A Liberal’s Thoughts on Capitalism

by David Deutsch

Many on both the left and the right are surprised when I describe myself as a capitalist. Conservatives generally view me as a redistributionist, someone who advocates for taking money out of certain people’s hands and giving it to people who they believe do not deserve it. I have heard many variations of that theme, which boils down to “You are a liberal, therefore you must be a socialist, an Obamabot, an America-hater, etc.” One conservative friend even equated my beliefs to forcing wealthy people to give portions of their houses away. Although I get pushback from liberals, some of whom are surprised when I extol the virtues of entrepreneurism, the positive potential of of venture capitalists, and the many benefits of free markets, I definitely get the most negative reaction from conservatives.

Here’s the thing: economics is a very complex field. Studying economics requires us to look at the complexities and trade-offs people make with each economic decision. My views on capitalism are also quite complex. So below I explain why I am not an economic conservative, and I illustrate this with a can of beans.

No, seriously.

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It is no exaggeration to say that free markets are incredible. Take a trip to the grocery store as an example of the benefits of capitalism. Let’s say someone wants to buy a can of beans. The effort that went into making that can of beans is breathtaking. First, someone somewhere had to plant the beanstalks, harvest them and send them to some sort of bean processing plant. Meanwhile another company was mining for iron and tin to make the can. Elsewhere some paper company made the label and ink used to mark it, and someone else had to design it to compel people to purchase that brand of beans. Finally, the can opener was designed and sold. All these items had to be shipped by boat, train and/or truck to end up in your cupboard. While the deconstruction of this process is daunting, most of us take it for granted as we make our trip to the store. This was described by Adam Smith, who famously coined the term “the invisible hand” of the marketplace. There does seem to be an unseen force magically filling our grocery stores with all the stuff we could ever need and more. And as you can see, even our most basic economic decisions connects with and impacts thousands of people in the public and private sectors all over the world.

The Who Sell Out

Many people forget the government’s role in putting those beans on the shelf. The National Institute for Standards and Technology (NIST) makes sure that power outlets across the country are 100% standardized, so you can plug any device into any wall and nothing will blow up. Laws prevent child laborers from doing all that work, at least in the US. The Department of Transportation ensures the car driven to the store meets minimum safety requirements, and the roads are built by US taxpayers. The government makes sure grocery stores are zoned for that specific commercial enterprise. Government agencies make sure they are clean and safe for customers. And the can of beans has a government-mandated nutrition label on it, so consumers know exactly what they are getting when they pick that can off the shelf.

It is this public/private relationship which makes our society hum along, and those who broadly advocate for less government for its own sake are naive. Granted, it feels good to be anti-government and anti-tax. But the government is both ubiquitous and necessary. This is why I believe Congressman Ron Paul is so dangerous. Paul recently proposed at the annual Conservative Political Action Committee (CPAC) meeting that people should be allowed to make a choice: they can pay the current tax rate for life or they could, at an early age, choose to opt out of all government services and pay a 10% flat tax for life. That idea whipped CPAC attendees into a near frenzy, as so many of them longed for the day that they didn’t have to be burdened by awful taxes.

But Congressman Paul never described how to opt out of government. What about the taxpayer-funded roads that move all kinds of things from one place to another? Or the power outlets that are consistent across the country, not to mention light bulbs that screw perfectly into fixtures? Or safe and clean restaurants and grocery stores? Who will pay for the judges that enforce your home ownership or rental contracts? Or makes sure the water you drink is safe and abundant? Or ensures that your car is safe?

Not the free market, that’s for sure. As I have previously said, markets are not perfect and require some governmental support to support them. Any student of economics knows that when supply equals demand in any market, that just means the market is efficient. So people who put blind faith in the highly simplified graphs which determine efficient outcomes do not even understand what they are advocating for.

So I view political demagogues who call for blanket deregulation as profoundly naïve, greedy or just plain dangerous. Oftentimes they are all three. That’s not to say they are disingenuous or liars; their beliefs do work well, on paper. But blanket deregulation simply does not, and cannot, work in the real world.

The same principle applies whether you are talking about a can of beans or complex banking regulations. Public and private sectors need to work together to create optimal outcomes. After all, if bean manufacturers did not have to comply with Federal regulations, who knows what you could end up with when you open that can?

David Deutsch is Principal and Founder of Synergi Communications. He is also a former Federal Auditor at the Department of Transportation, Office of Inspector General. He can be reached at .(JavaScript must be enabled to view this email address).

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