Moore-onomics

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Gresham’s Law states that whenever government overvalues one form of money and undervalues another, the undervalued money will leave the country or disappear into "hoarding," while the overvalued money will flood into circulation. Hence the saying, "Bad money drives out the good."

There is a version of Gresham’s Law that applies to economic literature: Bad economics drives out the good. There are many reasons for this, including the fact that most people never seriously study economics but are nevertheless influenced by the economic commentaries of fellow economic ignoramuses. A case in point is the huge sales of two books written by the socialist documentary film maker Michael Moore: Stupid White Men and Downsize This! Both of these books proudly announce on their front covers that they were New York Times bestsellers. And both books simply rehash old myths about capitalism that have been proven wrong over and over again for decades.

In Stupid White Men Moore condemns "C-A-P-I-T-A-L-I-S-M" for weeding out businesses that have higher costs and/or lower quality products or services than their competitors. He has no understanding that it is consumers who do the weeding out here: If consumers stop buying these inferior, high-priced products and services, the inevitable result is indeed bankruptcy. But the resources that were being used ineffectively (in serving consumers) will then be bid away by other businesses that will make better use of them. This is a virtue of capitalism, not a vice, but all economic sense is lost on Michael Moore.

The author of the film "Roger and Me" puts together a list of the "failures" of capitalism that is remarkable in that in almost every single case, the failure that he refers to is actually caused by interventionism or the failure by government to allow capitalism to work. He blames California’s energy problems on "deregulation," or a move in the direction of capitalism, for example. But California did not deregulate its energy industry: During the 1990s it deregulated the wholesale price of electric power but imposed price controls on retail prices. It also outlawed long-term contracts that allowed power distributors to lock in low prices, and it prohibited vertical integration in the electric power industry. The state is also famous for using regulation to stop virtually all expansion of electric power supply out of "environmental concerns," guaranteeing an energy crisis. It is glaringly obvious that California’s energy problems were (and are still being) caused by interventionism, not capitalism.

Moore struts around posing as a champion of the working class while advocating in his books policies that would unequivocally harm workers. In Downsize This! He lambastes businesses for not supplying their employees with a long list of extravagant fringe benefits, for example. Now, there is nothing at all wrong with fringe benefits as a form of payment — especially if they are tax exempt. But as a rule, employers cannot pay employees more than what economists call their marginal revenue product — the market value of the goods and services they produce for the employer. If government forces employers to pay higher wages and/or fringe benefits, those workers who cannot produce that level of profit for the employer will lose their jobs.

Michael Moore is essentially a union propagandist and, as such, he condemns certain "stupid" labor unions for agreeing to renegotiate their contracts during recessions. In such cases, companies typically allow the unions’ accountants to go over the company’s books to see that the company really is in financial distress. At that point, some unions have agreed to temporary wage cuts as a means of saving the jobs of their members. These are the unions that Moore labels as "stupid." The "smart" ones are the unions who refused to renegotiate and saw their employers go out of business, losing all of their union jobs. Smart.

Moore also repeats the absurd notion that labor unions in America were thriving until President Ronald Reagan fired the illegally-striking air traffic controllers in 1982. (Since the air traffic controllers are given a monopoly in providing that service, federal law prohibits them from striking). But private sector labor union membership as a percentage of the labor force peaked in the 1950s at around 33 percent and has been on the decline ever since, barely comprising 10 percent today. It was aggressive and belligerent unionism that did so much to cause the decline of the American automobile and steel industries in the 1960s and 70s, resulting in the loss of hundreds of thousands of union jobs. The notion that it all started with Ronald Reagan is nonsense.

Incredibly, Moore even blames the sorry state of Indian reservations on capitalism. But Indian Reservations are miniature centrally planned, socialist economies run by the federal government’s Bureau of Indian Affairs, complete with Soviet-style "five-year plans." They are the very epitome of socialism and its destructiveness.

Indeed, there are heartening stories all over the news today about long-suffering and abused (by the state) American Indians thriving economically thanks to capitalism. They have left the federal government reservation to establish successful gambling casinos and numerous other kinds of businesses and, for the first time, are building their own middle class communities. The first Indian MBA program is about to be established in North Dakota. American Indian leaders understand that capitalism will be their economic salvation, just as the socialist hellholes called "reservations" have abused them for generations.

Incredibly, Moore even blames the problems of crime, bad schools, poverty, and governmental corruption in Washington, D.C. on "C-A-P-I-T-A-L-I-S-M." But Washington, D.C., like Indian reservations, is an island of socialism in a sea of capitalism. Its government-run schools are among the nation’s worst; it is one of the highest-tax jurisdictions in America; has the largest number of local governmental bureaucrats of any city of comparable size; its police are notoriously ineffective and corrupt; and to D.C. residents the notion of "public service" is a cruel joke. This is all the result of government failure in a city that worships government.

The Nike Corporation comes in for especially harsh condemnation for paying factory workers in Indonesia less than what factory workers in the U.S. are paid. Moore advocates wage equalization, as do American labor unions, supposedly in the name of helping the poor, "exploited" Indonesian factory workers. In reality, as opposed to Michael Moore’s world, these workers 1) are paid more than they could make anywhere else in Indonesia; otherwise they wouldn’t work for Nike; and 2) Forcing up higher wages to anywhere near U.S. levels would cause Nike to close up shop in Indonesia and lay off all of these workers, many of whom would face the alternatives of grinding poverty and a life of theft, prostitution, or worse.

American labor unions are interested in eliminating international competition, not enhancing the welfare of Indonesians. Moore claims to be a champion of "the poor," but once again he advocates a policy that would be unequivocally harmful to the poor (and others).

In the end, after misdiagnosing nearly every social and economic problem that he writes about, incorrectly blaming them on capitalism, Moore proposes bigger and bigger government and higher and higher taxation — socialism — as a sure-fire cure-all for America’s ills. Talk about Stupid White Men.

Thomas J. DiLorenzo [send him mail] is the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is How Capitalism Saved America: The Untold Story of Our Country’s History, from the Pilgrims to the Present (Crown Forum/Random House, August 2004).

Thomas DiLorenzo Archives at LRC

Thomas DiLorenzo Archives at Mises.org

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