In this commentary Paul Craig Roberts supposedly documents the evils of capitalism, specifically the social costs which he defines as: “costs of production that are not born by the producer or included in the price of the product.” He elaborates on this general description and his list is quite lengthy. One might assume that Mr. Roberts is an educated man who understands economics since he was an assistant secretary of the treasury and writes extensively. So this nonsense about the deleterious effects of capitalism strikes me as strange.
Certainly from the founding of the Federal Reserve in 1913, and at an accelerating pace to this day, we have lost capitalism. By capitalism I mean free market capitalism, not the crony capitalism that has become the norm. The federal government in collusion with the Federal Reserve and the major banks, whose profits have been guaranteed, now control the U.S. economy.
First of all the massive federal deficits have required the cooperation of the Fed to peddle the debt, and they now buy much of it in order to deep the federal monolith going. Trillion dollar stimulus programs and Quantitative Easing have corrupted our monetary system while enriching the banks and the Fed. Right now the federal government virtually owns the home mortgage industry. Is this free market capitalism?
As for offshoring U.S. jobs, that has been the natural result of lower labor costs overseas and heavy-handed government regulations on manufacturers. Had American manufacturers continued to build products in the U.S., one can be sure that Japanese or European manufacturers would have taken the initiative to build more affordable products overseas and import them into the U.S. If American manufacturers cannot compete, is there some virtue in having consumers pay significantly higher prices for our computers, electronics, clothing, etc. just to support U.S. industry? Our standard of living would have been lowered proportionally. Incidentally, perhaps more significant than labor costs is government regulations on business. The destruction of American manufacturing is not the result of free market capitalism.
The author talks about the deregulated financial system, but what he fails to mention is that the large investment banks essentially control our government. Just look at the Goldman Sachs men that have permeated the executive branch. An oligarchy controlled by the major banks is not free market capitalism.
And we have the Federal Reserve which has become the controller of our economy. Our Founding Fathers never envisioned giving a national bank control of our money and banking system. Actually, a few did foresee that possibility, and they warned against it. The Fed creates money at will and drives interest rates to near zero, both of which are distorting our economy and punishing savers. What kind of twisted mind would call this free market capitalism?
“In order to keep the deregulated financial system afloat, the Federal Reserve has monetized trillions of dollars of debt over the last several years. Real interest rates have been driven into negative territory. Retirees are unable to earn any interest income on their savings and have to draw down their capital in order to cover their living expenses.”
What Mr. Smith should have written about is the social cost of crony capitalism and our banking oligarchy. We have not seen anything but a facade of free market capitalism for 50 years.