Speaking of Capitalism…

It’s not only people like George Bush and Herbert Hoover who have distorted the meaning of capitalism (by pretending they supported it while in office).  Quite often (if not each and every time) those in the media also get it wrong. One example was the 2009 film by Michael Moore entitled, Capitalism: A Love Story.

As Sheldon Richman of FEE explains in his article Frustrating Michael Moore, the term capitalism (when used to refer to free markets) is not used correctly.  What Moore is discussing is what Richman refers to as “State Capitalism”, or what I have heard referred to as, “Crony Capitalism”.  He says that he’s right to denounce many of the things he does, including, “…banks engaging in wild speculation without concern for the risk, taxpayer bailouts for banks and other businesses, cozy relations between Wall Street and Washington, politicians getting favors from companies that want benefits from government, and big institutions pushing less powerful individuals around.” However, as Richman points out, this is not the free market as argued by Moore. Richman also brings up the point that many “free market advocates” claim that we live in a capitalist system (including George Bush), despite the massive amounts of regulation, spending and intervention that take place. When that is the case, are we really surprised when people like Moore confuse the term?

Michael Moore not only misrepresents the meaning of free market capitalism in his movie, but he also seems to misrepresent himself with his actions. As discovered by the Michigan-based Mackinac Center for Public Policy, Michael Moore’s movie qualified for a tax refund for the movie producers of up to 42% of their spending in the state. This of course comes at the expense of tax payers, whom Moore claims to fight for. According to Mackinac, “This lavish provision means a studio can easily receive more from Michigan taxpayers than it pays in Michigan taxes.” While Moore was at first against this, he soon became silent after he decided to go ahead with the movie. So much for “the little guy”.

Relearning History – The Truth About Rockefeller

Remember learning about the so-called “Robber Baron’s” in high school?  Or as Michael Moore would say, those evil capitalists who took all the wealth in the country and left nothing for their fellow man?  The ones who created monopolies by trashing the little guy and charging exorbitant prices to the consumer.  Remember them?

Would it be a big surprise if I told you there was a different story behind these individuals?  That they actually helped the economy grow and helped make consumers and workers better off? Would you be surprised if I told you your teacher may not have told you the truth about men like Andrew Carnegie and John D. Rockefeller?

If you are someone who believes companies should be as inefficient as possible, just so long as everyone has a job, you might still believe Rockefeller to be a “Robber Baron”. If you think prices for commodities should stay as high as possible to benefit those in the business, then you might not have liked the guy much.  But if you believe the opposite, read on.

I recently read a fantastic article in the Objective Standard that discusses the real history of John D. Rockefeller, and the process by which his Standard Oil Company rose to claim around 90% of market share in oil refining from 1879-1899.

Unfortunately for most of us, we didn’t get the full story when learning about industrialists such as Rockefeller.  Most of us learned what was written by Ida Tarbell or Henry Lloyd; people who didn’t know much about economics, and were unable to see what Standard Oil did for America.

Because of the wealth generated by Standard Oil, Rockefeller is still able to give away his wealth to this day.  One tribute to his glory is the Rockefeller Center in New York, where they have the annual Rockefeller Tree Lighting.

I encourage people to take a second look at some of the things they learned in school.  The concept of “Robber Barons” and private companies creating “evil” monopolies is simply one of these bits of misinformation.  Read this article, entitled, “Vindicating Capitalism: The Real History of the Standard Oil Company” by Alex Epstein.  It is a little long, but easy to read and well worth it.  Epstein begins by quoting some of the nasty things said about Rockefeller.  The first of which was written in an essay by Henry Lloyd entitled, “The Story of a Great Monopoly”, where he alerts readers to the fact that Standard Oil “…produces only one fiftieth or sixtieth of our petroleum, but dictates the price of all, and refines nine tenths.”

Epstein quickly points out that the information most of us have about Rockefeller is untrue.  Being able to operate in a free economy simply allowed him to produce kerosene and other products better, faster and cheaper than ever before.  Before he had entered the market, no other businessman in the kerosene industry had discovered a way to produce more efficiently, in order to offer a better product at a better price.  Things were mostly done in a sloppy manner, which made the price of kerosene more expensive than it needed to be.  It also made it dangerous.  Because many small business owners in this industry didn’t have the right tools and temperature gauges to properly make kerosene, thousands of  fire deaths were reported each year throughout the 1860’s and 1870’s.

Rockefeller was a smart businessman.  He saw an opportunity to make money in the market by selling a product that people wanted.  And he did it better than anyone else!  He made his refinery bigger, invested in research and development to discover new ways to use resources so less would go to waste, he paid his employees wages higher than market price to attract the best and brightest.  Essentially he made smart decisions where others didn’t.  All of this revolutionized the refining industry.  He created more jobs than would have been created without his brilliant mind and the ability to operate in a free market.  He brought the price of kerosene down for consumers and made it safer.  In 1865 kerosene cost fifty-eight cents a gallon.  Due to competition in a free marketplace (and Rockefeller entering the market), by 1870 it was twenty-six cents a gallon and by 1874, ten cents.  How can anyone be against that?  The truth is that he helped the price go down, not up. He not only paid and treated his employees well, but they were there on their own volition!  He did not force anyone to do anything, whether it was to buy his product or work in his factories.

If we are ever to start understanding the truth about free market capitalism and how well it works, the first step is to get our facts straight.  I know they aren’t, because two years ago as a student teacher I taught a class the lessons from Lloyd and Tarbell, because that was what I was told to teach.  If I had known any better, I would have taught it differently, but I am certain that a majority of teachers would not.  That is why I encourage you to read this article on Rockefeller – and then pass it on to a friend.