Regulation, Government and Instutitions

In which I critique Andrew Sullivan’s critique of Rush Limbaugh’s critique of Pope Francis’s critique of capitalism:

Limbaugh has obviously never read the Gospels. He has never read the parables. His ideology is so extreme it even trashes, because it does not begin to understand, the core principles of capitalism, as laid out by Adam Smith. Market capitalism is and always has been a regulated construction of government, not some kind of state of nature without it. Indeed without proper regulation to maintain a proper and fair and transparent market, it is doomed to terrible corruption, inefficiency, injustice, and abuse.

Sullivan, the supposed conservative, makes the same mistake all Big Government advocates make, namely assuming “regulation” has to come from “government.”

Capitalism is regulated through institutions, which may or may not be the domain of governments. For example, where government has had a role in expanding the capitalistic free market, it has been more to do with preserving the fundamental rights of the individual — property rights, freedoms of expression and commerce, protection from physical harm or theft, etc. — than it has in actually instituting these successfully.

In fact, it was those those institutions which evolved in order to restrain government control which also enabled free markets to flourish and benefit the great mass of its participants. The Magna Carta and similar documents found in other European nations are good examples of this.

Furthermore, corruption in the free market is self-correcting in that those participating soon learn if another is acting without scruples and cannot be trusted. Investors need merely to place their capital into investments which are more trustworthy and better serve the demands of the market.

Corruption in government, which Sullivan claims would prevent “doom” to capitalism, is actually much more harmful as government compels taxes, controls the courts, distorts market signals, and monopolizes via fiat the means of violence. These days, a business is rarely corrupt for very long unless enabled or empowered to be so by the government. It is government which institutionalizes corruption.

As for evidence of inefficiency, injustice, and abuse, go no further than your nearest parliament.

(h/t Mytheos Holt)

 

UPDATE: Sullivan also mocks Limbaugh, a supposed fan of Pope John II, by quoting the past pontiff in Centesimus Annus:

The Marxist solution has failed, but the realities of marginalization and exploitation remain in the world, especially the Third World, as does the reality of human alienation, especially in the more advanced countries. Against these phenomena the Church strongly raises her voice. Vast multitudes are still living in conditions of great material and moral poverty. The collapse of the Communist system in so many countries certainly removes an obstacle to facing these problems in an appropriate and realistic way, but it is not enough to bring about their solution.

Indeed, there is a risk that a radical capitalistic ideology could spread which refuses even to consider these problems, in the a priori belief that any attempt to solve them is doomed to failure and which blindly entrusts their solution to the free development of market forces.

QED?

Nope. More people have left extreme poverty in the past decade than ever before, in large part thanks to “free development of market forces”:

 Never has so much wealth been generated — but, importantly, never has growth been shared more evenly. While the rich world is wallowing a mire of debt, the developing world is making incredible progress. The global inequality gap is narrowing – and thanks not to the edicts of governments, but to the co-operation of millions of people, rich and poor, through international trade. Or, as critics call this system, ‘global capitalism’.

As a result goals that once seemed fantastical are now within reach: from the end of Aids to the end of famine. To understand the speed of this progress consider the  United Nations’ Millennium Development Goals,  drawn up in 2000. The plan then was to halve the number of people living on $1 a day by 2015. This target was reached five years early. This amazing achievement passed with almost no comment, perhaps because it had been achieved by the market rather than foreign aid. People, when free to trade with each other, are succeeding where decades of government schemes failed.

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