A Crossroad in Human History
Human history has been a conflict between those uniting in economic common purpose to improve lives, and those using force to dominate others for economic benefit. With the advent of the European nation-state in the 16th century, imperialism became the use of such force on an international scale. Throughout history nations and religions have also used force to dominate others for ideological reasons.
Economic freedom can provide the necessities for humans to reach full potential, including food, clothing, shelter, education, good health, and hope. This capacity has been the American dream realized for two centuries and was confirmed during the 20th century by both authoritarian and democratic countries when China and India took one-half billion people out of extreme poverty in a decade.
Economic common purpose can unite people and stop the violence in an inversion in which as the standard of living goes up, the violence goes down. This was confirmed after WW II first by the Marshall Plan in Japan and Germany, and later by the European Union.
After the demise of communism, late in the 20th century the world seemed ready to move to economic common purpose. The age of imperialism was over as there was no further economic benefit and people everywhere sought their freedom. Great Britain left India reluctantly while France was thrown out of Algiers and Vietnam in bloody wars.
The country with the proud record to lead the world towards economic common purpose failed spectacularly and instead after WW II became the only remaining imperialist but for ideological reasons. Beginning with the overthrow of the democratically elected head of Iran in 1953, and including the humiliating defeat by the freedom fighters of Vietnam, America has used force to try to run the world. The result has been reciprocal atrocities that are then used in defense of more force. The military-industrial complex supports American imperialism and new enemies are provoked both by accident and deliberately to rationalize this enormous waste of the peoples’ money.
Late in 2006 the conflict between a world of economic common purpose and a world dominated by an ideological imperialist was being won by the militaristic, nationalistic, power-adoring few American fascists. The following chapters review the history of economic freedom, the mistakes of imperialism, and the urgent need for an Enlightenment II to educate and arouse the citizens in order to take their country back from the fascists, make economic common purpose the priority, and get the world back on the way to peace and plenty.
Economic Freedom- A History
Capitalism in its democratic form can purge the privileges, distribute wealth broadly, provide basic needs for all, unite people in economic common purpose, and stop the violence. “Capitalism” in the 21st century continues to be a pejorative expression for many because record concentration of wealth still prevents it from reaching full potential. Citizens must first reform the economic system before it can lead the world to economic common purpose.
In the late 18th century Adam Smith presented the economic system that, for the first time, could eliminate material scarcity. If Smith’s few conditions were met, there was no further need for nations and people to battle over finite resources. In mid-19th century Karl Marx described why the superior economic system was the starting point for social progress to be assimilated by the culture in order to modify the political structure in its support. Marx proposed that ownership participation would change the work culture from alienation to cooperation thereby adding to the production of wealth. John Stuart Mill also proposed this new mode of production but advised that it must be integrated with private property and competition. Mill presented the synergy between quantity of production and quality of life in a work culture of trust and cooperation. This was Mill’s signature concept: a capitalism that produced more wealth because it was moral.
Smith’s conditions for the success of economic freedom were peace, neutral money, and broad distribution of wealth. Peace because war is the greatest waste of lives and resources that should be invested in economic growth, infrastructure and environmental needs. Neutral money because economic freedom needs a medium of exchange that is enough, but no too much, patient, and non-volatile. Speculators with borrowed money demonstrate the damage from non-neutral money as they deflect capital from the job-growth economy.
Broad wealth distribution is fundamental to the success of economic freedom in four ways: motivation, multiplier effect, elimination of social tensions and diffusion of political power. It motivates the wage earner to innovate and produce through ownership participation. The rewards from superior performance are saved as patient investment capital, or spent with the greatest multiplier effect. Purchases by wage earners add volume to the commodities that energize Smith’s wealth spreading dynamic in comparison to luxury purchases by the wealthy It is this growing volume that reduces the cost to produce and through competition passes that reduction onto the consumer in lower prices. Lower prices in turn open up markets for those who could not purchase at the higher level and continue the addition of volume with lower costs and prices. This benign deflation with new products with functions and features at constantly lower price is more dramatic in the Information Age. Broad wealth distribution substitutes a sense of unity and a just society for the social tensions caused by concentrated wealth, and finally diffusion of economic power is prerequisite to diffusion of political power.
Free trade is the extension of Smith’s dynamic to the global economy and is the way to fulfill basic needs for the one-third of the world’s population that tries to live on less than $2 a day. Lack of understanding of Smith’s dynamic, however, is nowhere more flagrant than in world trade. “Globalization and Outsourcing” have joined “capitalism” as pejorative expressions by many who do not understand that world trade is the way to feed the world and stop the violence. Nor do they understand that free trade needs only broad distribution of wealth to provide the spendable income for reciprocal purchases that adds jobs in all countries.
Instead of treating ”globalization” as a dirty word with implications that it hurts people, citizens should demand an end to the hundreds of billions of dollars of subsidies of big agricultural companies for sugar, cotton and rice. These purely political actions in the rich countries of Europe, America, and Japan waste the peoples’ taxes and result in higher prices for poor people in the countries providing the subsidies, and no work for the even poorer people in emerging nations trying to farm their way out of extreme poverty.
Reformers at the time of Smith failed to understand his conditions and use democratic power to modify the political structure. The powerful few continued to concentrate wealth. Reformers responded to the exploitation by trying to redistribute wealth by government instead of purging the privileges and meeting Smith’s conditions.
Students sensitive to the human condition since then have not had an opportunity to study democratic capitalism because teachers cannot teach what they have not learned. Instead they were conditioned to contempt for generic capitalism. This lack of visibility of the system that can feed the world and stop the violence is a scandal that must be addressed by the universities.
At home and abroad it is capitalism with broad wealth distribution and free of tariffs and subsidies that adds to economic growth and limits the demands on government. It motivates, rewards, and elevates spirits in an environment of trust and cooperation to keep the economic perpetual motion machine running, none of which are accomplished by wealth redistribution by the government.
The many forms of commerce, loosely defined as capitalism, gain focus by examining three preconditions: Freedom, secure property, and discipline to restrain present consumption in order to invest for future return. They can be observed in the most basic form of commerce, farming. The farmer must be free to invest labor and cash; his or her property must be secure, protected by law from predators including the state, and the farmer must discipline consumption to invest for future gain.
There are three levels of freedom needed for democratic capitalism: state, company, and individual. Capitalism will function at full potential when all three levels are fully free, however, economic freedom is so powerful that it provides benefits when the companies are free and the individuals motivated to produce and innovate. In time freedom at this level will expand political freedom in the state and until it does there will be an economic penalty.
The state must assure the security of property and encourage long-term investment. It was clear by the end of the 20th century that the command economies of communism and socialism cannot provide basics needs because central control cannot match the performance of spontaneous order and it de-motivates people.. At the company level there must be freedom to decide what, where, and at what price products or services are built and sold. Within the company individual involvement and motivation will depend on the quality of management and the democratic work culture. History demonstrates at every level that more freedom works better than less freedom in the culture of trust and cooperation. This should not be surprising as it draws on basic human urges to be free and to work towards a better life. It is this force that should give history its direction towards peace and plenty.
It has also been demonstrated that at each level performance improves with trust and cooperation. This demonstrates that capitalism that in its democratic form is a moral system capable of spreading morality in the contiguous community. There are studies that show a reduction in crime and cost of police protection in communities with a concentration of cooperatives with a work culture of trust and cooperation.
The free market according to both Adam Smith and Thomas Jefferson works best with minimum government, which has been confirmed but that leaves plenty of room for debate. The true function of government is to do whatever is required in support of the free market system and that can vary widely depending on time and circumstances. An emerging economy, for example, may need subsidies and tariffs until they build sufficient critical mass to absorb costs. Wealthy nations, however, have no excuse for thousands of tariffs and hundreds of billions of dollars in subsidies.
China is a work-in-progress, an authoritarian country that abandoned the command economy and selected economic freedom. They have been criticized for human rights abuses and political oppression by those with little understanding of the delicate act required to privatize companies putting millions out of work in the move to economic freedom. The Chinese have added real human rights by taking 300 million of their people out of extreme poverty in a decade. American human rights advocates would better focus their concerns on the quality of education for African-American males because there are now more in the criminal process system than in college.
Economic freedom has demonstrated its capacity to improve lives in both authoritarian and democratic states. In time, it will lead to political freedom because involved, independent thinking people needed in the Information Age will carry that freedom of thought into the community. Countries resisting movement towards more political freedom will incur a commercial penalty that will sustain pressure towards freedom. Tyrannical countries will be pressured by the same urge towards freedom and a better life by their young people who can view it on the T V and Internet. It may now take a generation as relations with the Muslim world have been set back badly by the egregious mistakes of American imperialists.
The following are specific cases of the irresistible movement towards freedom:
Hammurabi (2123-2081 B C) replaced violence with law, invested in infrastructure, lent money at no interest to stimulate commerce, prevented exploitation by predators, . Broad wealth distribution and better education improved the standard of living and stimulated momentum in all branches of knowledge. (DC 426)
Confucius (542-479B C ) understood the unifying effect of broad distribution of wealth when he commented:” The centralization of wealth is the way to scatter the people, and letting it be scattered among them is the way to collect the people.” (D C 455)
China is also an example of what “secure property rights” means in practice. Rodney Stark describes how entrepreneurs in northern China in the 11th century built smelters producing more than one hundred thousand tons of iron, a wholly private enterprise . Mandarins in the imperial court envied the commoners gaining new wealth, ignored the security of their property, and nationalized the smelters. Within a few years the industry had disappeared.
The term “Capitalist” was first used in the 19th century as a pejorative expression denoting wealth and privilege. Idealists, however, could see that its unprecedented capacity to produce wealth made a world of peace and plenty a practical opportunity.
Singapore demonstrated this pattern but it is complicated in China because the hawks in America need enemies to support their ½ trillion a year in military waste. China is a designated enemy and America is seducing India into being part of a power block around China. This madness will intrude on the world movement to economic freedom and will destroy the opportunity to unite in economic common purpose to stop the violence.
2006 B P
Prof Putnam of Harvard, study in Northern Italy.
Robert Start, The Victory of Reason, How Christianity Led to Freedom, Capitalism, and Weatern Success, ( New York: Random House, 2005) p.72