While I haven’t read this book yet, it will be on my list as soon as I finish Robert’s book, “The Politically Incorrect Guide To Capitalism”, which helps provide a lot of the fire power behind this blog. Although, Robert is a highly regarded economist, he brings the dismal science down to a level that even an average Joe like myself can understand. In this interview, Robert discusses his book on the Great Depression. It highlights the fallacies you’ve been sold by the liberal establishment. Want to know why Obama’s policies are not working? All you have to do is see why FDR’s did not work.  You can also check out Robert’s blog, Free Advice out at http://consultingbyrpm.com/blog/

“The Politically Incorrect Guide™ to the Great Depression and the New Deal”

June 6, 2009

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Everything they say about the Great Depression and the New Deal is wrong.

No economic myth these days is more pernicious than the myth that the free market caused the Great Depression and the New Deal got us out of it. That, as economist Robert P. Murphy points out is flat-out false. In The Politically Incorrect Guide to the Great Depression and the New Deal he provides irrefutable evidence that not only did government interference with the market cause the Great Depression (and our current economic collapse), but Herbert Hoover’s and Franklin Delano Roosevelt’s big government policies afterwards made it much longer and much worse (just as President Barack Obama’s extraordinary expansion of government promises to do today). Perhaps even more compelling, Murphy exposes the untold story behind the New Deal—how it operated by force, and why what’s really at stake is not only our economy but our liberty. The real “lessons of the Great Depression” are not what you’ve been taught.

via Financial Sense Newshour Expert ~ Robert P. Murphy 06.06.2009.

While reading the Federalist Paper No. 6, I came across another great Hamilton quote that we should keep in mind.

In No. 6, Hamilton was arguing that in order to prevent unnecessary wars both internally between the colonies and externally between the colonies and foreign nations, they should ratify the Constitution to form the Union. With the Union, there would be rationality in calming the fervor for war with other nations, because one area of the country may be hurt by the war that another part of the country was calling for. With seperate colonies or three or four confederacies, one confederacy or colony could start a war without regard to the others. This would lead to more wars.

Internally, he was arguing with separate colonies or confederacies, there would more than likely be wars between them. He used examples of Britian’s wars with Scotland.

After laying out the historical proof, Hamilton was calling for the dismissal of the arguments to remain separated. He started by asking what would make us think that despite the history of similar nations’ experiences with inter-quarreling we would be able to have peace with separate confederations or colonies.

To shut down the claims from the anti-federalist, Hamilton wrote the following quote to ask why we think that we are different.

“Have we not already seen enough of the fallacy and extravagance of those idle theories which have amused us with promises of an exemption from the imperfections, the weaknesses, and the evils incident to society of every shape? Is it not time to awake from the deceitful dream of a golden age and to adopt as a practical maxim for the direction of our political conduct that we, as well as the other inhabitants of the globe, are yet remote from the happy empire of perfect wisdom and perfect virture?”

Hamilton is basically saying. We aren’t  different. These human traits that have led to war for other nations will not forgo us simply because those who want to maintain the separate colonies say so.

While, Hamilton was talking about war, I think the quote fits perfectly into our modern context. It fits in respect to the our further slide towards socializing as much as possible in our country. Surely, history has laid out the disaster of socialism whether it be the famine in China that killed countless millions, the never ending impoverishment of Cuba, or the horror stories of health care in Britain and Canada. If Hamilton was writing about our governments taking over banks, car companies, possibly newspapers and health care, I am guessing he would say what makes us think we are different? Why do we think we can ignore history?

Since the economic down turn began, I have heard countless politicians, media pundits, and average Joes smear, besmirch, and out right lie about Capitalism. These people are either ignorant or liars. I prefer ignorant, so we can still assume the best of our fellow man.

In order to prevent further spreading of this ignorance, I have decided to outline some of the arguments against Capitalism and the truth that is evident as logic presents itself. Over the next few blogs, I will present the reasoning and logic of Capitalism. First let me apologize to my liberal friends. I will not use my feelings to present my argument. As we all know, feelings can be easily manipulated, which is why you don’t base policy on feelings, well, shouldn’t anyways.

So, let’s start with the most rampant accusation against Capitalism. The socialist mantra goes “Capitalism equals greed”, “Capitalism is based on greed”, or “Capitalism is inherently greedy”. Now, where did this belief come from? Capitalism has been a defined economic system since 1776, when Adam Smith published “The Wealth of Nations”.  In the book, Adam Smith puts forth that in the pursuit of our own self-interest, we build a much more prosperous society.  Even though that isn’t our intent, that is what takes place.

It wasn’t until Karl Marx began the Communist revolution that Capitalism became tarred and feathered. Karl Marx invented the term Capitalism as a smear. Now, how do you convince someone to go against their own self interest, which is what Capitalism is by definition. Well, you need to play on peoples emotions, distort the truth, and play on their morals. More recently, the movie “Wall Street” used a ruthless character named Gordon Gekko that said “Greed is Good”. For some reason, this is what people associate with Capitalism.

Let’s walk through this piece by piece. First, greed has to do with morality. Capitalism has nothing to do with morality. You can be an altruistic capitalist, you can be a greedy capitalist, or you can be a regular capitalist. Notice, that you could just as easily substitute the word person with capitalist. That is because greed is an adjective to describe an object, in this case capitalist. The adjective isn’t the object.

Still a system based on everyone pursuing their self interest sounds really selfish. That is only if you are assuming that everyone’s self interest is the same, and that self interest is detrimental to the well being of others.

First, not all our self interest is the same. If everyone’s self interest was becoming rich and famous, we’d have no stay-at-home moms, school teachers, soldiers, etc. Everyone pursues their best interest by going after their dreams or what makes them happy. If you think money will make you happy, you may pursue wealth. You may also decide to stay at home with your kids and give up financial wealth for the emotional wealth of raising your family. As you can see, self interest is not interchangeable with money, wealth, or greed.

The second part of this selfish stigma has to do with people assuming that Capitalism is a zero-sum game, in which one person gains while the other loses. This couldn’t be further from the truth. This is actually what takes place in other economic systems, such as Socialism or Communism. Now, I know you aren’t going to let me off that easy, so let’s walk through an example.

Under Capitalism, I have a need. Let’s say I have the need for a coffee. This is what I currently want to make me happy (self interest). Now, the local Starbucks, by pursuing their self interest of building wealth, has decided to serve coffee. I walk into the local Starbucks, and we exchange my cash (hopefully not credit for a coffee) for their product, coffee. Now, as you can see, this was not a zero-sum transaction. I got what I wanted, and the Starbucks got what it wanted. We both valued the transaction at the exact same value without any outside force.

Ok, ok, that was a simple, but what about Scrooge. He was greedy. Scrooge was greedy, but by pursuing his greed, he creates jobs, innovates new products or services, and … hold on get this… he serves his fellow man. I know. That doesn’t sound selfish. Let me say (well type) this very loudly.

YOU CANNOT CREATE WEALTH AND BECOME RICH WITHOUT SERVING YOUR FELLOW MAN.

It is by this service that we build a better society. “Hold up”, you say. “What about Bernie Madoff, Enron, and this mortgage crises?”

Well, let me take Enron and Madoff first. Capitalism makes no claims that participants are angels. We all know we are all fallible. In order to protect each other from each other’s fallibility, we pass laws. Many of these laws are passed in order to prevent fraud, which is lying in order to take financial advantage of another. In both the case of Enron and Madoff, you had enterprises ran by criminals. This criminality has nothing to do with Capitalism. You would have criminals under any other economic system, because all systems are made up of men. Capitalism will eventually expose the fraud, because you have to continually produce economic value. Fraud does not produce value. Under competing systems, such as Socialism, these criminals can maintain their fraud much longer because Socialism isn’t concerned with economic value. The fraud could be propped by taking resources from another activity that does produce value.

Now, the mortgage crisis is much more difficult, because it did not involve criminality. “See”, you say. “I told you Capitalism was to blame for the mortgage crisis.”

Well, let me just end this blog, and we’ll dig into that accusation in the next blog. Let’s just say, Capitalism assumes people will make rational decisions, but rationality can be changed when outside forces are introduced.