Occupy Congress, Not Wall Street

Unfortunately, they are in the wrong city, targeting the wrong enemy.  The “Occupy Wall Street” protesters should have focused  on Washington, D.C., rather than New York from the beginning; pushing to replace crony capitalism with capitalism rather than attacking capitalism, the only real hope for progress.

The protestors have only a semi-coherent set of complaints.  Some objections focus on big business; others on the government bailouts they (particularly financial institutions) have received; still others on greed.  And there is some validity in their objections (I too object to the massive government bailouts and takeovers). But the common catch-all term for what they object to—capitalism–is incorrect, and therefore their “solution”—more political control, just of the “right” kind, would  actually be a move in the wrong direction.

The protestors seem to miss the irony of their position—they object to others being bailed out, but not themselves, and to what they consider other people’s’ greed, but not their own.  They are also misled by a major Marxian confusion about capitalism. The result is that they don’t want to eliminate the crony capitalism system of special government favors at others’ expense; they just want to become the cronies who control those favors.

These thoughts struck me because, yesterday morning, I went from reading an article about the self-styled “99 percent” to the introduction to The Morality of Capitalism (2011) , a slim book of essays edited by Tom G. Palmer.  Even though it was written before the protests began, Palmer seemed to capture the essence of what the protestors fail to understand about capitalism and, therefore, why their calls for more government control are misguided.

Palmer does an excellent job of correcting misunderstandings about capitalism.

“Far from being an amoral arena for the clash of interests, as capitalism is often portrayed…capitalism rests on a rejection of the ethics of loot and grab, the means by which most wealth enjoyed by the wealthy has been acquired in other economic and political systems…[where]  those who are rich are rich because they took from others…because they have access to organized force… Such predatory elites…feed at the state treasury and they benefit from state-imposed monopolies and restrictions on competition.  It’s only under conditions of capitalism that people commonly become wealthy without being criminals.”

“Capitalism is about creating value…The market—and not arrogant mercantilist politicians—shows us when we are adding value, and without free markets we cannot know.”

“Capitalism is…about adding value through the mobilization of human energy and ingenuity on a scale never seen before in human history, to create wealth for common people that would have dazzled and astonished the richest and most powerful…of the past…It’s about the replacement of force by persuasion.  It’s about the replacement of envy by accomplishment.  It’s about what has made my life possible, and yours.”

Palmer also locates the source of people’s confusion about capitalism in a failure by Marx to distinguish between it and crony capitalism.

“In some texts Marx used [capitalists] to refer to those innovative entrepreneurs who organize productive enterprises and invest in wealth creation, and in others he used it to refer to those who cluster around the state, who live off of taxation, who lobby to prohibit competition and restrict the freedom to trade; in brief, to those who invest, not in creating wealth, but in securing the power to redistribute or destroy the wealth of others…[He] confused productive entrepreneurship and market exchange with living off of taxes taken from others…’capitalism’…was used equivocally to refer to both free market entrepreneurship and to living off taxes and government power and patronage…”

“’free-market capitalism’ should be clearly distinguished from ‘crony capitalism’…

“Sadly, ‘crony capitalism’ is a term that can with increasing accuracy…be applied to the economy of the United States, a country in which failed firms are routinely ‘bailed out’ with money taken from taxpayers, in which the national capitol is little more than a gigantic pulsating hive or ‘rent-seeking’ lobbyists, bureaucrats, politicians, consultants, and hacks…[who] take it on themselves to reward some firms and harm others.  Such corrupt cronyisms shouldn’t be confused with ‘free-market capitalism,’ which refers to  a system of production and exchange that is based on the rule of law, on equality of rights for all, on the freedom to choose, on the freedom to trade, on the freedom to innovate, on the guiding discipline of profits of losses, and on the right to enjoy the fruits of one’s labors, of one’s savings, of one’s investments, without fearing confiscation or restriction from those who have invested not in the production of wealth but in political power.”

““People create relationships based on choice and consent.…Embracing free-market capitalism means…accommodating change and respecting the freedom of others to do as they please with what is theirs…embracing the freedom to create wealth which is the only means to the elimination of poverty…celebrating human liberation and realizing human potential.”

The Occupy Wall Street protestors justifiably object to abuses our government has imposed on the rest of us for its favored cronies.  But they are mistaken to blame the cronies rather than the government that “rents out” its power to use on their behalf. The abuses would disappear without government’s coercive backing.  Further, they are incredibly naïve in calling for more government intervention, with them as the new cronies, because those who aren’t well-informed, don’t vote, don’t contribute to politicians or mobilize resources on their behalf, and aren’t organized into an effective lobby, will not win political control over crony capitalism.

As Tom Palmer points out, if America was actually allowed to be capitalist, the fact that all such relationships are based on mutual consent, and are therefore mutually beneficial, would prevent all the abuses of some by others.  The legitimate claims of the protesters would be addressed.  As a result, the solution is not to try to redirect crony capitalism in their preferred direction, stealing for them rather than from them.  The solution is to reestablish capitalism, and once again unleash its now hamstrung cooperative miracles to improve all of our lives.

(Gary Galles is a professor of economics at Pepperdine University)