It is disheartening how the many faithful who believe in the false doctrine of free-market capitalism zealously continue to advocate it in spite of the numerous failures, problems, and harmful effects which its widespread application has wrought on large numbers of people around the world. Following the collapse of communism, a process that began in 1989, there has been a substantial increase in the number of people who espouse the principles of free-market capitalism. Many of these simpletons have concluded that, since communism failed, it necessarily follows from the infallible rules of human logic that capitalism must be right; and since capitalism is good, free-market capitalism is therefore even better. Between these two monolithic alternatives, their brains are not able to conceive any other possibilities. But it seems never to have occurred to them that both communism and free-market capitalism might be wrong. Despite all the evidence to the contrary, their continued faith in free-market or laissez-faire capitalism is no different from the communists’ faith when, during the course of the last century, it became increasingly clear that their cherished ideology was completely wrong.
At no time and in no country have more revolutionaries been killed and reduced to slavery than in Soviet Russia. To one who himself for seven years found excuses for every stupidity and crime committed under the Marxist banner, the spectacle of these dialectical tight-rope acts of self-deception, performed by men of good will and intelligence, is more disheartening than the barbarities committed by the simple in spirit.
Having experienced the almost unlimited possibilities of mental acrobatism on that tight-rope stretched across one’s conscience, I know how much stretching it takes to make that elastic rope snap.[1]
Economists are to blame for much of the harm that has been done by free-market capitalism. This is because of their mistaken belief that, like the laws and theories of physics, economic laws and theories are true for all people and for all time; their failure rigorously to verify their theories before presenting them to the world; their mistaken assumptions about human behaviour, notably that human beings are rational creatures; and their unwillingness to revise, modify, or abandon their unrealistic laws and theories due to changed circumstances and changing models of economic behaviour. Moreover, by enabling a tiny portion of humanity to amass vast quantities of wealth around the world, they have given these individuals a very strong financial incentive to preach the virtues of capitalism and free trade, while they zealously protect their ability to continue enriching themselves, often at the expense of others.
Now that communism has been discredited by its manifest failure to fulfill its lofty promises, it is imperative that the extremely dangerous ideological fools known as free-market capitalists first be exposed for what they are, namely, rigid ideologues whose erroneous views have harmed hundreds of millions of people around the world, and second, that they be prevented from causing even more harm. The maxim of these ideologues is that the private “free” market will provide better services, products, and solutions, and at a lower cost, than when these services or products are provided by governments. But there are cases where this maxim is wrong. Private corporations must earn, or at least attempt to earn, a profit, which governments do not need to earn, and hence this is an additional cost that can make the services provided by private companies more expensive than when they are provided by the government. Moreover, those who work for private companies are sometimes paid substantially higher salaries, especially in senior management positions, than those who work for the government.[2] This explains why, when certain services like water or health care have been privatized, the rates charged to users have gone up rather than down, as the free-market economists confidently but erroneously predicted.
In 1993, the World Bank required Argentina to privatize its water systems as a condition of its loan. The world’s largest water company, Suez, took over through a subsidiary, Aguas Argentinas. The World Bank, the IMF, and other lending agencies funded 97 percent of that $1 billion water privatization, and residential water rates increased by 88.2 percent. In 1997, Suez was charged with failing to improve and expand services as promised. In 2003, it was also charged with not fully treating much of the sewage it transported, and with dumping untreated sewage into Argentina’s rivers. Water in seven districts in Buenos Aires was found to be “unfit for human consumption.” In response, thousands of citizens have blocked roads in protest, and demanded congressional oversight and cancellation of the privatization contract.[3]
It is an absurdity to believe that the executives of a privately-owned foreign company, who neither know nor care about the people they serve, and over whom they are given monopoly control over something as vital as water, while their primary goal is to earn as large a profit for its owners or shareholders as possible, will charge lower rates than the government formerly did, while providing better service to its captive customers. Their corporate mandate to maximize the company’s profits will obviously lead them to try to cut costs while charging as much as the consumers, who have no alternative, are able to pay. Even if privately-owned companies are able to provide certain services and products, such as cars, phones, clothes, and oil, more efficiently than governments can, it does not follow that they can do so in all economic sectors, for this is an unwarranted generalization that is often contradicted by reality. There are many other examples where privatizing a government service has had precisely the opposite effect of what was predicted by free-market economists. And yet, these real-world falsifications of their predictions have not led economists to modify or abandon their cherished beliefs and theories, as would have occurred in any true scientific discipline, which clearly shows that economics has more in common with religion and philosophy than it does with science.
Another important point is that the stark division between government and the private sector, as if individuals who worked in these two sectors of the economy lived on different islands, countries, or planets, with no communication between them, that is claimed to exist by the advocates of free-market capitalism, so that the private sector is assumed always to be more efficient, innovative, and less costly than the government, does not always exist. It is a slanderous lie to declare that all those who work in government are not conscientious or motivated to do the best job they can, that they do not pay attention to what is happening in the world, or they are not capable of initiating innovative practices or adopting those that have been developed by others. An example that contradicts this widespread free-market belief is the improvement of postal service in the United States in the mid-1800s:
The initial growth of railroads had a powerful impact on the United States postal system. As the railroad network expanded, it increasingly carried the long-distance mail. In 1847 railroads carried only 4.2 million (or 10.8 percent) of the 38.9 million miles of mail moved by the federal postal service. Steamboats accounted for another 3.9 million miles (10.0 percent). Stagecoach and horseback riders carried the rest. By 1857 mail mileage had almost doubled to 74.9 million miles. Of these the railroad carried 24.3 million (or just under a third). The steamship’s share had only increased to 4.5 million (or 6 percent).
The increase in speed of mail and the improved regularity of its transportation helped to bring the sharpest reductions of rates in postal history. In 1851, first-class mail rates of 5 cents an ounce up to 300 miles carried, and 10 cents beyond, were reduced to 3 cents up to 300 miles and 5 cents up to 3,000 miles. Then in 1855 the rate became 3 cents an ounce up to 3,000 miles. Three years before that the Post Office made its first general use of postage stamps to facilitate mailing. The drop in rates and the speed and certainty of transportation greatly facilitated long-distance business communication. It also encouraged a much greater use of the mails for personal correspondence as well as business correspondence.
[…]
The [U.S.] Congress provided funds to carry out [assistant U.S. postmaster Selah R.] Hobbie’s proposals. By 1855 the Post Office had set up some fifty distribution units manned by salaried middle managers and had carefully defined the detailed procedures and controls needed to coordinate the flow throughout the country. At the same time, the railroads increased their use of the specialized mail car. As in the case of comparable arrangements devised by the railroad to coordinate the flow of freight, these procedures took time to carry out. By the 1870s, however, they had been perfected. By then, American postal service was the largest and among the most efficient in the world.[4]
Two contemporary examples of government-run organisations that are noted for excellence in their respective fields are NASA, the U.S. agency that has achieved many notable advances in the field of space exploration, and the BBC, which has a global reputation for broadcasting excellence. To deny their widely-recognized excellence is merely to spout the sort of free-market propagandistic nonsense that free-market fanatics often spout. In these and other cases of well-run government organisations, it is the example set by those who work for them – their diligence, integrity, competence, knowledge, passion, industriousness, and high standards – that determine the behaviour of the majority of their employees. What matters most in assessing a company, organization, or institution, regardless of whether it operates in the public or private sector, is to consider the models of behaviour that are practised by the people who work for it. And clearly there can exist good models of behaviour in government-run institutions, just as there can exist bad models of behaviour in a particular private-sector company, or more generally in the private sector, such as the financial sector in some countries in recent decades. It is certainly not true that the models of behaviour that exist in the private sector are always or necessarily better than those that exist in government institutions.
It is extremely misleading and irresponsible to make blanket judgments about government, for the fact is that governments in some countries, or certain government departments in one country, clearly function more efficiently, and with little or no corruption, than they do in other countries. To make such blanket condemnations of all governments and government departments, services, and programs is no different from making overgeneralized racist or sexist remarks about the members of a certain group of people, such as Jews, blacks, women, the Chinese, Indians, Latinos, or native or indigenous people. Those who do so, like Ayn Rand and Milton Friedman, are nothing more than highly prejudiced government bigots who have allowed their strong prejudices to distort their perception and understanding of the world we live in.
Governments are not the uniformly bad and inefficient institutions that the free-market fanatics would have you believe. There is as much variety in governments – in terms of efficiency, competence, innovativeness, corruption, diligence, and bureaucracy – as there is in any other large and disparate group of individuals, companies, societies, or institutions. It is important to recognize the falsehood of this common slander against governments that is made by the many government bigots because it has resulted in the grave weakening of governments all over the world, with the consequent increase in the power of undemocratic, privately-owned corporations. In seeking to discredit, diminish, debilitate, and dismantle governments, which are democratic entities that are responsive and responsible to the people, they have weakened the only defense and protection that ordinary people have against the selfish and sometimes harmful actions committed by large corporations, which are not democratic entities. In other words, these ideological free-market fools have delivered a large and ever-growing portion of the world’s human population into the bonds of economic slavery or servitude that is corporate serfdom, a situation that primarily benefits the rich. It is not at all surprising that the rich do everything they possibly can to maintain this situation, while they constantly try to find new ways to increase their wealth, along with their power and control, whether this power is economic, political, or legal.
The dogma of free market capitalism has much in common with all the other utopias that have been advanced, developed, implemented, and later abandoned when it became clear that they were wrong. All of these glorious but ultimately impractical visions of how to create the ideal society have assumed that a human society can be built in the same manner as a house or some other material human creation. These completely deluded architects of human societies have believed that a society can be torn down and rebuilt, just like a building. But there is a fundamental difference between building with inert and lifeless materials such as wood, metal, glass, and brick, and creating something as complex and, moreover, as continually changing as a human society. Although the first materials pose some problems and challenges in their manipulation, and will gradually deteriorate with the passage of time, they are far more malleable, obedient, consistent, and predictable than human beings, and, moreover, they are far less complex than human societies consisting of many millions of people.
Anyone who has owned a pet or farm animal knows that one cannot simply decide what is best for it in terms of where it will live, what it will eat, and how it will behave. Before one acquires the animal, one may entertain certain ideas about its care and the way it will behave. But these ideas often have to be modified or abandoned based on the reality of the animal’s condition and behaviour, or else the animal will become sick, unhappy, or die. Furthermore, different individual animals behave in different ways and have different needs and preferences, so that there is no single right or best diet, habitat, routine, and so forth. If these things are true of less complex animals like mice, rabbits, cats, cows, pigs, dogs, and chickens, then we should have no difficulty understanding how much more difficult is the problem of arranging, regulating, improving, or altering the behaviour of a large, disparate, and constantly changing group of human beings. And yet, there continue to exist arrogant and ignorant fools who believe that they have discovered the solution to complex problems like human poverty and inequality. As hard as it may seem to believe, these fools actually believe that there exists a single global solution, theory, model, principle, law, or vision that can be applied to solve the problems of all groups of people, in all situations and places, and for all time.
The creations of the human brain have often been compared to children. There are many similarities between these two different kinds of offspring: they both take time to develop, their birth is often accompanied by labour and difficulty, and their progenitors are strongly attached to them. The human ability to imagine things that are different from what actually exists in the world has been both a curse and a blessing. So strong is our imaginative faculty that there are individuals who prefer, or mistake, the constructs of their imagination to, or for, reality. And it is precisely this mistaken preference that transforms them from harmless and impractical dreamers into dangerous ideologues. The grave and perennial danger of all utopias arises whenever some individuals go about imposing their particular vision of the ideal or perfect way of life on others, in their arrogant assurance that they know what is best for all people. We have seen this happen with religions and with overarching doctrines like communism and socialism. Now we are seeing this same tragic mistake being repeated by the zealous advocates of free-market capitalism, who, in their ignorance of history and human behaviour, are repeating the terrible mistakes that have been made by so many other self-appointed saviours of humanity.
The dogma of free-market capitalism will one day be recognized for what it is, when it will be relegated to the rubbish heap of grandiose human failures, as just another of the many mistaken theories, religions, schemes, plans, doctrines, utopias, and visions that have seduced, misled, befuddled, harmed, plagued, confused, and deceived that part of humanity that believed in them, along with their many unfortunate victims. The only question is, how much more harm will this false doctrine cause before this day of enlightenment finally arrives?
[1] From The God that Failed: Six Studies in Communism, edited by Richard Crossman. Harper and Brothers, New York, 1950.
[2] High private-sector salaries are due to free-market competition to attract the best individuals to one’s company. This often leads to an auction-style bidding up of salaries, which then, with the passage of time, become the new standard of remuneration for that position. In the public sector, there is usually a limit to how much employees can earn, thus capping their salaries at lower levels. Hence, there have developed different remuneration models in these two sectors, which has led to the sometimes great divergence that exists in the salaries of those who work at senior management levels in the private and public sectors. Only a blind and deluded free-market fanatic would argue that, in all regards, the pay scale that exists in the private sector, often with very great discrepancies between the lowest and highest workers’ salaries, is superior to the one that exists in the public sector.
[3] Alternatives to Economic Globalization: A Better World Is Possible, p. 111. Edited by John Cavanagh and Jerry Mander. Berrett-Koehler, San Francisco, 2004.
[4] The Visible Hand: The Managerial Revolution in American Business by Alfred D. Chandler, Jr, pp. 195-197. Harvard University Press, Cambridge, Massachusetts, 1980.
Homo Stupidus 