Few syndicated columnists abrade this author much like Eugene Robinson of the Washington Post. Despite his plethora of literary honors including a Pulitzer Prize and twice weekly column in one of the nation’s largest newspapers, Mr. Robinson oft-displays an elementary view on the workings of a market economy. Robinson, like many of his less esteemed peers in the commentariat, sees the world as a perpetual power struggle between the haves and have-nots. This view, which dominated and clouded the thinking of Karl Marx, disallows Robinson from seeing true capitalism for what it really is: that is a system of mutual and remunerative transactions by willing participants.
Case in point- Mr. Robinson’s latest WashPo column.
Presidential front runner Mitt Romney is currently receiving a large amount of flack from his opponents on his role of heading the private equity firm Bain Capital. Bain, like any firm acting on behalf of its investors, sought to reorganize those companies which it purchased and set about revitalizing. This included wage cutting, lay offs, and disposing of withering asset weight.
Robinson pounces on this clear demonstration of evil capitalism and writes:
But as for heartlessness, well, it comes with the turf, right? Bain was just serving as an instrument of “creative destruction,” and if workers lost their jobs, if they had to raid their children’s college funds to pay their mortgages, if perhaps that money ran out and they ended up losing their homes, in the long run they’ll still be better off. Or the country will be better off. Or something.The world will never be one of abundance no matter what those infatuated with governmental interference give credence to. Scarcity in means and capital necessitate the prudent use of resources. Nobody, including workers, investors, or top management, benefits when the company in which they share a vested interest hemorrhages money. Businesses don’t exist to provide employment opportunities; jobs are only a happy byproduct of entrepreneurs looking to enrich themselves by complementing consumer demand.
But to the horror of radical free-market ideologues, the myth of no-fault capitalism is under scrutiny.By lamenting over the unemployed, Mr. Robinson spins the private-equity business as one of callous disregard for the human condition. Those who experience short term unsettlement from a dynamic market process are the hapless souls; those who execute layoffs are of another being lacking in any recognizable human traits. Or so goes the narrative. Like the language which pervaded the Progressive movement of the early 20th century, battle lines must be drawn to separate the wicked image of capitalism from a system of social cooperation conceived by purposeful men. The former is spread through universities and public classrooms. The latter is relegated for use by radicals.
No one is arguing that investors who risk their capital in a company should not be able to reap rewards. What the ideologues ignore, however, is that workers also have “capital” at risk — in the form of mind and muscle, creativity, loyalty, years of service. Why is this investment so casually dismissed?
Robinson labels the adherence to free markets as an unsubstantiated belief in “no fault capitalism.” This assertion presumes that champions of capitalism ignorantly shrug off the notion that displacement is a consequence of the market. But it is really this assertion which is misguided. Taste and preferences change as man is not the cog in the machine societal engineers wishes he be. This means some services and goods fall out of favor. Adjustments in business practices are required before income losses exacerbate and overwhelm any possibility of salvaging a floundering enterprise.
Interference in this process not only introduces coercion into a once peaceful development, it is also distortionary in the economization of resources. Market corrections are just that- corrections that must occur for new equilibriums between marginal supply and demand to be met.
Mr. Robinson may not realize it, but his demonization of capitalism is reminiscent of the Luddite movement which sought to limit industrialization by destroying mechanized looms in 19th century England. The idea of decrying or putting a limit on creative destruction, though palatable from a populist stance, lacks reason from a historical perspective. In the film Other People’s Money, Danny Devito plays the character of “Larry the Liquidator” who, like Mitt Romney, has the reputation of a corporate raider. In a speech to the shareholders of a company he looks to take over and downsize to profitability, Devito declares:
You know, at one time there must have been dozens of companies making buggy whips. And I’ll bet the last company around was the one that made the best ***damned buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead. Let’s have the intelligence…let’s have the decency to sign the death certificate, collect the insurance and invest in something with a future!No doubt Robinson would be issuing the same complaint on behalf of buggy whip producers if he were alive just a few hundred years ago.
The famed Pulitzer winner ends up falling back on the false gospel of the 1980s being a time of wild west deregulation. In spite of the dramatic increase in the size, scope, and spending levels of the federal government in the past thirty years, Robinson remains convinced that the country is still suffering from capitalism run amuck. He is blind to the damage wrought by government intervention and accumulation of authority which provide the catalyst for seeking political favors, crony capitalism, and staggering income mobility.
Robinson is still correct in one contention; capitalism doesn’t have a heart. That’s because capitalism isn’t an entity but a term to describe men, possessing hearts, who engage in enriching trade and production. If Robinson and his like-minded peers fail to understand the market process, what hope do they have offering suggestions in the first place?
To watch the excellent Danny Devito speech, see here: