Sunday, March 29, 2009

Money-Chasers vs. Money-Makers

The following is a letter published in the New Jersey Star-Ledger on March 12, 2009, followed by my posted comments. My comments were inspired by Ayn Rand's essay "The Money-Making Personality", originally published in the April, 1963 issue of Cosmopolitan magazine. In her essay, Ms. Rand drew a sharp distinction between what she referred to as the Money-Makers and the Money-Appropriators. The difference between the two is dramatized in her novel, Atlas Shrugged. The essay is reprinted in The Objectivist Forum

Producers Fell Short

I'm confused by your reader who's concerned that President Obama wants to replace the high standard of living through capitalism with socialism by punishing the producers and rewarding the slackers ("Obama policies destructive," March 7). Who are these producers? Perhaps he is referring to the Ponzi scheme specialists Bernie Madoff and R. Allen Stanford.

I also have in mind notable producers from 2008, before Obama was elected. Richard Fuld earned $70 million as CEO in the year that Lehman Brothers collapsed. Let's not forget some of the best producers of our lifetime: AIG, Washington Mutual, Merrill Lynch, Wachovia, Bear Stearns and Countrywide.

A famous comedian had a skit in which he handed out business cards announcing he was a producer. What did he produce? Business cards. Our producers created derivatives and other indefinable investment vehicles, raking billions of dollars off the top, leaving no value for the original investor.

I'm a capitalist like the reader. But my form of capitalism yearns for morality, integrity, clarity, and yes, regulation to assure that destructive greed can be minimized.

-- Richard Kochman, West Caldwell

My Commentary:

Posted by Zemack on 03/14/09 at 9:54PM
Richard Kochman's confusion stems from his equating of money-chasing at any cost with money-making. Money-makers are the producers who give value to money. It's true that the ranks of the money-chasers are growing...and the money-makers our politically corrupted economy. But, think of all of the goods and services available to you which you do not yourself produce, and you'll have proof of the existence of the actual producers. A producer is anyone who puts in an honest day's work producing something of value for others willing to purchase that value through voluntary, uncoerced trade to mutual advantage. Highly productive people are those who produce vast amounts of wealth for trade, thus enriching the lives of thousands and millions. The highest in this regard are the creators and inventors who turn innovative ideas and theoretical science into commercially valuable wealth. The fortunes they earn pale in comparison to the benefits they bring to their fellow man. The jobs we fill, the skills we learn, the tools we work with, and the array of products and services we purchase with our earnings...values we do not and could not ourselves provide...come courtesy of the most productive and creative few. In all cases, production can be traced back to the minds of individuals.

Mr. Kochman is right to tie capitalism to morality. Capitalism is the moral social system which rewards integrity and honesty (clarity) because it is based upon the recognition of individual rights, and a government charged with the task of protecting those rights from foreign enemies and domestic criminals...both violent and non-violent (ex. fraud). So long as an individual (or his business) does not violate the rights of others, he is free, under capitalism, to act on his own judgement and in his own self-interest. Madoff is a criminal money chaser, not a producer. His prosecution is government's proper function. It is grossly unjust to equate him with producers on any level of competence.

But government regulation is destructive of capitalism and free markets. The mostly capitalistic system established at our Founding has been replaced over the past century or so with a special-interest-driven mixed economy drifting steadily toward total government control. Regulations that replace the private judgements of individuals regarding their own affairs with those imposed by government bureaucrats are a violation of an individual's rights to life, liberty, and property and are thus immoral...i.e., anti-capitalist.

The current financial crisis is proof of the failure of government regulation and market interference. The shenanigans of some of the bankers and financiers as well as many home-buying borrowers, while representing the face of this crisis, occurred within the context of a heavily regulated banking system under the control of a coercive government central bank money monopoly. On top of that is a whole network of market distorting government housing policies accumulated over a period of decades spawned by the intention to "encourage" homeownership. We are witnessing the climax of the failure of those policies and regulations today.

We should turn away from the destructive and immoral policies of targeting the productive and rewarding government with more power, and instead discover and turn toward capitalism.

Businessweek Debate Room-CEO Pay Caps

The Debate Room

Let CEOs Make Do with $500,000
President Obama’s proposed salary restrictions for banking executives are a good idea for all of Corporate America. Pro or con?

Pro: Welfare Checks for Execs
by Dean Baker, Center for Economic & Policy Research

President Obama has proposed restrictions on the pay of top executives at banks that are getting bailed out by taxpayers. It remains to be seen how effectively these restrictions, which would set a maximum salary of $500,000 a year for these corporate officers, will be applied, but lower pay for top executives in the financial sector is a good idea that can help set an example for the rest of the economy.

The tens of millions of dollars received by top executives in the financial industry set a standard that executives in other industries strive to match in the same way that a record contract signed by a sports superstar turns into the new benchmark for other top athletes. Perhaps a sharp decline in salaries in the financial sector will set in motion a trend toward lower pay—whether enacted by the government or by the corporations themselves—for CEOs and other top executives in other sectors.

Rewriting rules on corporate governance to provide shareholders with more control on pay would aid this trend. For example, if companies were required to win shareholder approval for executive pay packages in real elections (unreturned proxies don’t count), it would go far toward reining in the pay of top executives.

President Obama should take advantage of the extraordinary opportunities in the current political and economic environment to rebalance the relationship between corporate management and shareholders. This would be the best and most immediate way to limit executive compensation.

Con: An Unneeded Complication
by Yaron Brook, Ayn Rand Center for Individual Rights

Like Bush, Obama is using our tax money to bail out AIG (AIG), GM (GM), Bank of America (BAC), etc. In return many Americans expect, not unreasonably, that our government should now be able to dictate to these companies how to run their businesses, including what to pay their CEOs. But do we really want America’s largest corporations taking orders from members of Congress, government bureaucrats, and professional lobbyists? I think not.

Instead, we should end the bailouts, repeal the numerous government regulations that have distorted the free market, and let companies sink or swim on their own merits. That’s the American way.

But letting the government determine pay for all corporations? A CEO can mean the difference between a company’s success and collapse—just think where Apple (AAPL) would be without Steve Jobs. Shareholders have a moral right to pay whatever they judge necessary to attract, retain, and motivate talented leaders.

What about not-so-successful CEOs who walk away with millions while their companies tank? Shareholders are free to insist on clawback provisions and other contractual measures. But a government-enforced cap on CEO pay would punish the best CEOs by denying them the huge rewards they earn by creating vast amounts of wealth.

The only sure result of this injustice would be a flight of the best and brightest from public corporations.

Government mandates on CEO pay mean CEOs lose, shareholders lose, and all those who benefit from dealing with public companies—i.e., all of us—lose.

My Commentary

Mike Zemack
February 11, 2009 08:48 PM
On the face of it, the pay cap doesn't seem to make any kind of sense at all. At a time when top talent is needed to turn these companies around, which was the whole point of the government’s bailout "investments," these companies are denied the flexibility and freedom to attract that talent.

But viewed from the proper perspective, this does make sense. The pay cap is a government power grab. Eventually, the precedent established here will lead to greater government intrusions into all companies. As has been pointed out previously here, the pay cap is the latest in an escalating series of government intrusions into the private economy, each leading to the next. We are witnessing creeping fascism.

I agree with Mr. Brook. Repeal the cap and end the bailouts. Then abolish the myriad of market-distorting government regulations, programs, and policies that led to the crisis to begin with.

Other Commentary

February 11, 2009 11:49 PM
"... a government-enforced cap on CEO pay would punish the best CEOs by denying them the huge rewards they earn by creating vast amounts of wealth."

These CEOs ran their companies into the ground, begged the government to give them money and they should keep multi-million dollar salaries for failure?

To all those who bemoan that the banks are getting nationalized and reaching for the USSR/Cuba hyperbole, keep in mind that the banks ran to Congress, crying that they needed government help and the same regulation they described as injurious meddling. Obama didn't nationalize banks. Bush did. At their request.

If you're perfectly happy with these hypocritical "leaders" keeping $200 million pay packages and rewarding them for their failures, that's your business. I, on the other hand, wouldn't want my taxes to be paying for a generous retirement of someone who ran his bank into the ground and socialized it rather than face the music and take his lumps.

"Although not an example of LFC, the Industrial Revolution was a time during which there was very little government interference in business. The result was an overall improvement in the quality of life for all people. This country realized a surge in private wealth no other had ever known."

Really? According to whom? During the Industrial Revolution factory workers spent 10 hours a day, six days a week for almost nothing and kids as young as 6 were used for hazardous repair work. Grocery stores sold rotten food, butter mixed with mashed potatoes and tap water was better suited for biological warfare than for drinking, cooking or cleaning.

Monopolies crushed competition and the overwhelming majority of the new wealth was concentrated at the top 1%. There was no such thing as the middle class until the mid 1940s.

Unless of course you have data that contradicts every college textbook written in the last 50 years.

Finally, when using Marx or the Communist Manifesto in an insult, here's something to remember. Marx and Engels were sitting down to a cup of coffee and ranting about the mistreatment of factory workers. None of the things they outlined were supposed to come from government interference. Both of them just assumed that the changes will happen on their own.

My Commentary Response to Random

Mike Zemack
February 12, 2009 07:58 PM
Random, and apparently the college textbooks he cites, fails to consider historical context. The conditions that existed at the dawn of capitalism and the Industrial Revolution were horrendous. Unimaginable poverty, including hordes of homeless children, was the norm. Life expectancy was abysmally low, and the mortality rate for children under five years old was 70% plus.

This must be kept in mind when criticizing the allegedly terrible conditions of "factory workers [who] spent 10 hours a day, six days a week for almost nothing and kids as young as 6 were used for hazardous repair work." People filled those conditions, those jobs, voluntarily because it vastly improved their lives, compared to previous conditions.

In particular, most of those child laborers Random laments would most likely have been dead children before...part of the hordes of children abandoned by parents too poor and hungry themselves to feed all of their children. All of those people, adults and children alike, flocked to the newly opening factories by choice, because it improved their lives. I know of no historical record of businessmen forcing people to take those jobs. The rising prosperity of the 19th century capitalist economies pulled families out of pre-industrial poverty, gradually alleviating the need for children to work. Today's child labor laws that rightly protect children from exploitation were not made necessary by capitalism, but made possible because of capitalism. Had those laws existed during the early days of the Industrial Revolution, they would have condemned countless children to death by starvation.

It should also be noted that life expectancies almost doubled, from about 30 to the mid fifties, between the late 18th and early 20th centuries in the industrializing capitalist nations, an unprecedented and incredible achievement in so short a period of time. This occurred in large part because of improved living conditions for children, resulting in a sharp fall in their mortality rates. It also occurred during a period of time unlike any before or since--an almost laissez-faire economy.

As for monopolies, both practice and theory demonstrate that the kind of monopolies that "crush the competition" are a logical impossibility in a free, capitalist economy. As long as political force isn't brought into the economic equation, there is no way any company...even one that is the sole producer of a particular product at a particular time...can prevent new competitive entrants.

Take the just-announced merger between Ticketmaster and Live Nation. Despite the fact that it will initially create a market monopoly, new entrants are free to enter into the ticket business at any time, including Springsteen, LiveStub CEO Hershfield, or any of the artists and others in the ticketing industry who are squawking against the merger. If this deal is approved, as it morally should be, the combined company would still have to satisfy its customers or lose them to a new competitor. As long as individual rights are protected, as they are only under capitalism and as long as political connections aren't employed by the big established players to thwart competitors, as typically happens in the kind of mixed economy we have now competition (which includes potential competition) can not be "crushed" or coercively eliminated by anyone.

Capitalism has never had a fair hearing because it has never been fully understood, even by most of its supporters. A good place to start would be to examine the total context of the current crisis, as Mr. Brook has attempted to point us in the direction of. Even Random might be tempted to set aside "every college textbook written in the last 50 years", and think again.

One final comment. Not all of "the banks ran to Congress, crying that they needed government help..." Some, such as Wells Fargo, among many others, were forced to take bailout money by the Bush administration. Many, though, did run to the government. But keep in mind that one must not confuse capitalism with capitalists. Laissez-faire means, essentially, the separation of state and economics. Under capitalism, no bailout would have occurred, and the incompetent banks would have folded. Of course, under capitalism, we wouldn't be having this discussion, because the housing bubble would never have occurred to begin with.

random response
February 13, 2009 02:39 PM
Really, you shouldn't make things up. To say that kids doing factory work in hazardous conditions circa 1905 wouldn't been dead instead is to use a heavy amount of artistic license about tough times in the big city and make your own version of history, more agreeable with what you like to hear. Historical context doesn't mean you get to make up something to disagree with facts you'd rather ignore.

The same goes for your bizarre concept that monopolies give room for new entrants into a market. They don't. If they did, they wouldn't be called monopolies. A monopoly owns 98% of the market or more which means that it controls 98% of the customers and close to 99% of all revenues that can be generated in the market. They can and do crush any new entrants to the field which is exactly what happened with US Steel, Standard Oil, AT&T and the other famous monopolies of the day. Your example of the TicketMaster and LiveNation merger uses customers who are forced into partnerships with the companies because they've shut out everyone else and calls them "new entrants." So if my Internet is provided by Time Warner which has a monopoly in my area and I have no choice but to go with them for Internet access, I'm their competition? Wow. Just wow.

Finally, I find it hard to believe that Paulson was shoving money down Wells Fargo's throat. Why? Because that never happened. No bank is forced to take bailout money. They ask for it in order to be eligible to receive it. It may help to actually read the news before pontificating on morality of running a monopoly. Big words and long posts by themselves do not a valid argument make.

My Response

Mike Zemack
February 13, 2009 11:03 PM

I specifically said "As long as political force isn't brought into the economic equation, there is no way any company...even one that is the sole producer of a particular product at a particular time...can prevent new competitive entrants."

There is a crucial difference between a market monopoly and a government-enforced monopoly. The cable companies are typically awarded a franchise to operate in a given geographical area--by government. This means, competitors are forbidden by law from entering into that particular market segment. Absent government interference in the market, a monopoly can be maintained only by the voluntary actions of customers willing to buy the products of that company. A market monopoly cannot forcibly prevent new entrants. Citing AT@T and Standard Oil in the same context is comparing apples to oranges. AT&T's market share was guaranteed by law (until 1984), while Standard Oil's share dropped precipitously after the Texas oil discoveries and exploding demand for petroleum products with the advent of the auto industry.

Wells Fargo was one of nine healthy banks called to Washington to meet with Paulson, at which time he "offered" a contract in which the banks must take the money as a "one-time" offer. This was understood by the banks as a threat from the entity--the government--that controls their industry. Wells Fargo immediately resisted, but ultimately signed the agreement. None of the nine banks actually asked for the money. This was reported by the New York Times and other news outlets last fall. It must be remembered that we have a centrally controlled and regulated banking industry. When the people who have regulatory control over your business demand something, you are hardly in a position to refuse. Perhaps Wells Fargo and the others could have taken the risk of refusing the money, but none of the nine banks asked for the money.

As to child labor and the other facts I cited, the source for the information I presented is, among others, the book The Capitalist Manifesto by Andrew Bernstein. And I was specifically referring to the early years of the Industrial Revolution regarding child labor, not 1905. If you can't refute some one's arguments, it doesn't mean you should accuse him of lying.

Tuesday, March 24, 2009

Blame Government, Not Health Insurance Industry

LTE to Star-Ledger, 3/19/09

Insurance industry to blame

President Obama recently said of health care reform: "We didn't get it done .¤.¤. in recession, in booms, in wartime, peacetime .¤.¤. We didn't get it done."

The main reason "we didn't get it done" was the health insurance industry, which has fought meaningful health care reform for over 50 years. It invented the concepts of pre-existing conditions and cherry picking, gave us "Harry and Louise" and confuse the issues by using bizarre terms like "moral hazard" and "adverse selection".

And now they have the gall to say, "Trust us."

Karen Ignani, president of America's Health Insurance Plans, says, as you quote in your editorial of March 15 ("A good prognosis"), "You have our commitment to play, to contribute and to help pass health care reform this year". Do tell. Why do we even consider giving these people a seat at the table?

As someone said recently, the health insurance industry should not be at the table, they should be served on it.
-- Kevin Twine, Orange

My Commentary:

Posted by Zemack on 03/19/09 at 5:28PM
Kevin Twine's anger is completely misplaced. The health insurance crisis is a classic example of an industry and a market crippled by massive government intervention. And in further classic form, the blame is placed on the victim...the government-shackled industry. Mr. Twine's unjust, un-American, and dangerous solution is to deny to insurance industry officials the right to speak out and participate in the functions of government in direct violation of the First Amendment...for the sin of complying with their own government's irrational dictates.

This is not, however, an endorsement of the status quo. But before any discussion on reform can begin, the nature of the beast we erroneously call a "private health insurance system" needs to be understood for what it actually is, and how we got here. In the slide toward a healthcare dictatorship, which began decades ago, we are probably in about the seventh inning. All along the way, the problems in healthcare and insurance have grown in tandem with the growth of government controls.

Today's health insurance industry is a government controlled and protected cartel, not a market creation. The insurers are insulated from the insured (their actual customers) by the government-imposed third-party-payer system. The policies insurers write are dictated by government through thousands of federal and state ratings, benefits, and mandatory guaranteed issue...and not based upon objective market considerations such as the needs, judgements, and budgets of their customers, or economic and risk assessments. Interstate competition among insurers is virtually non-existent, having been unconstitutionally barred by law.

The current "private" health insurance industry is really a quasi-private extension of government that could not exist without government force. It is not really insurance at all, which is supposed to be protection against unforeseen or catastrophic financial loss. Our current system is a forced prepayment of medical services and is really nothing more than wealth redistribution masquerading as "insurance". It is socialism coming through the back door of fascism...with business superficially private but controlled by government. It forces one to pay enormously for services one has little control over and to cover other people's health expenses, while removing personal responsibility for one's own healthcare.

Leaving aside other problem areas of American healthcare such as the market-destroying government-run "insurance" schemes (which should be phased out and abolished), a good place to begin reform is to eliminate the immoral, rights-violating interventions cited above. This would break up the cartel and establish a free market, which essentially means the recognition of the rights of all people to think and act on their own judgement, for their own benefit. Insurers, health products and services providers, and their customers/patients would be free to contract with each other voluntarily to mutual advantage. People would be free to spend their own healthcare dollars as they see fit and new market-oriented insurance companies would emerge. The competition for those dollars among insurers, doctors, pharmaceutical companies, and other providers would inevitably lead to lower costs and better quality. Further cost savings would come about as a result of the elimination of the huge government-imposed and necessitated administrative costs embedded in our current system.

The government's proper role in a free market is to protect the rights of consenting adults to their contractual rights...which are derived from their rights to life, liberty, and property...and to protect against and prosecute fraud and breech of contract.

This would be a start, but much would remain to be done. No talk of rational reform is valid or possible without a fundamental re-evaluation of every aspect of our current system, including the most sacred of our sacred cows. What currently passes for "reform" ideas is nothing but more of the same destructive rewarding of the cause of the crisis...the government...with more power.

Saturday, March 21, 2009

USA Today on the "Right" to Healthcare

Health care is a right

Miles J. Zaremski - Highland Park, Ill.

Health care is a right The USA TODAY article "21% of Americans scramble to cover medical, drug bills" illustrates how badly broken our health care system is, and that it needs immediate reform (News, Cover story, March 11).

Health care is a right for all Americans. During a presidential debate last fall against Sen. John McCain, then-Sen. Barack Obama made that point. President Obama should now make the same strong declaration from the Oval Office.

Millions are uninsured and underinsured. Others are forced into bankruptcy as they try to pay their medical bills. Without our health, we cannot earn income, and thus care for ourselves, our families and our communities.

My Commentary:

The fundamental principle that America was founded upon is unalienable individual rights possessed equally by all people, at all times, and protected equally and at all times by government. They are guarantees to freedom of action within a social context...such as the rights to speech and religious practice. The strong constitutional protections for property rights sanctions the right to satisfy one's own needs through one's own productive work or through voluntary trade (freedom of association) with others. Rights are validated by man's nature as a being of reason, and the factual requirements necessary for his survival, qua individual. These rights presuppose the right to life.

Rights are not an automatic claim to the products, labor, or earnings of others. Nor are they created by the arbitrary assertions of politicians, "society", or anyone's claims of "need". To enforce an alleged "right" to any man-made value such as health care means that the government must be granted the power to loot and enslave its people. This is the very evil America's founding principles were meant to abolish.

The only proper and civilized way for one to acquire the healthcare that one needs is to pay for it out of one's own earnings through direct purchase or through a prior, voluntary contractual agreement such as insurance. Otherwise, one must depend upon some type of voluntary, uncoerced charity. Any method involving force...governmental or immoral and un-American. It must be said; Need is not a license to steal, or to elect political surrogates for that purpose. Establishing need as a license to steal, as Mr. Zaremski implicitly advocates, is the path to a slave state governed by a predatory government. It is a society ruled by the law of the jungle..."I need it, therefor I can seize it by force."

There are no facts of reality that establish the right to healthcare, shelter, food, cars, or any other man-made wealth, other than what one can acquire through voluntary, uncoerced production and trade. Replacing the current semi-socialist, semi-fascist system with a free market in medicine is the only moral, rights-upholding path to widely available, affordable, and quality healthcare.

Thursday, March 19, 2009

Sanchez on Class and Other Subjects

Commentary: It's time for America to think straight about class

By Mary Sanchez | The Kansas City Star
So now, with people's 401(k) retirement accounts vanishing along with their puffed-up middle class pride, perhaps there is space for a little truth telling.

The average American never leaves the class level he or she is born into. Yes, it's true, despite all those Horatio Alger kitchen table talks about "you can be anything you want dear, this is America!" I don't want to let greedy financiers off the hook for current market turmoil, nor do I wish to deflate the ambitions of next great entrepreneur, Google founder or Warren Buffet in the making. But Americans just don't understand class and how it works within the version of capitalism that is the U.S. of A.

Just consider the heedless and lemming-like way most Americans stumbled into this recession.

For decades, people truly believed they were far better off financially than they actually were, even though the average American worker saw a 16 percent drop in his earnings (adjusted for inflation) between the 1970s and 2004, according to economist Benjamin Friedman of Harvard. Meanwhile, the top 1 percent of the income scale skyrocketed ahead? Yet somehow, every American proudly proclaims membership in "the middle class." Amazing what E-Z credit and the ability to buy a latte every morning can do to a worker bee's perspective.

It is time for the voting masses – and I'd include myself here – to understand economic facts better and begin pushing for real change. We need to shed our mythical beliefs about class and build a stable economic foundation that all Americans can depend on. I suspect more people will be open to this line of learning now that unemployment has hit 8 percent. For decades, people missed the fact that a white collar job, a college degree and a cubicle did not necessarily offer them a level of job or financial security above the blue-collar, manual labor workers they thought they'd moved ahead of.

Consider the findings of the 2009 MetLife Study of the American Dream, released in March: Half of all respondents admitted they were one or two paychecks from ruin. If they lost their jobs, within a month, 50 percent of the people polled admitted they would not be able to pay their bills.

Another 28 percent said losing their job would find them unable to pay their bills within two weeks. More than a quarter of people earning $100,000 said they'd be insolvent after a month of unemployment. That's not middle class stability as most people would define it. No doubt this situation owes much to the recent crash in home prices and the cratering of the stock markets. But that's another way of saying that many Americans were simply never as upwardly mobile as they had assumed, or deluded themselves into thinking they were.

You may own a sprawling home with the three-car garage, take an annual trip to Cancun, and be able to discuss basic investment strategies, but somehow at least a quarter of you are living one month away from financial oblivion. The trappings of middle class life are not the same as security.

Another sign of our cluelessness is that half of us are railing (a few decades late) at the excesses of the executive class, while the other half of us are railing at deadbeat subprime borrowers. What we should be doing is pouncing upon our elected officials, demanding that Congress lay a foundation for true prosperity and security, as previous generations did in the 1930s and 1950s. In this session, Congress will likely decide on major legislation that would make it easier for unions to organize workplaces; that would reform the American health care system; and possibly that would overhaul the way we regulate banks and other financial institutions. In each of these areas we need bold change from recent policy.

I hear the cry of "socialism" coming from the back of the room.

This isn't about class conflict; this is about building a stable foundation for the future, so hard work really will get people ahead.

My Commentary:

America does not have a “version of capitalism”, but a mixed economy of steadily eroding capitalistic freedom and ever expanding government control. There is nothing new or bold about Obama’s policies, which continue America on the century-long path toward total statism.

Ms. Sanchez points to the 1930s and 1950s as models we should follow to “lay a foundation for true prosperity and security”. Far from any such thing, the foundation for the current crisis in finance and healthcare were laid in the early to mid 20th century in a quest for the free lunch of government-guaranteed “security”. Instead of turning toward a free market, she calls boldly for government to be rewarded for its failures with still more power.

The two areas of concern mentioned by Ms. Sanchez, the financial crisis and the mess that is our healthcare system, are perfect examples of a mixed economy, not capitalism. The third-party-payer system, the thousands of insurance mandates, barriers to interstate competition for health insurance, and rights-violating programs such as Medicare, Medicaid, SCHIP, and EMTALA have virtually destroyed all but a few remnants of capitalism and free markets in healthcare. The current financial crisis is proof of the failure of government regulation and market interference, not capitalism. This crisis occurred within the context of a heavily regulated banking system under the control of a coercive government central bank money monopoly. On top of that is a whole network of market distorting government housing policies accumulated over a period of decades spawned by the intention to "encourage" homeownership. We are witnessing the climax of the failure of those policies and regulations today.

Ms. Sanchez doesn’t like hearing the term “socialism”. But words have meanings, and ignoring the nature of where America is heading will not wish it away. The fact is that socialism is coming to America via the back door of welfare state fascism, a system whereby most property remains in private hands, but is totally controlled by the state. It is just this mixed economy trending toward total fascism that tends to freeze people into economic “classes”. The graduated income tax, massive government business regulation, dependency-fostering welfare-state programs, and tax and monetary policy are among the reasons upward mobility is shackled in America. Capitalism, the system of individual rights, eliminates all of those barriers under a system not of classes or tribes or special interest groups but of individuals associating with each other through voluntary trade and contract to mutual advantage.

“Hard work” is not the primary ingredient to “get ahead”. People worked a lot harder in pre-capitalist times just to stay ahead of the next famine. Slaves can be made to “work hard”. The irreplaceable virtue that lies at the foundation of economic prosperity and progress is the individual human mind. But reason and thinking require both political and economic freedom…i.e., to be free from interference by force from one’s neighbors and the government. Only one social system establishes the proper social conditions man’s rational faculty (and thus wealth production) requires…capitalism.

The fundamental battle today is between capitalism and socialism, or individual rights and the total collectivist state. Mostly what we hear today in varying degrees from both major parties is more of the second. The truly bold change would be to discover and embrace individual rights and capitalism as the foundation for a truly free and prosperous laissez-faire society.

Other's Commentary:

borisjimski wrote on March 17, 0:29 AM:
"Local projects should be paid out of local funds, not by federal moneys taken from people who are nowhere near . . . in a quest for the free lunch of government-guaranteed “security.”" Right you are! So all those southern states that live off the largess the Yankee states give them each year as the excess over what they pay into the federal system, time to cough it up. As to healthcare being a market-based business, do you really believe people price out how much it will cost them at each hospital with each doctor when they have a heart attack or discover a lump? "This crisis occurred within the context of a heavily regulated banking system under the control of a coercive government central bank money monopoly," notwithstanding the fact all those regulations were ignored the last eight years. Geez Mike, sounds like you're getting your talking points directly from the AEI. Capitalism isn't a social system, it's an economic system. And socialism isnt the total collectivist state.

MikeZemack wrote on March 17, 9:06 PM:
Capitalism in the philosophical sense is a social system based upon the recognition of individual rights to life, liberty and property, and a government limited to protecting those rights. A free market is an economic system, which is integral to capitalism. But capitalism encompasses both political and economic freedom, Political freedom is only possible under economic freedom. Freedom of speech, religion, association, etc. are not practicable when government controls one’s property and livelihood. Only capitalism provides both freedoms.

Government economic regulation is the means by which politics corrupts the private economy. Political pressure on the banks applied through the conduit of the regulators and the GSEs, compounded by the Fed’s easy money, low interest rate policies, led to this crisis. The quick-buck artists on Wall Street, while not to be excused, were merely riders on a political train. At no time did the government relinquish any of its regulatory powers.

Other's Commentary:

mongrel wrote on March 17, 3:10 PM:
Mike Zemack said it all:

"The fact is that socialism is coming to America via the back door of welfare state fascism, a system whereby most property remains in private hands, but is totally controlled by the state."

This is not new, it has happened elsewhere in the past. "Limousine liberals" and misguided leftist do-gooders were instrumental in making "welfare state fascism" become reality.

What "our" limousine liberals forget that all those previous limousine liberals also thought they will be allowed to keep their limousines while the misguided "masses" will be ruled by the socialist government. Instead of limousines, they were labelled "enemies of all classes" & ended up in prison, in concentration camps, and execution chambers. The "masses" lost freedom of speech, freedom of assembly, freedom of religion, the right to private property, and became poorer, hungrier, completely oppressed by government.

MikeZemack wrote on March 17, 9:22 PM:
Mongrel, you are scarily right.

The growing dependency on government, the breakdown of society into a civil war of special interest pressure groups at the expense of the individual and his rights, government controls breeding more government controls, calls for more and more sacrifice to the state (or the nation or the race or society), exploding government debt, a flood of printing press money…it’s all happened before.

The closest historical parallel to the America of recent decades is pre-Hitler Germany…from Bismarck’s 1880s welfare state to the 1930s.

Friday, March 6, 2009

No "Right" to Healthcare

The following is a letter published in the New Jersey Star-Ledger on February 19, 2009, followed by my posted comments.

Affordable health care

The time is long overdue for America to catch up with most of the other industrialized nations in providing affordable quality healthcare.

When everyone can get the same kind of care that those in Congress already enjoy (on our dollars) then we will definitely be on the right track. Right now, we are paying top dollar and far too many of us are getting unsatisfactory care.

Health care is a necessity and a right for everyone and should be equally accessible to all regardless of their bank statement or social standing. That is what democracy truly looks like.
-- Diane Beeny, Westfield

My Response

Posted by Zemack on 03/06/09 at 7:59PM
The idea that healthcare is a right (Diane Beeny letter, 2/19/09) is wrong and a dangerous threat to freedom. Rights are a sanction of freedom of action...such as freedom of speech or religious practice...that are unalienable and possessed equally and at all times by all people, and which impose no unchosen obligations on others. This is one of the fundamental principles of America's founding, along with the idea that the government's proper role is to protect those rights. Rights are the natural birthright of each individual, not whimsical creations based upon need or "necessity".

Rights are not an automatic claim to the earnings, products, or services produced by others. The only way a government can guarantee a "right" to healthcare is by violating actual rights to life, liberty, and property...i.e., by assuming the totalitarian power to loot and enslave its citizens in order to pay for and make healthcare "equally accessible to all regardless of their bank statement or social standing". There is no other way. A government-guaranteed "right" to healthcare is indeed "what democracy truly looks like"...democratic fascism, that is, not the American concept of democratic republicanism limited by constitutionally protected individual rights.

Under the American concept of democracy, the natural unalienable individual rights enunciated in the Declaration of Independence are constitutionally placed outside the power of the ballot box. Those rights are considered the natural birthright of each individual, not creations based upon the whims of any state, king, politician, or "society". No democratic majority (or its elected representatives) has the power to seize the earnings or property of private citizens to pay for some arbitrarily asserted "right" to healthcare simply by assembling a large enough voting block. Nor does any voting block have the power to place an entire industry under state control in order to force doctors and other healthcare professionals to provide that service according to the dictates of bureaucratic tyrants.

Under the American concept of individual rights, a person can acquire healthcare only through voluntary means, such as paying for it with one's own earnings either directly or through a prior contractual agreement such as insurance, or by voluntary private charity.

But American principles have been all but forgotten today, which is why we are steadily evolving toward the very enemy we defeated in World War II, fascism.