May 2012

A Guide to Capitalism for Concerned Citizens

by John R. Hendrickson

In a recent column George Mason University economist Walter E. Williams wrote about the danger of intervention in an economic crisis such as the Great Depression.[1] “Between 1787 and 1930, our nation suffered both mild and severe economic downturns. There was no intervention to stimulate the economy, but the economy always recovered,” wrote Williams.[2] The policy of noneconomic intervention changed with the onset of the Great Depression in the 1930s. As Williams wrote:

During the 1930s, there were massive interventions, starting with President Herbert Hoover and later with President Franklin D. Roosevelt. Their actions turned what would have been a sharp three-or-four year economic downturn into a ten year affair. In 1930, when Hoover began to “fix” the economy, unemployment was 6 percent. FDR did even more to “fix” the economy. As a result unemployment remained in double digits throughout the decade and reached 20 percent in 1939. President Roosevelt blamed the high unemployment on his predecessor.[3]

The result of government intervention, primarily with President Franklin D. Roosevelt’s New Deal, resulted in the continuation of the Great Depression and failure to achieve economic recovery. In addition, the legacy of New Deal economic intervention continued throughout the twentieth century and into the twenty-first century. Part of the reason was the dominance of New Deal-style liberalism until the election of Ronald Reagan, but also because many Americans supported economic intervention. Williams argues that:

Americans have been miseducated into thinking that Roosevelt’s New Deal saved our economy. That miseducation extends to most academics, including economists, at our universities, who are arrogant enough to believe that it’s possible for a few people in Washington to have the information and knowledge necessary to manage the economic lives of 313 million people.[4]

The “Great Recession” has seen a continuation of government economic intervention in both President George W. Bush’s administration and even more so under President Barack Obama, whose administration is using FDR’s New Deal not only as an example of economic intervention, but also to launch a new era of progressive reform. President Obama and the Democrat Congress have initiated policies ranging from corporate bailouts, massive economic stimulus spending, and increasing the power of the regulatory state over the economy. In addition, unless prevented, looming tax increases will hit the economy in the near future, which will have severe economic consequences.

In response to President Obama’s policies concerning the “Great Recession,” the Tea Party movement rose up to push for a return to not only constitutional, limited government policies, but also free-market economics. Citizens who are interested in learning more about economics and capitalism from a free-market perspective can consult a number of academic resources ranging from F. A. Hayek and the Austrian school of economics, Milton Friedman and the Chicago school of economics, or the numerous writings of the Supply-Side school of economics such as Steve Forbes or Arthur Laffer.

For a more introductory lesson in free-market economics and capitalism citizens should be encouraged to read Leon Weinstein’s Capitalism 101: My Tea Party Principles. Weinstein, who was born in Russia, wrote Capitalism 101 as a statement in defense of free-market principles and with the objective of advancing a civic understanding of capitalism. Many conservatives, libertarians, and Tea Party members agree with Weinstein’s argument that the United States is at a fundamental crossroads. With an escalating national debt of over $15 trillion, the federal government running yearly trillion dollar deficits, and the economy still struggling with high unemployment and low economic growth, a return to free-market principles is needed to avoid a national, economic collapse. In order to prevent this, not only will free-market policies need to be initiated, but also the public must be provided with a renewed understanding of the benefits of capitalism.

“I think that a capitalist economy can’t support a socialist welfare state and that if we will not change our ways very soon, the American economy and its political system will collapse,” argued Weinstein.[5] Weinstein also notes that “during the last years it looked to me that America was going down the predictable path of wealth re-distribution and self-destruction,” but he became more hopeful with the emergence of the Tea Party and the principles they advocate.[6]

The purpose of Capitalism 101 is to “present a case-by case study of volitional science,” and Weinstein notes that his “thoughts and ideas” for the book were influenced by individuals such as Ayn Rand, Milton Friedman, F.A. Hayek, and Ludwig von Mises, among others.[7] Weinstein’s own life experience also adds greatly to his book. Being born in the Soviet Union (Russia) Weinstein experienced Soviet communism and its effect upon both the economy and society. “I am very sensitive to any even small manifestations of socialism and its twin sister — fascism,” wrote Weinstein.[8]

This is why Weinstein is trying to fight the good fight of restoring economic liberty. As he wrote:

This is why I believe that it is of utmost importance to convince the population of the United States of America that they have to stop taking their great lives for granted. If you will not resist with all your might, a terrible disease called “socialism” will topple America and very possibly the world as we know it will perish. It will take under its ruins the ideals of the American Revolution, capitalism, and liberty.[9]

Throughout the book Weinstein provides an overview of capitalism and the philosophy behind capitalism. He covers topics such as human nature, the moral value of capitalism, profits and competition, among other topics pertaining to capitalism. In addition the chapters contain various quizzes that engage the reader to seriously think about capitalism. These quizzes or exercises will allow the reader to understand the principles of capitalism. In addition, Weinstein provides some of the typical responses to economic questions posed by progressives and socialists.

Capitalism 101 is a “statement” of Weinstein’s beliefs of the need to return to free-market ideas.[10] One of the most crucial arguments that he makes is the need to understand the value of capitalism. As Weinstein wrote:

If we will not understand and appreciate our values, if we will not pass them along to the next generation, if we will not teach our children and grandchildren to cherish those values and defend them, we are doomed…Capitalism and liberty is the best yet invented way for human society to coexist…because it is proven to be the best for individuals, leads to prosperity, and unlike other social structures might (just might) stop the mutual destruction of humankind.[11]

Capitalism 101 provides a much needed defense of capitalism and free-market principles and it is a valuable resource for concerned citizens who want to restore constitutional principles back to government.

John R. Hendrickson is a Research Analyst at Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation. They are brought to you in the interest of a better-informed citizenry.

[1] Walter E. Williams, “Good Economists,” Creators Syndicate, April 16, 2012, <http://www.creators.com/conservative/walter-williams/good-economists.html> accessed on April 16, 2012.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Leon A. Weinstein, Capitalism 101: My Tea Party Principles, Telemachus Press, 2011, p. i.

[6] Ibid., p. ii.

[7] Ibid., p. iii.

[8] Ibid.

[9] Ibid.

[10] Ibid., p. iv.

[11] Ibid.