I’m an ardent capitalist. I hope that goes without saying, as one of my three blogs is "The Savvy Capitalist" (www.savvycapitalist.blogspot.com) but you never know. Among my friends around Naples, I’ve been labeled liberal so often that I’m beginning to believe it myself. (In Boston, by comparison, I was often called a conservative or even a libertarian).
I suppose you can be a liberal and a capitalist at the same time. Go figure.
Regardless, I’m not sure it’s completely accurate to call me a liberal when it comes to matters of fiscal policy. Here’s my take:
1. Government should stay out of our lives – and our wallets – when at all possible. “The Government is best which governs least” …I think there’s at least something to that.
2. Government intervention is almost by definition coercive.
3. The private- and citizen- (“nonprofit”) sectors are more efficient than government.
4. However, it isn’t always possible for government to stay small.
5. It isn't always possible, because companies and individuals often don’t pull their weight. As a result, the government is morally obligated to step in.
Take health care as an example. Health insurance has been the purview of the private sector for decades. State and Federal agencies fill in some around the edges. Citizen organizations try their best to augment this.
Yet 40 million Americans have no health insurance.
The present system is, in a word, inadequate. The result is that the federal government is about to step in and rewrite the rules.
A lot of people will snipe about this, but I think it’s fair for the rest of us to ignore their criticism. Conservatives have had their chance to insure our entire citizenry for decades in whatever creative way they saw fit. They failed to do it. Now, if their taxes go up and their government gets bigger as a result… hey, fair warning.
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If you’re still with me, you’re likely convinced that I am, indeed, a tax-and-government-loving liberal.
Far from it.
In the 1760s and 1770s, economist Adam Smith wrote that the wealthy have a moral obligation to care for those who are less fortunate.
No one ever called Adam Smith a liberal.
The Father of Capitalism didn’t say that the wealthy should consider caring for the less fortunate, or that they should do so a little, if it’s convenient.
His position was that a true, savvy capitalist understands the economic imperative to care for those worse-off than he.
Adam Smith’s take on government was that if you want to keep it small, fund charity work from the private sector. Otherwise, you’ll deserve a large, meddling government. Yes, “deserve.” As in, “this is what you asked for.”
Funny how few self-described capitalists understand this essential component of capitalism. It’s as if, for over two hundred years now, we’ve been picking what we like of this economic system and discarding the rest.
Let me state this quite clearly: You can’t have pure, true capitalism without a very active citizen sector, funded by the private sector.
What we have in the United States today is not pure capitalism; it is watered down on one side by inadequate private giving. It is watered down on the other side by the result, robust governmental activism.
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We at The Naples Institute (www.institutenaples.org) devised the Adam Smith Award for Socially Conscious Businesses not just to reward good corporate behavior – no, far from it! We have established this prize to expand the conversation. …To educate the region, the country, and the world on what true capitalism actually means. …And yes, absolutely, to change behavior on a very profound scale.
In future entries on this blog, you will read about specific companies doing some very laudatory things. Their leaders may not even know it, but they are followers of Adam Smith; they are some of the few, our culture’s bona fide capitalists.
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2 comments:
great stuff. loved your book. glad to see you have a blog.
Pat OMalley
Pat O'Malley
Hi Ted! I actually agree with much of what you write, but vary on the conclusions. First, in Boston you would likely be a knuckle dragging conservative throw back...I know, I have family up there. Any group that continues to elect John Kerry, Ted Kennedy and Barney Frank has permanently divorced itself from any concept of Capitalism (and, I would argue, reality...but I digress).
That said, IMHO you're mixing some essential concepts. Corporations exist to provide a necessary good or service for the economy, and therefore to generate earnings to shareholders. Management that fails to return excess profits to shareholders in the form of greater investment, retiring debt or issuing dividends are failing in their fiduciary obligations to their shareholders.
While I would argue that some allowances can be made -- and have built parks or run 5k's on company time to support worthwhile causes -- the fact remains that management is making a judgment on behalf of the owners as to what is a "worthwhile" contribution. More often than not it becomes an ego rewarding exercise on behalf of a management team which, ultimately, is donating OTHER people's money. Hardly a charitable effort. Additionally, one look at the donations of Freddie Mac or Enron will give even the most generous spirit pause before rewarding this allocation of monies.
Further, when you indicate that Smith seems to require Corporations to donate in lieu of Government this fails to account for donations made willingly by employees of the Corporation. In this case, you have employees -- who already work 1-5 months of the year to pay taxes -- choosing to donate their earnings. This is a direct result of the wealth created by the Corporation, and should then be viewed by extension as a donation from the Corporation.
Many companies set up funds to enable this type of giving (which I support) and it is far different than direct financing by the Corporation, yet allows for the voluntary nature of giving.
Regardless, while I support Starbucks offering Health Care, NONE of this discussion should be used as a basis for more government intervention in the health care system. If for no other reason than it does not work.
Every other country that has tried it is failing to deliver health care at close to the level available in the US. Many of the 40 million people you reference choose not to have health care, but then believe it is a "right" when they need it.
As the husband of a physician I can assure you that emergency care is available to whomever, whenever they need it in this country, while Medicaid supports the truly poor and Medicare supports the elderly. However, some people expect care for free or as their "right" when they get sick despite having options to secure insurance (i.e. pay for it) but not exercised them.
That is hard, but government does not exist to guarantee people will not face the consequences of bad decisions. Further societies around the world show there is not now, nor will there ever be, enough money to give everyone the health care to which they believe they have a "right".
And when placed in the context of "rights", one can fairly observe that all rights come with concomitant responsibilities (the right to free speech can be curtailed in the event of yelling "fire" in a theater). If someone has a "right" to health care, what is their responsibility? Diet, exercise, limit alcohol, tobacco and drugs? How about participation in dangerous activities like scuba diving, motor cycle riding, hang gliding or promiscuous sex? Is government obligated to pay for someone's VD treatment after a big weekend? LOL
Suppose people don't abide by their responsibilities, can we cut off treatment? Who will monitor? If I pay for health insurance do I get to drink more alcohol than someone who pays nothing? Or is that an infringement of his "rights" under the "to those according to their needs and from those according to their abilities" ethos? A slippery slope indeed.
Smith would argue a free market is the best arbiter of such inherently messy decisions, and such decisions should be left well out of government's hands. At best it is a blunt instrument, at worst it will -- as you observe -- deprive us of our freedom.
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