Search

Begin New Search Topic Economics Political Geography America Journal The Objective Standard

11. Capitalism Unbound: The Incontestable Moral Case for Individual Rights

Author:
Ari Armstrong
Publication Date:
04-2010
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
With Congress debating far-reaching bills to expand federal control of health care, politicians and pundits blaming the economic downturn on allegedly free markets, President Obama fulfilling his promise to "spread the wealth around," and dozens of czars overseeing wide swaths of American life, it seems that capitalism is in retreat. A rousing defense of capitalism, therefore, could not have come at a better time, and that is what Andrew Bernstein provides in his new book, Capitalism Unbound. Bernstein ably defends the achievements of the Industrial Revolution, presents the moral foundation for capitalism, skewers socialism, and indicates in some respects how several disasters-including the recent housing bust-were caused by government meddling in the economy. Capitalism Unbound is an updated and highly condensed version of Bernstein's 2005 book, The Capitalist Manifesto: The Historic, Economic and Philosophic Case for Laissez-Faire. With the new book, Bernstein promises "the essential points-presented in a simple, easy to read format" (p. ix). He begins his sixteen-page Prologue, "The Primordial Struggle for Individual Liberty," by mentioning that capitalism rests on the "moral code . . . of an individual's inalienable right to his own life" (p. 1). After recounting the American Revolution as a key example of the furthering of individual rights, Bernstein applies the principle of rights to issues such as contracts, property, and employment. He then defines some key terms, including capitalism ("the system of individual rights, including property rights, in which all property is privately owned"), freedom (protection "against the initiation of force by either private citizens or the government"), and statism ("the subordination of the individual to the state [and] the repudiation of inalienable individual rights") (pp. 10-11). The prologue concludes with a discussion of some of history's most horrifying instances of statism, including tribal dictatorships, Soviet communism, National Socialism, and Islamic theocracy. The rest of the book is divided into three parts, about the historical, moral, and economic superiority of capitalism, respectively. In Part One, "The Historic Superiority of Capitalism," Bernstein first summarizes the impoverished conditions of preindustrial Europe. He then explains how, inspired by Enlightenment thinkers, innovators of 18th-century England and 19th-century America achieved profound advances in technology and economic production, created goods and services that radically improved the living conditions of the common person, and often amassed fortunes in the process. These productive giants include steam engineer James Watt, steel titan Andrew Carnegie, and oil pioneer John D. Rockefeller, who by the height of his dominance had driven oil prices from fifty-eight cents to eight cents per gallon (p. 52). Bernstein reviews many of the economic advances of the Industrial Revolution, such as the enormous expansion of cotton cloth-spun English cotton increased twenty-four-fold between 1765 and 1784 alone-enabling "hundreds of millions of people worldwide . . . to dress . . . comfortably, cleanly, and hygienically" (pp. 34-35, emphasis removed). . . .
Topic:
Economics
Political Geography:
America and Europe

12. From the Editor

Author:
Craig Biddle
Publication Date:
10-2010
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
Welcome to the Fall 2010 issue of TOS—and a special welcome to our new Canadian readers who, with this issue, are discovering the Standard via newsstands in Canada's largest bookstore chain, Chapters/Indigo. We are excited to add our northern neighbors to the list of countries we infiltrate with principled discussion of the moral and philosophical foundations of freedom.
Topic:
Economics and Islam
Political Geography:
America and Canada

13. An Interview with John Allison about Pro-Capitalism Programs in American Universities

Publication Date:
10-2010
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
I recently spoke with Professor John Allison about his efforts and successes in creating pro-capitalist programs in American universities. Professor Allison was the CEO of BB for twenty years, during which time the company's assets grew from $4.5 billion to $152 billion. He now teaches at Wake Forest University. —Craig Biddle Craig Biddle: Hello, John, and thank you for joining me. John Allison: It is a pleasure to be with you. Photo courtesy Wake Forest University CB: Let me begin with a couple of questions about your work at Wake Forest. I understand that you joined the faculty in March 2009 as a Distinguished Professor of Practice—a fitting title given your decades of applying philosophy to business. What has your work at the university entailed so far? And how have your ideas been received? JA: I've primarily been involved in teaching leadership both to students and to some of the administrators in the university. I taught a course on leadership last fall, and I've been participating in various courses taught by other professors on finance, mergers and acquisitions, and organizational development. But my focus is on leadership. My ideas have been well received. The students take great interest in talking to someone who has been in the real world and been successful in business. I think they appreciate that perspective. CB: Through the BB Charitable Foundation, you've established programs for the study of capitalism at a number of American universities. How many of these programs are there now? What unifies them? And what generally do they entail? JA: BB has sponsored sixty-five programs to date, and they're all focused on the moral foundations of capitalism. While many people recognize that capitalism produces a higher standard of living, most people also believe that capitalism is either amoral or immoral. Our academic question is: How can an immoral system produce a better outcome? We believe that capitalism is moral and that this is why it is so successful. We think it is critically important that we not only win the battle over economic efficiency, but that we engage in and win the debate over ethics as well.
Topic:
Economics
Political Geography:
America

14. An Interview with a "Capitalist Pig" Jonathan Hoenig on Hedge Funds, the Economic Crisis, and the Future of America

Publication Date:
06-2009
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
I recently spoke with Jonathan Hoenig, manager of the Capitalistpig Hedge Fund and regular contributor to Fox News Channel's Cashin' In, Your World with Neil Cavuto, and Red Eye with Greg Gutfeld. Mr. Hoenig is also a columnist for Smartmoney.com and contributes economic commentary to WLS 890AM in Chicago. -Craig Biddle Craig Biddle: I must ask at the outset, why did you name your firm "Capitalistpig"? Is there a story behind that? Jonathan Hoenig: Yes, there is. From weeding yards as a young boy to working at Starbucks in high school, I have always been interested in money and actively hustling for dollars. Getting an "A" in school didn't mean much to me, but earning a few hundred dollars working in a local warehouse or passing out samples of Nutella (another summer job) always provided a tremendous sense of accomplishment and pride. One of my earliest memories is going with my dad to our local bank and opening my first passbook savings account. Even then, it was a real thrill to watch the balance slowly build. As a kid, while many of my contemporaries were either bullying (or being bullied), I was busy discovering the virtue of mutually beneficial exchange. My neighbor appreciated me cleaning out her basement, and, for a few bucks, I was more than happy to do an excellent job. Ever since I can remember, capitalism wasn't something I spurned, but embraced. Knowing I wanted to pursue a career in the financial markets, after college I traded futures at the Chicago Board of Trade for a few years before opening up my firm in 2000. The name Capitalistpig Asset Management was a punchy way of communicating the philosophy by which my operation is run. We also give all new clients a copy of [Ayn Rand's] Atlas Shrugged. The name Capitalistpig also helps to attract the right type of customer. I prefer to work with like-minded individuals who support capitalism and individual rights and are happy to be part of an operation that loudly promotes these ideals. CB: What exactly is a hedge fund? How is it different from a mutual fund? And what do you and other hedge fund managers do? JH: A hedge fund is simply a pool of money funded by profit-seeking investors and managed by a professional money manager. In that sense, it is similar to a mutual fund. But unlike a mutual fund, a hedge fund is not required to register with the Securities and Exchange Commission. This doesn't mean hedge funds are unregulated; far from it. The government places stringent restrictions on how hedge funds can operate. Most notably, we're prohibited from accepting investments from "nonaccredited" individuals-meaning, those who don't have a liquid net worth of at least $1 million or haven't earned an income of at least $200,000 for two consecutive years. This, incidentally, is the source of the notoriously "exclusive" and "elitist" nature of hedge funds: They're exclusive and elitist not by choice, but by government edict. While most people assume that hedge funds trade frequently and make big bets on financial esoterica, the truth is a hedge fund is a legal structure, not an investment technique. Some trade frequently and use leverage, others buy and hold stocks for months or years at a time. So while the media routinely characterize hedge funds as "risky" or "highly leveraged," the reality is that hedge-fund strategies, just like mutual-fund strategies, run the gamut from the ultraconservative to the highly volatile. Some managers employ complex spread trades, while others simply buy and sell stocks. Just knowing someone runs a hedge fund tells you absolutely nothing about how it's run. What matters are the strategies, positions, and discipline that the manager uses to maximize the money. My fund is focused on absolute return, ideally earning a profit regardless of the condition of the stock market or larger macroeconomic environment. To accomplish this, I use strategies such as selling short, trading options, commodities, currencies, and other instruments, some of which aren't directly correlated with the stock market. My fund functions as one part of an individual's portfolio, usually no more than 25 percent, and it has been profitable eight out of nine years, earning a total return of over 345 percent. The Dow Jones has lost 28 percent over the same period. CB: Hedge funds and their managers have been loudly and repeatedly condemned for having somehow caused or exacerbated the current financial crisis. Did hedge funds lead to or worsen the crisis? If so, how? If not, what do you make of such claims? JH: Such accusations are absurd. Hedge-fund managers have neither caused nor exacerbated the financial crisis, and they couldn't have done so even if they had tried. These managers simply invest money for their clients. If they make good investments, their clients make money; if they make bad investments, their clients lose money. Moreover, hedge funds-one of the few financial industries that has not asked for and will not receive a bailout-actually helped shoulder the burden of the credit collapse. In buying and selling risky mortgages, loans, and other instruments, hedge funds substantially mitigated the crisis by adding liquidity to the marketplace and facilitating trade. Wealth creation requires investment, and the savings needed in order to make loans, finance operations, start new companies, and invest in R come from investors, such as hedge-fund managers, who are seeking to profit. Far from fueling the financial crisis, hedge-fund managers reduced its severity, and continue to do so, by allocating capital in accordance with the principles of economics, long-range thinking, the profit motive, and market demand.
Topic:
Economics
Political Geography:
America and Chicago

15. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger

Author:
Heike Larson
Publication Date:
06-2009
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
Free marketeers reading the news these days cannot help but feel depressed. Media reports would lead us to believe that entrepreneurs are exploiters, that global trade hurts rather than helps people in America-in short, that capitalism has failed and that only the "change" offered us by central planners can alleviate our economic woes. In this climate, Marc Levinson's book The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger provides a welcome respite and intellectual refueling for weary capitalists. It tells a suspenseful story of achievement-replete with many twists and turns and a swashbuckling American hero-that will leave you wanting to run to the nearest container port to admire with newfound appreciation the industrial machinery that impacts almost every part of our daily lives. The Box, published on the fiftieth anniversary of the first sailing of a containership christened The Ideal-X, tells the story of how a seemingly mundane thing-a metal box with a wooden floor-managed to fundamentally change the world we live in. Until the 1960s, shipping had not changed much in decades. Handling cargo was a labor-intensive activity, and transportation costs and times-whether by land or by sea-were huge obstacles to trade, often making transcontinental, let alone global, trade economically unfeasible. In the 1950s, moving goods by ship was "a hugely complicated project," involving "millions of people who drove, dragged, or pushed cargo through city streets to or from the piers" (p. 16). Docks were cluttered with every kind of good imaginable, "steel drums of cleaning compound and beef tallow alongside 440-pound bales of cotton and animal skins"-all of which needed to be loaded and unloaded manually by gangs of longshoremen (p. 17). The process of loading and unloading a single ship during a single visit to a port often took weeks and accounted for between 60 and 75 percent of shipping costs. And, given the difficulties inherent and time involved in moving goods housed in a variety of different containers, it was imperative that factories locate close to docks for fast access to raw materials. Transportation costs and long delivery times made long-distance trade challenging and expensive-even before factoring in the heavy regulation that plagued the shipping industry. Recognizing the great expense and wasted time inherent in shipping practices of the day, two companies-both outsiders to the maritime shipping industry-developed in parallel an alternative system. Malcom McLean, an entrepreneur who grew his trucking company from a single vehicle purchased on credit during the Great Depression to one of the largest in America, bought a marginal East Coast maritime shipping line using "an unprecedented piece of financial and legal engineering" to circumvent regulations that prevented trucking companies from owning ship lines (p. 45). McLean set out to design and build a new shipping system from scratch based on a novel approach to the business: Whereas most shipping executives at the time believed that their business was operating ships, "McLean's fundamental insight, commonplace today but quite radical in the 1950s, was that the shipping industry's business was moving cargo" (p. 53, emphasis added). Within less then two years, McLean and his company, Pan-Atlantic, bootstrapped the first viable container system, in which cargo was loaded into stackable metal and wooden boxes of uniform dimensions, eliminating much of the labor required for and many of the problems inherent in loading ships with goods housed in a variety of containers. Further, "McLean understood that reducing the cost of shipping goods required not just a metal box but an entire new way of handling freight. Every part of the system-ports, ships, cranes, storage facilities, trucks, trains and the operations of the shippers themselves-would have to change. In that understanding, he was years ahead of almost everyone else in the transportation industry" (p. 53). His team of entrepreneurial, fast-moving engineers, managers, and partners designed, among many other things, the 33-foot box (only small steel containers were previously available); developed a quick-release locking system that eliminated the need to chain containers to ships or trucks; built a new trailer chassis to guide containers automatically into place; and put in place large cranes equipped with spreader bars-devices stretching the entire length of a container that enabled crane operators to attach and release hooks at the container's corner with the flick of a switch, thereby eliminating the need for longshoremen to climb up to each container corner and attach chains manually. And they accomplished all of these things while dealing with skeptical regulators who doubted the safety of containers and were pressured by truck and rail competitors to prohibit the container shipping experiment. When the first containership sailed on April 24, 1956, McLean's detailed cost tracking system showed clearly the benefits of the new system: "Loading loose cargo on a medium-sized cargo ship cost $5.83 per ton in 1956. McLean's experts pegged the cost of loading the Ideal-X at 15.8 cents per ton. With numbers like that, the container seemed to have a future" (p. 52). . . .
Topic:
Economics
Political Geography:
America

16. Antitrust with a Vengeance: The Obama Administration's Anti-Business Cudgel

Author:
Eric Daniels
Publication Date:
12-2009
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
Not yet a year into its term, the initially popular Obama administration has plummeted in popularity. In light of Washington's escalated meddling in the economy, many Americans are expressing deep concerns and anger about the statist direction in which this administration is steering the country. Unfortunately, however, few Americans are aware of-and the media is ignoring-one of the administration's most serious threats to our freedom: its stated intention to bolster antitrust enforcement. Since May, Christine Varney, the newly appointed assistant attorney general for the Justice Department's Antitrust Division, has conducted a speaking tour promoting the Division's new mandate under Obama and affirming the president's many campaign promises to "reinvigorate antitrust enforcement." Varney and her counterpart at the Federal Trade Commission, Jon Leibowitz, are publicly threatening "possible investigations" of businesses ranging from Google to Monsanto to IBM. In response to this new climate, antitrust advocates from Senator Charles Schumer to the American Booksellers Association have called on Varney to undertake new prosecutions. And New York Attorney General Andrew Cuomo recently joined the push by filing a suit against Intel.1 Americans should not only be aware of this ominous trend; they should be up in arms about it. Antitrust laws violate the rights of American businessmen and consumers, thwart economic development, and stifle our quality of life in myriad ways. To see why, we must first understand what antitrust law is. During the second half of the 19th century, as American companies grew and acquired assets around the country, they found themselves in a difficult position. Although companies could achieve economies of scale by acquiring smaller firms and unifying their efforts, state laws prevented them from doing so. Whereas some state legislatures imposed special taxes on out-of-state corporations doing business in their states, other legislatures forbade corporations in their state from holding the stock of companies based elsewhere. (Legislators established such restrictions in the hope that they would force successful companies to incorporate-and thus pay taxes-in their state.) In response to these restrictions on acquisitions, C. T. Dodd and John D. Rockefeller of Standard Oil created a new form of business using the device of a legal trust, which enabled them to hold the stock of dozens of companies and thus effectively manage vast productive assets.2 The operational and financial advantages of this novel corporate structure were immense, yet critics alleged that the newly created trusts were "odious monopolies," charging them with "making competition impossible," "raising prices," and "disregarding the interests of the American consumer."3 Critics condemned this new legal device as a "problem" and branded businessmen who employed it as "robber barons." Yet these businessmen used this legal device to create their vast fortunes by increasing competition, lowering prices, and providing American consumers with more and better products.4 The problem was not that their novel form of business had generated economic inefficiencies-it had done the opposite. Rather, the problem was a political one. Because these businesses were becoming fabulously successful and their owners enormously wealthy, egalitarian-minded and envious Americans pressured politicians to "do something," and politicians, seeking approval, got "tough" on the issue. A solution to the trust "problem" came in the form of the Sherman Antitrust Act of 1890. Senator John Sherman and his colleagues claimed that trusts were "combinations that affect injuriously the industrial liberty of the citizens of these States."5 Critics of the trusts claimed that their high profits were achieved-not through the entrepreneurial, managerial, and productive genius of men such as Rockefeller, Edison, and Carnegie-but by "the few extorting the many."6 Because of the "public outcry on the trust question" and the alleged need to protect the "interests of the consumer," Sherman and his colleagues advocated the creation of a broad law that outlawed "monopolization" and "restraint of trade." That law was the Sherman Antitrust Act, and since its passage in 1890 Congress has added five other antitrust laws to the books, prohibiting dozens of supposedly "anticompetitive" business practices.7 . . . To read the rest of this article, select one of the following options: Subscriber Login | Subscribe | Renew | Purchase a PDF of this article.
Topic:
Economics and Oil
Political Geography:
America

17. Deeper Than Kelo: The Roots of the Property Rights Crisis

Author:
Eric Daniels
Publication Date:
09-2008
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
On June 23, 2005, the United States Supreme Court's acquiescence in a municipal government's use of eminent domain to advance "economic development" goals sent shockwaves across the country. When the Court announced its decision in Kelo v. City of New London, average homeowners realized that their houses could be condemned, seized, and handed over to other private parties. They wanted to know what had gone wrong, why the Constitution and Fifth Amendment had failed to protect their property rights. The crux of the decision, and the source of so much indignation, was the majority opinion of Justice John Paul Stevens, which contended that "economic development" was such a "traditional and long accepted function of government" that it fell under the rubric of "public use." If a municipality or state determined, through a "carefully considered" planning process, that taking land from one owner and giving it to another would lead to increased tax revenue, job growth, and the revitalization of depressed urban areas, the Court would allow it. If the government had to condemn private homes to meet "the diverse and always evolving needs of society," Stevens wrote, so be it. The reaction to the Kelo decision was swift and widespread. Surveys showed that 80 to 90 percent of Americans opposed the decision. Politicians from both parties spoke out against it. Such strange bedfellows as Rush Limbaugh and Ralph Nader were united in their opposition to the Court's ruling. Legislatures in more than forty states proposed and most then passed eminent domain "reforms." In the 2006 elections, nearly one dozen states considered anti-Kelo ballot initiatives, and ten such measures passed. On the one-year anniversary of the decision, President Bush issued an executive order that barred federal agencies from using eminent domain to take property for economic development purposes (even though the primary use of eminent domain is by state and local agencies). The "backlash" against the Court's Kelo decision continues today by way of reform efforts in California and other states. Public outcry notwithstanding, the Kelo decision did not represent a substantial worsening of the state of property rights in America. Rather, the Kelo decision reaffirmed decades of precedent-precedent unfortunately rooted in the origins of the American system. Nor is eminent domain the only threat to property rights in America. Even if the federal and state governments abolished eminent domain tomorrow, property rights would still be insecure, because the cause of the problem is more fundamental than law or politics. In order to identify the fundamental cause of the property rights crisis, we must observe how the American legal and political system has treated property rights over the course of the past two centuries and take note of the ideas offered in support of their rulings and regulations. In so doing, we will see that the assault on property rights in America is the result of a long chain of historical precedent moored in widespread acceptance of a particular moral philosophy.Property, Principle, and Precedent In the Revolutionary era, America's Founding Fathers argued that respect for property rights formed the very foundation of good government. For instance, Arthur Lee, a Virginia delegate to the Continental Congress, wrote that "the right of property is the guardian of every other right, and to deprive a people of this, is in fact to deprive them of their liberty." In a 1792 essay on property published in the National Gazette, James Madison expressed the importance of property to the founding generation. "Government is instituted to protect property of every sort," he explained, "this being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own." Despite this prevalent attitude-along with the strong protections for property contained in the United States Constitution's contracts clause, ex post facto clause, and the prohibition of state interference with currency-the founders accepted the idea that the power of eminent domain, the power to forcibly wrest property from private individuals, was a legitimate power of sovereignty resting in all governments. Although the founders held that the "despotic power" of eminent domain should be limited to taking property for "public use," and that the victims of such takings were due "just compensation," their acceptance of its legitimacy was the tip of a wedge. The principle that property rights are inalienable had been violated. If the government can properly take property for "public use," then property rights are not absolute, and the extent to which they can be violated depends on the meaning ascribed to "public use." From the earliest adjudication of eminent domain cases, it became clear that the term "public use" would cause problems. Although the founders intended eminent domain to be used only for public projects such as roads, 19th-century legislatures began using it to transfer property to private parties, such as mill and dam owners or canal and railroad companies, on the grounds that they were open to public use and provided wide public benefits. Add to this the fact that, during the New Deal, the Supreme Court explicitly endorsed the idea that property issues were to be determined not by reference to the principle of individual rights but by legislative majorities, and you have the foundation for all that followed. . . .
Topic:
Development and Economics
Political Geography:
United States, America, and London

18. From the Editor

Author:
Craig Biddle
Publication Date:
12-2008
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
No abstract is available.
Topic:
Economics
Political Geography:
America

19. Capitalism and the Moral High Ground

Author:
Craig Biddle
Publication Date:
12-2008
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
Concretizes the selfishness-enabling nature of capitalism and shows why this feature makes it the only moral social system on earth.
Topic:
Economics
Political Geography:
America

20. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America

Author:
Eric Daniels
Publication Date:
12-2008
Content Type:
Journal Article
Journal:
The Objective Standard
Institution:
The Objective Standard
Abstract:
Seventy-five years have elapsed since Franklin Delano Roosevelt introduced the flurry of government programs he called the New Deal. In the years since, most historians have lavished FDR with praise, claiming that his bold leadership helped to pull America out of the Great Depression. Even those who acknowledge the failure of particular Roosevelt-era programs claim that FDR instilled hope and confidence in the American people, and that his economic failures were the result of his not going far enough in his policies and not spending enough money. Today, amidst calls for increasing government regulation of the financial industry and increasing government spending through stimulus packages, the New Deal is making a comeback. In light of the recent mortgage crisis and economic downturn, pundits are calling for a revival of 1930s-style policies. Daniel Gross claimed at Slate.com that New Deal reforms were "saving capitalism again." Newly minted Nobel economist Paul Krugman issued calls in the New York Times for President-elect Obama to mimic and expand FDR's response to the Great Depression. And a recent Time cover called for a "New New Deal"-and featured an iconic photo of FDR, with Obama's face and hands substituted. As the Obama administration begins to implement its economic plan, Americans would do well to reexamine the history of the original New Deal and its effects. Though most historians rank FDR as a great president, some, including Burton Folsom Jr., boldly dare to ask if "the New Deal, rather than helping to cure the Great Depression, actually help[ed to] prolong it" (p. 7). According to Folsom, a professor of history at Hillsdale College, the answer is clearly the latter. In New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America, he challenges the myth that FDR's New Deal represents a shining moment in American history. As long as the mythology surrounding the New Deal remains intact, he notes, "the principles of public policy derived from the New Deal will continue to dominate American politics" (p. 15), costing Americans billions of dollars and further damaging the economy. . . .
Topic:
Economics, Government, and History
Political Geography:
America