Don't smash capitalism

Here is something I just sent to the San Antonio Express-News. The link to the article I refer to is listed after my post.

The economic policies reported in The Express-News that were promoted by the participants of the Poor People’s & Low-Wage Workers’ Assembly and Moral March on Washington are counterproductive and destructive (“Poor People’s Campaign rallies in Washington,” June 19). For example, they call for ending all evictions and raising the minimum wage. They also carried signs that said “Let’s smash capitalism together.”

 

Capitalism is the economic system that lets anyone use their private property to start a business and keep any profit they make. It is the only system in world history that, in the long run, has proven to reduce poverty.

 

In their book The Economics of Macro Issues, economists Daniel Benjamin and Roger LeRoy Miller state that around the year 1750, about 90% of the world’s population lived in abject poverty. Fifty years ago, it was half and now it is under 10%.

 

According to economic historian Deirdre McCloskey, this happened because the elites (clergy, nobility) stopped controlling ordinary citizens who could now use their private resources to produce whatever goods and services they could sell for a profit.

 

As for poverty in the U.S., the lowest official rate ever reported by the Census Bureau was 10.5% in 2019. It fell 1.3 percentage points that year, tying for the biggest one year decrease in the last 50 years. But that was before Covid hit (and all the government restrictions), which can’t be blamed on capitalism. It was 22.4% in 1959, the first year it was reported.

 

We can also see the superiority of capitalism by looking for the closest thing we have to apples-to-apples comparisons. These are cases like South vs. North Korea and West vs. East Germany.

 

They had similar cultures and histories, yet South Korea and West Germany allowed private, profit-making businesses to exist while North Korea and East Germany generally did not. The latter places had much lower standards of living.

 

As for specific policies, what is wrong with raising the minimum wage? According to a 2021 study by the non-partisan Congressional Budget Office raising it to $15 would cost 1.4 million jobs.

 

Christina Romer, who was chair of President Obama’s Council of Economic Advisors, said in 2013 that labor markets were generally competitive, so that a higher minimum wage was not necessary. She recommended the Earned Income Tax Credit as a better way to fight poverty.

 

If we outlaw evictions, who will want to build apartment buildings or become a landlord? You would not be able to collect rent if there is no chance to evict. This would result in less housing.

 

We need to reduce zoning restrictions and other regulations to increase the housing stock in this country. Most economists agree on this point.

 

The protesters also complained about inflation. But that has been caused the money supply (M2) being increased 40% in the last 2 years by the Federal Reserve, not by capitalists (even Larry Summers, one of Obama’s top economic advisors, says that).

 

For a recent example of how government intervention can backfire, look at the baby formula crisis. High tariffs keep foreign supply out of the market.

 

The federal government is a large purchaser and state governments gives exclusive contracts to just one company. That reduces the incentive for competitors to come in.

 

So, when one factory had to shut down due to contamination, there was not enough formula. But it was not the fault of capitalism. Government policy created the conditions for the shortfall.

 

We should not smash capitalism. We should smash government regulations that cause harmful, unintended consequences. That actually means more capitalism.

 

https://www.washingtonpost.com/dc-md-va/2022/06/18/poor-peoples-campaign-dc-march/