“Stalin was a banner of creativity, of humanism and an edifying picture of peace and heroism!” declared Salvador Allende during a eulogy in 1953 to the Soviet mass-murderer.  

Allende became the Communist president of Chile in November 1970. Fortunately, he was thrown out of power on September 9, 1973.

Now the triumph of capitalist Chile needs to be celebrated, and its economic ways emulated throughout the world.

This is from Investor’s Business Daily, by Monica Showalter:

By the looks of the bright, shiny Chilean capital, where it’s possible to shop at Starbucks, H&M or Banana Republic, dine at globally ranked restaurants … or marvel at the world-class architectural engineering of the continent’s tallest skyscrapers that escaped Chile’s 2010 8.8-scale earthquake unscathed, it’s hard to believe that 40 years earlier Chile was a tottering democracy in ruins, well on its way to becoming a Soviet-Cuban satellite.

The country changed course by a legislatively ordered military coup in 1973, which to this day remains globally reviled as if it were a destruction of democracy that came out of a vacuum. …

But the hard fact is, the military action led by Gen. Augusto Pinochet on Sept. 11, 1973, effectively turned back the global ambitions of an emboldened Moscow-Havana communist axis, which sought to take over South America as an enfeebled U.S reeled from the Vietnam War.

That strategy was to create a sort of “red sandwich” on the South American continent, with Cuba in the northeast and Chile in the southwest, and both sides training terrorists and revolutionaries to move inward and northward until they could reach the final prize: Mexico.

Pinochet turned it back … He [eventually] stepped down as promised … 

Yet, instead of being seen as a hero who saved his country from a totalitarian fate, both the global and Chilean establishment, taking their propaganda cues from an embittered Cuba, continue to paint Pinochet as a villain and his action to save his country as a tragedy.

In reality, Pinochet was, as historian Paul Johnson noted, “the most misunderstood man of the 20th century”.

See, Chile’s story might not have ended in skyscrapers, OECD membership, a per capita income of more than $18,000, the region’s highest transparency, lowest infant mortality, least corruption and negative net debt had Pinochet just sat there and held the fort. And even that would have been a huge improvement over communism.

But besides blowing out a communist beachhead, Pinochet instituted the world’s first genuine free-market reforms. They effectively transformed his country from a messy Latin American semi-democracy into a first-world country with a booming economy.

Years before Reagan and Thatcher began their earth-shaking revolutions, which finished off communism as a cause and put even leftist politicians on the defensive around the world, Pinochet turned his nation’s fiscal matters over to a group of young economists trained by Milton Friedman.

Known as “Los Chicago Boys”, they had the decree powers of a military regime but the ideas of free markets. Using both, they effectively privatized state-owned industries, broke up crony capitalist cartels, enacted airtight property rights, cut red tape, opened Chile’s markets to the world — bringing its wines, seafood, fruits, timber, copper and, now, high-tech to the West in quantities never before seen — reformed social security, and, after a few miscues, restored the integrity of the country’s currency, credit rating and fiscal discipline.

What’s more, their reforms stuck, even as the country continued to re-elect socialist governments, because the institutions were so strong and the culture of ownership was so great. …

The left’s effort to revile Pinochet out of all proportion to the crimes of the era — while excusing the far more severe crimes of Cuba’s Castro and the Nicaraguan Sandinistas — ultimately amounts to an angry left’s effort to discredit Pinochet’s most lasting legacy: the free market revolution.

And this is from Townhall, by Humberto Fontova (also quoted at the top of this post):

On September 11, 1973 the Chilean military led by General Augusto Pinochet slapped Fidel Castro so smartly that his Stalinist regime (and its dutiful U.S. Media minions) are still sniveling and sniffling and wiping away tears of shock, pain and humiliation.

We feel your happiness, Humberto!

True to form, The New York Times leads the sniveling. They just published an article decrying the Chilean “tragedy” (i.e. Chile saving itself from Castroism with a military coup and is today the richest and freest nation in Latin America.) The article’s author Ariel Dorfman is a former advisor to Chile’s Marxist president and Castro acolyte Salvador Allende. …

“Without the help of the New York Times, the Revolution in Cuba would never have been,” …  beamed Fidel Castro during a visit to the New York Times offices in April 1959 to decorate their star Latin America reporter with a newly-minted Cuban medal.

“We’re following the example of the Cuban Revolution and counting on the support of her militant internationalism represented by Fidel Castro and Che Guevara!” boasted Chilean president Salvador Allende’s minister Carlos Altamirano in January 1971. “Armed conflict in continental terms remains as relevant today as ever!” he declared.

And he wasn’t bluffing. By the time of Pinochet’s coup, an estimated 31,000 Cuban and Soviet bloc operatives and terrorists infested Chile …

By 1973, 60% of Chile’s arable land had been stolen by Allende’s Marxist regime, often with the aid of Cuba-trained death squads. “In the final analysis only armed conflict will decide who is the victor!” added Allende’s governmental ally, Oscar Guillermo Garreton. “The class struggle always entails armed conflict. Understand me, the global strategy is always accomplished through arms!”…

Then, in September 1973, the military, led by General Pinochet, made a strike with arms against Allende. It was a successful coup d’etat. Allende committed suicide. Pinochet came to power.

Although he had acted with arms, and although he took tyrannical actions against his enemies, the Left did not  think he was “a banner of creativity, of humanism and an edifying picture of peace and heroism.” Perhaps because those tyrannical actions of his were not remotely on the same scale as Stalin’s.

Allende and Castro’s media minions claim 3000 people were “disappeared” during this anti-Communist coup and its aftermath, collateral damage and all. Well, even if we accept the Castroite figure, compared to the death-toll from our interventions/ bombing- campaigns in the Mid-East (that have yet to create a single free, peaceful and prosperous nation) Pinochet’s coup should be enshrined and studied at West Point, Georgetown and John Hopkins as the paradigm for effective “regime–change” and “nation-building.” Granted, Pinochet had much better raw-material to work with.

But the Castroite –MSM figure is mostly bogus, as many of those “disappeared” kept appearing, usually behind the iron curtain.

More importantly, Pinochet and his plotters were scrupulous in keeping U.S. State Dept. and CIA “nation-builders” and other such egghead busybodies out of their plotting loop. (This probably explains Pinochet’s success.) Then two years after the coup they invited Milton Freidman and his “Chicago Boys” over for some economic tutelage. And as mentioned: today Chile is the freest and richest nation in Latin America.

Obama says there should be a limit to how much money anyone should make. He and the “progressive” majority in Congress are trying, step by step, to turn America into a European-style socialist state. Only the state, they believe, can be extravagant, taking money from people who’ve earned it and will earn it in the future, and using it to extend and tighten the power of government. Austerity must be imposed on the people. Let them eat less, feel colder, do without cars. Let them have only the medical treatment and the education government will allow them to have. Limit the amount of wealth any individual may acquire. Profit is a dirty word. Tax, tax, and tax again.

It is a recipe for disaster.

Europe is experiencing the disaster. It is seeing its socialist dream go up in flames on the streets of Athens.

What cannot work, won’t work. Socialism, like all Ponzi schemes, can seem to be working for a time, but must fail. In a favorite word of the Left (applying it where the Left would not) Socialism is “unsustainable”.

Capitalism is sustainable. Capitalism is beautiful. A cornucopia. “The incredible bread machine”.  It’s what Adam Smith called “the natural order of liberty”. It could also be called “the system of mutual benefit”.

You want the means to keep yourself alive? Provide something – goods, labor, services, ideas – that others want to buy. You want to live comfortably? Provide more of it. You want to live luxuriously? Provide it better than anyone else does. Both a seller and a buyer you will be. A buyer wants the thing he buys more than he wants the money he pays for it, just as the seller wants the money more than the thing he is parting with.

How can you know what others want? Put what you have to offer on the market and see if it sells. The right price for it is the best price you can get. The free market signals what traders need to know. As the great free-market economists, most notably von Mises, Hayek, and Milton Friedman have explained over and over again, government interference with price controls, minimum wages, rationing, compulsory purchase, bailouts, distort the signals and harm the economy.

Whether idealists and moralists like it or not, human nature is selfish. It has to be. If we were not selfish we would not eat when we’re hungry, warm ourselves when we’re cold, acquire what we need, protect ourselves from enemies. Without selfishness, the human race would not have survived. (It is not only or purely selfish. Individuals can and do choose to act unselfishly too – once they have seen to the needs of their survival.)

The Marxist idea of “from each according to his ability and to each according to his need” ignores human nature. Any attempt by government to put the formula into effect by creating the welfare –  or “entitlement“ – state invariably handicaps, suppresses, and impoverishes the nation.

Capitalism is the reverse of that idea. It is a system that encourages each to contribute according to his self-determined need, to be rewarded according to how ably he does it. From each according to his need and to each according to his ability would be a fair description of how the natural order of liberty works.

To satisfy bare need is a poor political aim. It reflects a pinched, narrow, joyless, life-quelling mentality. “O, reason not the need!” King Lear pleads, “our basest beggars
are in the poorest thing superfluous.” Generally speaking, in practice, the only way to be sure of having enough of anything is to have too much of it. Profit is a very good thing. It is only when people have extra money and extra time that they can invent new things. And those who produce things that improve the lives of multitudes, things that millions of people want to own and use, are doing far more for the general good than the most generous philanthropist could ever possibly do. Bill Gates with his Microsoft (though he seems not to realize it but to hold some silly lefty views) has actually done more for mankind than all the charities that have ever existed put together.

That is why it’s reasonable to propose that there is no sin of greed. There is a sin of envy. Envy is the raw material of socialist idealism. But wealth, Mr Obama, is not a problem. Poverty is a problem. And your socialist policies will cause it on a massive scale. Let us be free to work for our own maximum profit. Let us have abundance. Let us have feasts, fatness, generosity, might, novelty, and splendor.

Jillian Becker   May 11, 2010

 Walter Williams reminds us what Adam Smith said, what he meant by the ‘invisible hand’, why capitalism works and socialism doesn’t, and why our selfish instincts benefit others far more effectively than our charitable endeavors. Read his whole column here.

What is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don’t give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today’s silly talk – people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. … He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. … By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."

 Joseph Calhoun writes in Real Clear Markets (read the whole thing here):

Now markets are waiting on pins and needles as the politicians haggle over the details of the latest bailout attempt by the Fed and Treasury. This has introduced another roadblock to the re-capitalization and reorganization of the financial industry. Companies that are in need of capital are waiting to see if the plan will bail them out of their difficulties. If Hank Paulson is willing to pay an above market price for their bad loans, why should they dilute their equity now? Why not wait until they can offload the bad paper on the taxpayer and raise capital at a better price? Why take Tony Soprano terms when Uncle Sam is willing to let the taxpayer take the hit for you?

If this bailout goes ahead in its current form and the Treasury pays a high enough price to recapitalize the troubled banks, what has been accomplished? The plan may be enough to induce the banking sector to start lending again, although frankly, I don’t know why we would want institutions who have shown such poor judgment in the past to stay in that business. This plan short circuits the capitalist model which would allow the stronger, well-run institutions to gain market share and/or expand profit margins. The long-term effect will be to lower the overall return on capital in the financial services industry. The government apparently believes that the key to economic recovery is to allocate limited resources in an inefficient manner. Does that make sense?

Paulson and Bernanke have testified to Congress that the market for the mortgage paper rotting on the balance sheets of bad banks is not working. They have not offered an explanation of why that market is not functioning except to blame the complicated nature of some of the securities. That explanation begs the question of how exactly the Treasury believes it will be any better at deciphering the mortgage market. A more logical explanation is not a lack of willing buyers, but a lack of willing sellers. The Fed has allowed institutions to use collateral of ever falling quality to secure loans from the Fed. If a bank can finance its activities through the Fed and keep the bad loans on the balance sheet, what incentive does it have to sell? Selling will reveal the true condition of the company and will also force other institutions to do the same under mark- to-market accounting. The Fed is the one keeping the market from functioning. The Treasury does not need to enter the market for it to start functioning; the Fed needs to leave the market.

Paulson has said that the cause of the current problems is the housing deflation, but that ignores the elephant in the living room. The housing bubble, which was concentrated in a relatively small number of states, was caused by the reckless actions of the Greenspan Fed. The consequences of that bubble have been exacerbated by the Bernanke Fed. The market is functioning as it should. It is the Fed that is not functioning correctly. There is no reason we had to go through either the bubble or the aftermath. We got into this mess because we tried to avoid the consequences of the Internet bubble. We will only make things worse by trying to avoid the consequences of the housing bubble.

We are not on the verge of a new depression. The housing bubble collapse in California, Florida and a few other states is not enough to bring down the entire banking system. Investors who made mistakes in these markets should be held responsible and those who navigated the Fed-distorted market should be rewarded for their wisdom and prudence. Enacting the Paulson plan will not allow that to happen and our economy will suffer for it in the long run. The Japanese tried to prop up failed banks in the aftermath of the bursting of their twin bubbles and the result was 15 years of stagnation. Why are we emulating a strategy that is a demonstrable failure? A better alternative would be to allow capitalism to work as it should and stop the interventions of the Fed in the money market. Trust capitalism. It works.

 

 Britain has been hit by economic crisis from the same causes as the US. The world’s anti-free-marketeers, Communists, Socialists, European haters of the Anglo-Saxon world, and a multitude of left-wing churchmen are gloating, calling the meltdown a ‘crisis of capitalism’.

Madeleine Westrop comments:

I know you are Atheist Conservatives: so, if you have any interest in your diametric (or dialectic?) opposite, consider for a moment the Church of England. It is advocating Karl Marx.

I don’t mean that the whole ecclesiastical edifice is daubed in Hegelian anti-God revolutionary anti-Capitalist slogans.  Most of the Anglicans I know are constitutionally unable to talk about politics, religion, money or even ideas at an English dinner party.   (I suppose if Marx had bred dogs or polyanthus…) Our dear old Anglican aunts go to the pretty parish church every Sunday and are true blue Conservatives from their charming hats to their patent shoes. 

But look further up.  Turn your gaze from the modest and crumbly foundations to the airy spires above.   The astonishing thing is that the Archbishop of Canterbury, the most senior figure in the Established Church, turns to Marx when the world is troubled.

An article in the Spectator this week was written by The Most Reverend and Right Honorable, his Grace Dr Rowan Williams, Primate of All England, Lord Spiritual in the House of Lords, overseer of the Anglican Communion (the third largest denomination in the world), Ordinary to the Chaplains in the Army, Navy and Royal Airforce, Visitor, Patron and Governor to hundreds of charitable trusts, President of the House of Bishops and the General Synod, Chairman of the Archbishop’s Council, Church Commissioner responsible for administration of the wealth and property of the Church (about £6 billion and hundreds of acres of land), resident and official host to many at Lambeth Palace, resident of the Old Palace at Canterbury, bishop of the Diocese of Canterbury, blesser of oils, annointer of the Monarch at each coronation.  I have counted how many have been enthroned as Archbishop of Canterbury and I think Dr Williams is about the 109th, since the first, St Augustine in 597 AD.

Dr Williams has decided to write about the economic crisis afflicting the world wholesale money markets, the banks and the stock-markets and ruination of all our pensions and savings to boot.  He says that unimaginable wealth has been generated by fiction and paper with no concrete outcome beyond profit for the traders.  He says the challenge is now to connect money to material reality.  And then it comes: “Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves.”  He reminds us that “ascribing reality to what you have in fact made yourself” is idolatry. 

I agree there has been an “unreality” exposed because those debt obligations turned out to be worthless.  But this was not the work of a Monster Capitalist system.  Exposure is just what happens when you find out you have been stupid enough to deal in rotten wheat or quack medicine.  And there has been “unreality” in thinking such prodigal borrowing and spending was sustainable.  Again, this is not Monster Capitalism at work, but simply old fashioned bad business practice.

Was Dr Williams  thinking of the sorcerer in Marx’s Communist Manifesto?  In 1848 Marx and Engels wrote:

Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. 

This is nuts. Dr Williams can’t just say the problem is that we have created a Capitalist Monster and idolised it. For a start, here in England the problems have not occurred where old-fashioned capitalist values have prevailed.  The Northern Rock Bank lent out 110% mortgages to people who couldn’t make repayments and the bank went bust.  The taxpayer now has to pay a Bishop’s ransom for this failure. But Northern Rock was not a single-minded profit-mad selfish Capitalist Monster.  If it had been a bit more selfish it might have been more prudent. It gives 5% of its profits to ‘tackle disadvantage’ in the North East of England through a charitable foundation. It was a Labour Party pet and it was lending improvidently while the Labour Government was also borrowing like crazy to fund its socialist “transformations” (spending).  Northern Rock shared basic Labour Party socialist values. The bank employed Deborah Mattinson, Gordon Brown’s focus group guru, to advise it about social responsibility.  The Northern Rock charity gave money to the left wing think-tank the IPPR, which the Labour Government has used to outsource its own policy making.  In fact 17 departments have outsourced to the IPPR over the last 10 years.  And the inclusion and acceptance of the market system in a movement for social justice was part of the plan set out in Tony Blair’s New Labour movement.

Dr Williams also accepts private enterprise to some extent.  He writes,

“Of course business is not philanthropy, securing profit is a legitimate (if not a morally supreme) motivation for people…It’s true as well that, in some circumstances, loosening up a financial regime to allow for entrepreneurs and innovators to create wealth is necessary …But it is a sort of fundamentalism to say that this alone will secure stable and just outcomes everywhere.”

Which brings me to the second reason that the Shelleyesque Capitalist Monster, or the ungovernable sorcerer’s powers, are both inappropriate ideas.  Securing profit is a morally supreme motivation.  And while it is true that profit may not alone secure stable outcomes, the waste of wealth always produces unstable outcomes. True wealth (as contrasted with inflated speculative bubbles of paper wealth) is a sine qua non of stability, along with peace, the rule of law and liberty.

The problem is that Dr Williams has chosen a scoundrel unemployed insolvent misanthropist who sponged off his dying father and friends and couldn’t afford to bury his own child, for his lessons in morals and economics.  He chose Marx.  Instead he should have chosen a prudent, kindly, careful man who worked hard and made a meticulous study of how the wealth of nations can be increased and warned us against the very problems that have arisen in our economies: Adam Smith.  (It seems hardly worth mentioning in this Atheistic context, but it strikes me that an Archbishop might also have taken advice from Smith who believed, at least, in ‘a beneficent Providence’ over the anti-Religious Marx.)

Moreover, Marxism doesn’t really help to explain our predicament. The Communist Manifesto says that economic crises occur because of over-production:

“It is enough to mention the commercial crises that, by their periodical return, put the existence of the entire bourgeois society on its trial, each time more threateningly…. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity – the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce.”

But but but! Our present ills arise because we have unrealistically overestimated our wealth.  Dr Williams pointed this out himself.  We are not in trouble because of over-production!  It is truer to say that we have spent more than is justified by what we have produced.  National debt in the United Kingdom is high: the Government says it is about £650 billion but if you add in the hidden debt obligations – Northern Rock, public sector pensions, Public-Private partnership commitments, decommissioning of power stations – the figure is at least doubled.  In other words, to claim the official figure for debt,  about 37% of our gross domestic product, is to make a wild underestimate.  And where Government led, we followed.  Personal debt amounts to about £1.4 trillion.  Adam Smith would not have approved:

Whatever we may imagine the real wealth and revenue of a country to consist in, whether in the value of the annual produce of its land and labour, as plain reason seems to dictate; or in the quantity of the precious metals… in either view of the matter, every prodigal appears to be a public enemy and every frugal man a public benefactor. 

It is true that the economic crisis has been made worse by the obscurity of the real state of things. But how like a priest to say that the problem is, in the end, idolatry of an unknowable, ineffable dark thing.  We should shine light on the problem rather than condemn it to the shadows. Obscurity and superstition is our enemy here. 

Take the South Sea Bubble problem of three hundred years ago. The south Sea Company bought a monopoly of trade with South America.  The company underwrote the National Debt for interest Payments from the Treasury. This all seemed rosy. Share prices soared and other companies were founded in a frenzy of speculation. People had no idea what they were buying or risking: for example, one to fire square canon balls, and one just for an unknown undertaking of ‘great advantage’. Ladies’ maids and porters bought carriages on supposed mountains of wealth. When the value of the stocks crashed, investors were made destitute overnight and suicides and arrests followed.  Isaac Newton lost money and said “I can calculate the movement of stars but not the madness of men.”   

Smith discusses, years later, the South Sea company itself in The Wealth of Nations:

The directors of such [joint stock] companies, however, being managers rather of other people’s money than their own; it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private company frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it.  Negligence and profusion must always prevail… in the management of the affairs of such a company.  

How apt this basic analysis seems today.  Risk takers must be responsible and face moral hazard. And responsibility, like charity, is best applied close to home.  England has had some marvellous institutions, the building societies, owned by their depositors whose only purpose was to provide finance for buying houses.  They were prudent and profitable, on the whole and allowed multitudes to buy their own house by slow and careful saving.  However, in the last twenty years or so they have ‘de-mutualized’ and become publicly owned banks, dealing in the wholesale markets and lending to the inflated ‘buy to let’ investment market.  Since they have stopped being owned by their depositors, many have had disastrous losses and only this week, the biggest ‘buy to let’ lender, the Bradford and Bingley bank (building society that was) has been nationalised.

There is no Monster. In fact there is no capitalist system. There are frugal habits that build wealth and wasteful or irresponsible habits that destroy it.  It is terribly dangerous to condemn the market for failings in ourselves and our Governments.   When you go to bed tonight, you might look under the bed: pessimists might check on a hoard of gold coins rather than trust banks; Marxist revolutionaries might simply turn in; but let us hope only the Prelates  are looking for Monsters.  

  

 Jonah Goldberg writes in Townhall:

‘Capitalism is the greatest system ever created for alleviating general human misery, and yet it breeds ingratitude.

People ask, "Why is there poverty in the world?" It’s a silly question. Poverty is the default human condition. It is the factory preset of this mortal coil. As individuals and as a species, we are born naked and penniless, bereft of skills or possessions. Likewise, in his civilizational infancy man was poor, in every sense. He lived in ignorance, filth, hunger and pain, and he died very young, either by violence or disease.

The interesting question isn’t "Why is there poverty?" It’s "Why is there wealth?" Or: "Why is there prosperity here but not there?"

At the end of the day, the first answer is capitalism, rightly understood. That is to say: free markets, private property, the spirit of entrepreneurialism and the conviction that the fruits of your labors are your own.’

Read the whole thing here – it’s very good.