke, and one in particularly poor taste.  And
    capitalism hasn't failed?

    >5. Capitalism is the only viable system, that's why
    >it's the only one that is still functioning.

    First, nothing remotely like capitalism exists.  Is the
    US economy, relying crucially on the dynamic state
    sector, a capitalist economy?  But putting that aside,
    was it an argument in the 18th century to say that
    feudalism, absolutism, rule by Kings, slavery,.... are
    the only viable systems because they are the only ones
    still functioning?  Or in the 1960s to say that women
    can't be granted elementary rights because such rights
    aren't granted in any viable system?  Or that freedom
    of speech must be blocked by state power for the same
    reason?  This is beyond absurdity.

    >6. The competition inherent in capitalism creates
    >innovations and produces things that would not be
    >possible in other systems.

    Have a look at the actual history of innovation, as
    barely hinted above.

    And also, note the way you are being trapped into
    wasting time.  Among rational people -- say, in the
    normal practice of the sciences -- someone who puts
    forth a thesis is expected to provide evidence and
    argument for it, not to just shriek it from the
    rooftops and challenge you to show that it is wrong. 
    The debate into which you are being trapped works in
    quite the opposite way.  By participating in it, you
    are immobilizing yourself and allowing free rein to
    those who prefer to shriek from the rooftops.  I think
    it's worth asking whether that is a sensible procedure.

    Noam Chomsky

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