HOW CAPITALISM WILL SAVE US: WHY FREE PEOPLE AND FREE MARKETS ARE THE BEST ANSWER IN TODAY’S ECONOMY
By Steve Forbes and Elizabeth Ames Crown Business, $25, 357 pages
Reviewed by James Srodes
If Obamanomics worries you, if the recent health care reforms frankly disturb you, if the prospect of Al Gore-style environmental meddling alarms you, indeed if the whole drift of the world economic system is discomfiting, then this is the book for you. It is not too much of a stretch to say that what author Steve Forbes has done with this book is much like what Thomas Paine did in 1776 when he penned “Common Sense.”
In “How Capitalism Will Save Us,” Mr. Forbes, like Paine, offers a spirited, authoritative challenge to current authority and provides intellectual ammunition for the average citizen whose instinct to protest has been stifled by the combined rhetoric of politicians and much of the information media.
While it is too late to buy this book as a holiday gift for your favorite contrarian, it is very much a timely purchase for anyone with a stake in the 2010 election campaigns that are just about to get under way.
Along with journalist Elizabeth Ames, Mr. Forbes uses a conversational style to challenge what he calls “Capitalism’s bad Rap,” which seeks to place the blame for the current economic crisis that grips the world on free enterprise and free markets rather than where the blame really belongs - with the market distortions caused by government meddling.
Two points first in the interest of full disclosure. One, I have always had a certain affectionate respect for Steve Forbes. Thirty-five years ago when I was a Washington correspondent for Forbes magazine, Steve was then a lowly staff reporter who was always the first one in the magazine’s Manhattan offices where he labored in an airless back cubicle not only polishing his journalism but learning the business he would ultimately inherit.
Many of the other magazines I have worked for over my lifetime have lost their way and gone under, but as the fourth generation of his family to be editor-in-chief, Steve has kept Forbes an imaginatively written, authority for business analysis.
My second point is a mere personal quibble. If I were Language King, I would ban the use of the word capitalism. What we have come to call capitalism is not, strictly speaking, an “ism” at all; it is in fact the antithesis of an “ism.” Unlike communism, socialism or, even, Methodism, there are no dialectical points of doctrine, not even a high philosophical priest like a Marx or a Wesley.
Adam Smith, whose profile often adorns the neckties of self-professed “capitalists,” merely sang the praises of the “unseen hand” by which individuals freely seek their own advantages; in so doing Smith was a precursor of John Maynard Keynes, whose exposition on the certainty of uncertainty in the market was his most lasting contribution to economic thought.
In short, what we call capitalism is merely what free people do when they are free to make the most use of their talents and resources in free exchanges with other free people.
So, if you will, where Mr. Forbes writes the word “capitalism” you can use “freedom.”
Mr. Forbes is right to single out the “bad Rap” on free markets as the primary villain to challenge. Here’s how he sums up the indictment which we all have heard so many times on the chattering channels that it has become received truth:
“That [capitalism] is fundamentally greedy and immoral. That it enables the rich to get richer at the expense of the poor. That open markets are Darwinian places where the most ruthless unfairly crush smaller competitors and where the cost of vital products and services like health care and energy are almost beyond the reach of those who need them. Capitalism has also been blamed for a range of social ills - from air pollution to obesity.”
As with any big lie, the “bad Rap” Mr. Forbes outlines for us obscures the greater truth, that many of the economic ills that beset us owe their beginnings to arguably well-intentioned government efforts to shape society to meet supposedly more humane goals.
Two obvious examples are “the central role of government-created mortgage behemoths Fannie Mae and Freddie Mac in the subprime-mortgage meltdown and financial crisis and the mammoth impact of giant government insurers Medicare and Medicaid in shaping today’s dysfunctional health-care market.”
Given the ongoing congressional momentum to create a new health care system, that last point is certainly worth the separate chapter Mr. Forbes devotes to the topic. Interestingly, he cites two areas of medical care which are not covered by insurance or government rationing - cosmetic surgery and laser vision surgery where, along with a significant rise in demand and in the development of new technologies, costs have been restrained (in the case of plastic surgery) or actually sharply reduced (for eye surgery) to a third of what they were a decade ago.
His solution is to provide the individual (through tax deductible health savings accounts) and small employers (through pretax dollar pools) the means to negotiate better insurance coverage than any government-mandated system would.
There are plenty of laugh-making insights amidst the serious arguments here. My favorite is Mr. Forbes’ assertion that those awful McMansions that blight suburban (and increasingly urban) America “are a reflection of the fact that capitalism allows more people to enjoy luxuries once reserved for the rich. Isn’t that good - indeed moral? Over the last 30 years, free markets have made life better for people on all rungs of the social ladder. That doesn’t mean everyone will have the best of taste. The controversy over McMansions is emblematic of the social tensions that typically occur when large numbers of people move up the income ladder, causing discomfort to those both above and below.”
Take that, Thorstein Veblen. Take that, President Obama.
James Srodes has been a Washington financial correspondent for more than 40 years for United Press International, Business Week, Forbes, Financial World, World Trade, The Far Eastern Economic Review and others.