Dennis Prager liked this article so much that he discussed it on Friday AND Monday. A lot.
I read the article, too. And I think there is a lot to learn from it. Let’s take a look at some of it, and then I’ll make a point.
During Customs week, in PAF sessions, and in everyday discourse here at Haverford, we are taught to ask for help when we feel we need it, speak up when we feel uncomfortable, and prioritize our own well being over most other things. At McDonald’s, acting in this way could have cost me my job, a job I needed to afford college. There, I, as an individual, was insignificant: The most important thing was that the customer walks away satisfied, and it didn’t matter what I had to go through to make that happen. There is something ironic about this: In order to do what was necessary to be a Haverford student, I had to act in un-Haverford-like way.
Because I worked the front counter, whenever there was a problem with an order — even though I never made the food — I was the one who was verbally abused. “One must never interrupt the customer,” and “The customer is always right,” so I would stand and listen to the entirety of elaborate rants, trying to put aside the attacks on myself, on McDonald’s, on America, and on capitalism, so that I could report the relevant details to those who actually had the power to correct the problem. These issues were usually simple, like a missing piece of cheese from a McDouble, or whipped cream on a milkshake when they hadn’t wanted any.
The customer is always right, and how you feel about the “injustice of it all” doesn’t matter. In fact, if you put your personal feelings about the need of the business owner to grow his business, you’ll probably get a talking to about how the customer is always right and to toughen up and take it.
I’m grateful to have worked at McDonald’s: It taught me how better to handle my anxiety and how to put myself last in the name of efficiency and a common goal. McDonald’s strengthened my character, my work ethic, and expanded my capacity for resilience, valuable lessons which could not be learned in the “safe spaces” of Haverford’s campus. We must remember that putting oneself first is the essence of privilege, and that, in order to grow, we must leave this selfish mindset behind.
So what can we say about this?
I don’t know if most young people really understand that the essence of the free market / free enterprise / capitalist system is that in order for you to make money, you have to make something or do something for someone else that they find valuable. You cannot greed your way to a fortune. There is no filthy capitalist dog in a top hat, twirling his long mustache and laughing evilly as money magically appears. In a free market, you have to give something to someone to get their money. And you have to give them more value for less cost than all the other competitors they can choose from. So, people in businesses have to be nice to you. That’s why Amazon and Costco don’t ask questions when you return stuff. They want a relationship with you for life, and questioning you would make you go somewhere else. And all their employees are taught that – the customer is always right.
The opposite of free market competition is monopoly. Monopolies do exist in the world, but not usually in the free market. Where do monopolies exist? Well, they exist in the government. Think of what the service is like at the department of motor vehicles, or immigration office, or the social security office, etc. The customer service is lousy, the lines are long, the unionized government workers are uneducated and rude, and they get too many benefits and too much salary for the value they offer. How are they allowed to do that? Simple. You can’t go anywhere else to get the stuff you need from them. That’s why they can underperform, and you can’t do a thing about it.
Anyway, the main point is that you should always encourage your children to take the most demanding job in the private sector they can handle. And by the way, if you know an irresponsible college student who insists on having fun, thrills and travel, the best thing you can do is encourage them to get a job that they hate. It will help them to grow their character and build their finances at the same time – making them ready for the responsibilities and obligations they will face from marriage and parenting. Working in a capitalist system is magic for your character. Even if you didn’t have the best parents, you can still grow up right just by showing up for work every day.
There has never been a purely free market economic system, just as there has never been a purely communist system. However, we can rank economies and see whether ones that are closer to the free market end of the economic spectrum are better than ones that are closer to the communist end.
Let’s try it.
First, list countries according to whether they are closer to the free market or the communist end of the economic spectrum. Then rank countries according to per capita gross domestic product. Finally, rank countries according to Freedom House’s “Freedom in the World” report.
People who live in countries closer to the free market end of the economic spectrum have far greater income than people who live in countries toward the communist end — and enjoy far greater human rights protection.
According to the 2012 “Economic Freedom of the World” report by James Gwartney, Robert Lawson and Joshua Hall, nations ranking in the top quartile with regard to economic freedom had average per capita GDP of $37,691 in 2010 compared with $5,188 for those in the bottom quartile.
In the freest nations, the average income of the poorest 10% of their populations was $11,382. In the least free nations, it was $1,209.
Remarkably, the average income of the poorest 10% in the economically freer nations is more than twice the average of those in the least free nations.
Free market benefits aren’t only measured in dollars and cents.
Life expectancy is 79.5 years in the freest nations and 61.6 years in the least free.
Political and civil liberties are considerably greater in the economically free nations than in unfree nations.
Leftists might argue that the free market doesn’t help the poor. That argument can’t even pass the smell test.
Imagine that you are an unborn spirit and God condemned you to a life of poverty but gave you a choice of the country in which to be poor. Which country would you choose?
To help with your choice, here are facts provided by Robert Rector and Rachel Sheffield in their report “Understanding Poverty in the United States: Surprising Facts About America’s Poor.”
Eighty percent of American poor households have air conditioning.
Nearly three-fourths have a car or truck, and 31% have two or more.
Almost two-thirds have cable or satellite TV.
Half have one or more computers.
Forty-two percent own their homes.
The average poor American has more living space than the typical non-poor person in Sweden, France and the U.K. Ninety-six percent of poor parents stated that their children were never hungry; in other words, they could afford food.
The bottom line is that there is little or no material poverty in the U.S.
At the time of our nation’s birth, we were poor, but we established an institutional structure of free markets and limited government and became rich.
This might be a good article send along to people who want to bash our free-market system. It’s easy for them to make assertions that we have to do this or that policy to redistribute wealth. But the real solution to helping the poor is not to take from one and give to another, it’s to put into place a system that causes wealth to be created for all. That’s what happened in the United States, and you can see how it happened in other capitalist economies like Chile, Hong Kong and Singapore. Capitalism turns poor nations into rich nations.
Part 1: The Eight Most Common Myths about Wealth, Poverty, and Free Enterprise
Part 2: Can’t We Build A Just Society?
Part 3: The Piety Myth
Part 4: The Myth of the Zero Sum Game
Part 5: Is Wealth Created or Transferred?
Part 6: Is Free Enterprise Based on Greed?
Part 7: Hasn’t Christianity Always Opposed Free Enterprise?
Part 8: Does Free Enterprise Lead to An Ugly Consumerist Culture?
Part 9: Will We Use Up All Our Resources?
Part 10: Are Markets An Example of Providence?
Parts 4 and 5 are my favorites. It’s so hard to choose one to excerpt, but I must. I will choose… Part 4.
Here’s the problem:
Myth #3: The Zero Sum Game Myth – believing that trade requires a winner and a loser.
One reason people believe this myth is because they misunderstand how economic value is determined. Economic thinkers with views as diverse as Adam Smith and Karl Marx believed economic value was determined by the labor theory of value. This theory stipulates that the cost to produce an object determines its economic value.
According to this theory, if you build a house that costs you $500,000 to build, that house is worth $500,000. But what if no one can or wants to buy the house? Then what is it worth?
Medieval church scholars put forth a very different theory, one derived from human nature: economic value is in the eye of the beholder. The economic value of an object is determined by how much someone is willing to give up to get that object. This is the subjective theory of value.
And here’s an example of how to avoid the problem:
How you determine economic value affects whether you view free enterprise as a zero-sum game, or a win-win game in which both participants benefit.
Let’s return to the example of the $500,000 house. As the developer of the house, you hire workers to build the house. You then sell it for more than $500,000. According to the labor theory of value, you have taken more than the good is actually worth. You’ve exploited the buyer and your workers by taking this surplus value. You win, they lose.
Yet this situation looks different according to the subjective theory of value. Here, everybody wins. You market and sell the house for more than it cost to produce, but not more than customers will freely pay. The buyer is not forced to pay a cost he doesn’t agree to. You are rewarded for your entrepreneurial effort. Your workers benefit, because you paid them the wages they agreed to when you hired them.
This illustration brings up a couple important points about free enterprise that are often overlooked:
1. Free exchange is a win-win game.
In win-win games, some players may end up better off than others, but everyone ends up better off than they were at the beginning. As the developer, you might make more than your workers. Yet the workers determined they would be better off by freely exchanging their labor for wages, than if they didn’t have the job at all.
A free market doesn’t guarantee that everyone wins in every competition. Rather, it allows many more win-win encounters than any other alternative.
2. The game is win-win because of rules set-up beforehand.
A free market is not a free-for-all in which everybody can do what they want. Any exchange must be free on both sides. Rule of law, contracts, and property rights are needed to ensure exchanges are conducted rightly. As the developer of the house, you’d be held accountable if you broke your contract and failed to pay workers what you promised.
An exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game.
On this view, what you really need to fear as a consumer is government intervention that restricts your choices in the marketplace.
Free trade in the real world
This is not a theoretical problem, either. Millions of people in the Ukraine are protesting against Vladimir Putin and his restrictive Russian policies in order to get more economic freedom by signing a free trade deal with the European Union.
Hundreds of thousands of protesters swarmed Ukraine’s capital Kiev on Sunday, where the country’s opposition leaders urged them to continue heaping pressure on President Viktor Yanukovich to sack his government and abandon plans for closer ties with Russia.
Many of the demonstrators who gathered at the city’s central Independence Square are furious with the government over its decision to back out of a historic agreement with the European Union in favour of a possible trade deal with Russia, Ukraine’s Soviet-era ruler.
The protest . . . is just the latest sign of mounting tensions in Ukraine over the past two weeks, raising fears over the country’s political and economic stability.
That’s a real crisis: freedom-loving people fighting for their right to be prosperous by adopting the economic policies that produce wealth.
If you care about poverty, it’s often tempting to think that it can only be solved one way – by transferring wealth from the rich to the poor. But that is a very mistaken view, as any economist will tell you. The right way to create prosperity is by creating laws and policies that unleash individual creativity. Letting individuals create innovative products and services, letting them keep what they earn, making sure that the law doesn’t punish entrepreneurs – that incentivizes wealth creation. Fixing poverty does not mean transferring wealth, it means giving people more freedom to create wealth on their own. Free trade between nations is an important way that we encourage people to create better products and services that what they have available in their own countries.
Economists agree on the benefits of free trade
Who could possibly disagree with free trade? Well, many people on the left do. They favor imposing restrictions on free trade. For example, people on the left favor making those who import goods pay tariffs, which makes it harder to trade with other nations. People on the left want to pass rent control laws to block landlords and tenants from trading more freely. People on the left want to pass minimum wage laws that block employers and workers from trading wages for labor more freely. But economists generally don’t agree with any of restrictions on free trade. In fact, even across the ideological spectrum, the majority of economists view free trade as a wealth creating policy, and restrictions on free trade as a wealth destroying policy.
Here is the list, together with the percentage of economists who agree:
A ceiling on rents reduces the quantity and quality of housing available. (93%)
Tariffs and import quotas usually reduce general economic welfare. (93%)
Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
The United States should not restrict employers from outsourcing work to foreign countries. (90%)
The United States should eliminate agricultural subsidies. (85%)
Local and state governments should eliminate subsidies to professional sports franchises. (85%)
If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
A large federal budget deficit has an adverse effect on the economy. (83%)
A minimum wage increases unemployment among young and unskilled workers. (79%)
The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)
Now when you are talking to a Democrat, you are talking to someone who disagrees with most or all of those common sense economic policies. For example, Obama’s backers in the labor movement inevitably endorse higher import tariffs, which discourage free trade between countries. No economist supports these tariffs on imports, because history has shown (e.g. – Smoot-Hawley Act) that tariffs destroy economic growth and reduce wealth creation. And that’s what I mean when I talk about economic illiteracy – I mean ignoring what we know from economics and our own experience with bad policies when we make policy.
Democrat economic policies don’t work because they are making policies that are based on economic myths. We know that these myths are myths because of economics is a mathematical science, and because we have tried good and bad policies in different times and places. We have calculations and we have experience to know what works and what doesn’t work. If you want to help the poor, you have to respect what economists know about how wealth is created. The solution is not to “spread the wealth around”, it’s to encourage people to create more wealth by inventing things that people freely choose to buy.
A great episode of the Unbelievable podcast. This is a great debate. I really enjoyed it. All three speakers were excellent putting forward their points. It’s nice to hear an American voice, a British voice and an Australian voice debating an important issue. HIGHLY RECOMMENDED.
Wayne Grudem is a theologian known for his conservative approach to both doctrine and economics. His new book “The Poverty of Nations: A Sustainable Solution” (co-authored with economist Barry Asmus) makes the case that pouring aid into developing countries is a failed strategy. Grudem debates whether the Bible supports free market, capitalist economics with Australian economist and theologian Richard Glover who wrote a critique of the book for the Australian Bible Society.
The list is from John Hawkins, who runs Right Wing News. It’s posted at Townhall.com, though. (H/T Lindsay)
Keeping Americans poor in a prosperous country like America is not as easy as you think. After all, this is the “land of opportunity.” Legal immigrants pay tens of thousands of dollars and wait years for the opportunity to come legally and illegal immigrants often risk their lives just so they can get here and do menial work. This is the country that made Bill Gates, Steve Jobs and even OPRAH into billionaires and it’s a nation where you can have everything from hoverboards to medicine for your pet delivered right to your door. So when there’s so much wealth and opulence everywhere, how do you lock Americans out of that success?
No matter what you do, there will always be a few poor people around, but to really maximize those numbers there are very specific government policies abetted by a few cultural attitudes that will make all the difference.
Here’s the list of policies that make people poor:
Making Sure Taxes And Regulations Are Sky High
Encouraging People To Have Babies Out Of Wedlock
Screwing Up The Education System
Having Massive Immigration
Ratcheting Up Their Expenses
I partially disagree with him on #6, where he goes after skilled immigrants. I think it’s right to go after unskilled immigrants, and immigration through family sponsors, since those people may use more social programs than they pay for in taxes. I don’t mind if they come, so long as they are barred from social programs. Failing that, we should only allow skilled immigrants to come – they pay in more than they use up.
However, if he was talking about illegal alias, and not skilled workers, I agree 100%. Everyone who is here should be here legally with a work permit, and there should be enforcement to punish employers who cheat.
Here’s the one I really like, though – the one I think my Democrat co-workers would not be surprised by:
7. Ratcheting Up Their Expenses: Of course, if you want to create more poor Americans, it’s best to tax the middle class as much as possible, but in a country where they can vote you out of office, you have to be careful about directly reaching into their wallets. So, how do you take their money without their realizing that you’re responsible?
Have the Federal Reserve print money non-stop, which drives up inflation. Over time, that reduces the purchasing power of the middle class as the cost of everything seems to creep up. It’s also important to go after cheap sources of energy like oil, coal, natural gas and nuclear power. Not only does that drive up the cost the middle class pays across the board for products, it also hits people directly when they heat and cool their homes. Exploding medical costs are also helpful and Obamacare has done an amazing job of this. Medical costs are skyrocketing for the middle class and helping to drive them towards poverty. As an extra added bonus, middle class Americans who can no longer afford to pay for their medical care because of Obamacare will also be hit with a tax penalty. If your goal is to hurt middle class Americans financially, you could not do much better than Obamacare.
There are many ways to impoverish working people more than just raising their taxes. Just make them pay more for everything by regulating and taxing the people who create the services and products that people buy.