Occupy Wall Street

The bulk of the Wall Street protestors deliver a garbled, incoherent message along the lines of “abolish capitalism”.  Their ridiculousness is captured here.  When asked what to replace capitalism with, they don’t know.  The answer, of course, is something along the lines of socialism and communism.  But most people, without having a working definition of these economic models, inherently know that they’re not desirable – so nobody wants to state the obvious alternative.

It’s refreshing to know, however, that there are some intelligent voices in this group.  You can hear one such voice in the following video:

Unlike the hippie anti-capitalists his is a message of anti-corporatism, limited government, and sound money.  Unfortunately, by trolling around with this riff-raff I fear he risks weakening the importance of the “End the Fed” message.  Nevertheless, unlike the call for “economic equality”, it’s a sensible one.

If you want economic equality, look no further than North Korea: there is no upper, middle, or lower class.  Everyone is poor.

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10 Responses to Occupy Wall Street

  1. Guest says:

    Actually, North Korea does have an upper class. And in the USSR, those who worked for the State were also part of the upper class. Ditto for Cuba. It’s impossible to have a classless society.

    • matthewnbarr says:

      Yes, to be perfectly technical, a classless society is impossible. However, for all intents and purposes, North Korea’s working class, aside from core state loyalists, is considered middle or “neutral” (and, no, that doesn’t mean that per capita net worth is spread evenly amongst everyone).

      By your comment, are you suggesting that North Korea isn’t a communist country or are you just eager to correct me? Do you agree with their economic model? Do you agree with the Wall Street protestors that we should strive for economic equality? If so, how do you define economic equality? How do you achieve it? How would you propose to fix capitalism if that’s your desire?

      Just as North Korea is not completely classless, America’s economy isn’t entirely one of capitalism. On the contrary, it’s a mixed economy of both socialism and capitalism.

      • Guest says:

        Well, I used to be an advocate of pure capitalism, but as of late, I’ve been moving more towards socialism. Most of us Americans fail to realize that we don’t, in fact, have the highest standard of living. If you look at some of the Scandanavian nations, they have free education (including college), more holidays, much cheaper healthcare, and, in general, far less debt than the average American. Naturally, the difference is taxes. We do have a bigger portion size, but I’m not sure that that necessarily equates to a higher standard of living. What I’m getting at is that the common economic indicators – GDP, GNP, inflation, unemployment rate, etc. – don’t tell the whole story. So I think that there should be a way to define economic equality apart from the econometric data.

        Regarding the video, my reaction is mixed. The protestors fail to realize how a business cycle works. You can’t have the peaks without the troughs. Abolishing the Fed won’t abolish the troughs. Most of US history consists of economic expansion (growth), as opposed to contractions, so the Fed is not the problem. Also, it’s impossible to go back to the gold standard, much less bring back the “productive jobs.” If by “productive” he’s referring to manufacturing jobs, the loss was inevitable given the transformation to a services-type economy. I do agree that the Government should watch its spending. Two simultaneous wars on two different continents is pretty costly.

        To address your last point, I don’t propose to “fix” capitalism, at least not with any short-term “magic bullets.” But some adjustments might need to be made if Americans wish to maintain their standard of living relative to the growing debt. Some of the gradual fixes might not be in the spirit of American capitalism – they may border on socialism – but I see no other way out of the present crisis.

      • matthewnbarr says:

        What made you switch from capitalism to socialism? And, would you say the Scandinavian nations have achieved economic equality? If so, how so?

        To clarify: if a greater portion of your income is taxed to provide “free” education then it isn’t free.

        With all due respect, you fail to understand what causes the business cycle. Yes, there are ups and downs in an economy but without the Federal Reserve they wouldn’t fluctuate as wildly. Just as throughout the roaring 20’s, the Fed inflated the recent housing bubble with an inflationary, easy credit, low interest rate policy. This manipulation of interest rates distorts market signals and leads investors to believe that there are more savings in the system than there actually are. Over-leverage and malinvestment ensue. Eventually the bubble pops and investments are liquidated. If the Fed isn’t the cause of the boom-bust business cycle then why were huge market gyrations absent in the 19th century?

        And what makes you say that returning to the gold standard is impossible? The research is out there that says it’s possible.

        Finally, what are the adjustments/fixes that will lead us out of the present crisis?

    • matthewnbarr says:

      Here’s a great article on Occupy Wall Street that I encourage you to read: http://mises.org/daily/5746/Occupy-Wall-Street-A-Story-without-Heroes.

      As it pertains to your comment I find this section most notable (my comment in brackets):

      “… Although there is no single ideology uniting the movement, it does seem to have a general philosophical thrust, and not a very good one at that. OccupyWallStreet.org has a list of demands, and while the website does not represent all of the protesters, one could safely bet that it lines up with the views of most of them: A “living-wage” guarantee for workers and the unemployed, universal healthcare, free college for everyone, a ban on fossil fuels, a trillion dollars in new infrastructure, another trillion in “ecological restoration,” racial and gender “rights,” election reform, universal debt forgiveness, a ban on credit reporting agencies, and more power for the unions. …

      All in all, this wish list is a terrible recipe for moving far down the road toward socialism. On the way to achieving these goals, totalitarian controls on the population would be necessary. Some of these demands are merely horrible ideas that would injure the economy severely — such as the huge expansion of public infrastructure. But others are so fancifully utopian — such as a living wage guaranteed to all, especially when combined with free immigration — that their attempted implementation would confront the many disasters and horrors we have seen in every nation that has seriously attempted socialism [such as North Korea]. Such policies would vastly expand the government, including its manifestations in the corporate state and police power that these protesters find so unsavory. All of the corruption and brutality they think they oppose are symptoms of the same essential political ideology they favor.”

  2. Guest says:

    Hello Again,

    The common argument as to why socialism works in Scandanavia is that socialism in general works for small mono-cultural populations with shared values. The way I see it, however, is that high taxes actually force people to be more productive; not only that, but they force people to save. Isn’t it ironic that despite the overly generous welfare system in these nations, they also have extremely low rates of unemployment relative to the USA? By generous, I’m referring to the type of system where say, a Swedish resident could collect maximum annual unemployment benefits equivalent to about $35,000 USD (http://www.thelocal.se/14164/20080905/). As you know, an economy with a high unemployment rate stagnates – we can see this from the business cycle, where the unemployment rate is generally higher during contractions than expansions. I’ve also mentioned savings. To put this into perspective, the cars and the houses are much smaller in Europe than in the USA (although there’s a trend toward smaller houses in the USA now). I don’t know what the disposable income of a typical Scandanavian resident is, but it’s fair to say that it’s a lot less than that of the typical American, as you can see if you compare Sweden to America (http://en.wikipedia.org/wiki/List_of_countries_by_per_capita_personal_income), and where disposable income equals total personal income minus taxes. So basically we have a lot more to spend than the typical Scandanavian, and we have a lot less to pay in taxes, but we have a way higher debt, at all levels, from individual to household to government. I guess the point of all this to show that measuring equity in purely monetary terms has severe limitations.

    The Fed may be partly responsible for the bubble bursting, but there were a lot of other factors. As Alan Greenspan puts it (http://online.wsj.com/article/SB123672965066989281.html), there were never-before-seen global factors at work, e.g. a world-wide decline in long-term rates, and the unprecedented growth rates of some emerging market economies. Returning to a gold standard would turn the market upside down: http://www.bnet.com/blog/financial-business/why-were-not-returning-to-a-gold-standard/8738.

    • matthewnbarr says:

      “The common argument as to why socialism works in Scandanavia is that socialism in general works for small mono-cultural populations with shared values.”

      And that’s precisely why socialism, despite your proposal to gradually introduce more socialist elements into our economy, wouldn’t work in America (unless you support taxpayer-funded churches – Sweden still has them). We are neither a small nor mono-cultural population. In fact, we celebrate the complete opposite.

      Of all the Scandinavian nations, socialist apologetics most-often point to Sweden as the model of socialism. Simultaneously they ignore North Korea, Venezuela, the Soviet Union, Mao’s China, Cuba, pre-reform India, Laos, Vietnam, Bangladesh, Libya, … etc. Why do you suppose that is? If the secret to Sweden’s so-called success is a culturally homogenous people then are you actually suggesting that America move toward that aim? Is that the “fix” you alluded to?

      Furthermore, it’s a myth that Swedish socialism works so well: For a full discussion, see chapter 7, Why Sweden Stinks, of the Politically Incorrect Guide to Socialism by Kevin D. Williamson. In short, Swedes basically pay more into their political system and get less out of it than the US. In that way they closely resemble American inner-city schools.

      The article you link states the most common objections to returning to the gold standard: transition, instability, and creditability. To type out an adequate reply would be too lengthy for a simple, already-too-long blog comment. So, for a thorough response to these issues, please read the following:

      Money: Sound and Unsound, Joseph T. Salerno (particularly chapter 12, starting on page 337), http://mises.org/books/sound_money_salerno.pdf

      Is the Gold Standard Still the Gold Standard among Monetary Systems?, Lawrence H. White, http://www.cato.org/pubs/bp/bp100.pdf

      The Political and Economic Agenda for a Real Gold Standard, Ron Paul (see the section The Transition to a Gold Standard), http://www.lewrockwell.com/paul/paul431.html

      The Theory of Money & Credit, Ludwig von Mises (see Part Four: Monetary Reconstruction, Chapter Three: The Return to Sound Money, starting on page 435), http://mises.org/books/tmc.pdf

      The Case for a Genuine Gold Dollar, Murray N. Rothbard (see the last section, Which Gold Standard?), http://mises.org/rothbard/genuine.asp

      Along the way you may learn a thing or two about the Fed as well. The Greenspan article you linked doesn’t disprove that the Fed causes the boom-bust business cycle; it merely cites relatively insignificant peripheral economic circumstances of the day.

  3. Guest says:

    I never claimed socialism was universally successful. Like every good economics book makes clear, the final say in economic policy comes from politicians, not economists. Politics, of course, is about as dirty as it gets. So if NK, Cuba, etc. are screwed up, it probably has more to do with politics than economics.

    The secret to Scandinavian prosperity is NOT a homogenous population (although that may help somewhat). As I explained in detail in my last post, it’s a combination of very high taxes combined with an incentive to be productive. I don’t see why Americans can’t adapt these two things, even if it means becoming a bit more frugal.

    We agree to disagree about the gold standard. Regarding the recession, yeah, Greenspan-era low interests were one factor, but there was much much more to it. Too many people were eager to buy houses and banks were too eager to give them the loan to do it, without doing the proper background check. In some bizarre way, a gold standard would have prevented such a crisis, given that credit is much harder to come by, but that’s an extreme solution. It’s like saying let’s permanently divide Germany up between Russia and France to negate the possibility of National Socialism.

    • matthewnbarr says:

      Politics and economics are intertwined, so much so that they’re barely distinguishable. So, I don’t totally grasp your point of the first paragraph or how it’s relevant. If Obama’s Jobs Act passes in its current form then is that politics or economics? I’d say both. Who cares?

      In the Politically Incorrect Guide to Socialism Williamson attributes the efficiency of Scandinavian governments to the “high levels of social trust” among its nations. He goes on to say that “highly trusting societies tend to be ethnically, religiously, and linguistically homogenous, relatively small, and often culturally insulated by the use of a rare language such as Swedish or Icelandic.” I believe the so-called “success” of Swedish socialism has a lot more do to with this uniformity – uniformity that’s impossible in America – than you let on.

      More important, however, is the fact that the Scandinavian model of socialism “allows for a less authoritarian, more genuinely democratic expression of socialism, one that is not held hostage by the petty corruption and endemic misallocation of resources associated with other kinds of socialism.” Even so, the Swedish model of democratic socialism still delivers sub-par results, to say the least. For the sake of brevity, I’ll refrain from expounding on that for now.

      Onto your “high taxes spurs productivity” point. So let’s see. Last year 17.1% of my income went toward federal taxes. If, say, the government took 52% from me then I’d have to work much harder to net the former amount, right? That’s your theory? Meanwhile I spend less time with my family and work myself to the bone. That’s fair, right? And, it’s fair because someone else will enjoy the fruits of my labor – the government will make sure to redistribute it to someone who truly needs it, right? Is it so hard to see where socialism departs with liberty? Why doesn’t that bother you? What makes someone else entitled to my wages?

      Furthermore, do you know about the Laffer curve? The Laffer curve basically states that when you raise taxes beyond a certain point, 50% theoretically, then government revenues begin to decrease. So, think about it: if in your world higher taxes means higher productivity then wouldn’t it stand that a 99% tax rate would result in the highest levels of productivity? Just image: everyone working so hard to eke out a few extra dollars of disposable income for their own interests versus the government’s! The more money the government allows them to keep, why, the less they’ll work!

      As far as the gold standard – I’m disappointed by your “agree to disagree” comment. You cherry-picked one article with an all-too-common, lazy objection to returning to a constitutional standard of money that our forefathers intelligently prescribed for us and that we adhered to for over 150 years. I read your article. Now if you want to educate yourself and learn the objections to your objection then you owe it to yourself to read my references. Or if you want to dig in your heals and blindly cling to your original ideas then, yes, we can agree to disagree.

      But don’t pretend that you understand the business cycle created by the Fed. Not when you say this:

      “Regarding the recession, yeah, Greenspan-era low interests were one factor, but there was much much more to it. Too many people were eager to buy houses and banks were too eager to give them the loan to do it, without doing the proper background check. In some bizarre way, a gold standard would have prevented such a crisis, given that credit is much harder to come by, but that’s an extreme solution.”

      Low interest rates were the REASON people were eager to buy houses they couldn’t afford. They were the REASON banks were so willing to lend. You admit that a gold standard would’ve prevented that but still don’t endorse it. Why? Why is the gold standard extreme? Why is it extreme to not inflate the money supply? Why is it extreme to object to devaluing the currency? Why is extreme to object to higher food and energy prices? Why is it extreme to object to a fiat monetary system that produced the worst economic downturn since the Great Depression?

  4. matthewnbarr says:

    It seems you’ve disappeared but nevertheless I wanted to point you to this report on Sweden’s form of government: http://www.tomwoods.com/blog/sweden-and-the-welfare-state-another-view/.

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