Capitalism Saves Us All

Contrary to what many thought in 2000 after George W. Bush became President, we are now living in a time of unprecedented government growth and spending, and it seems quite likely that the federal government will continue to expand for the foreseeable future regardless of who wins the election in November. That is why are fortunate that Thomas J. DiLorenzo's new book, How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present, will be released shortly. DiLorenzo's work is a pragmatic celebration of some Americans resisting big government's siren call and embracing freedom over misguided state intervention whenever they could. Hopefully some in Washington will learn from its contents.

Di Lorenzo's is not a traditional history. It is a concise work of economic history in which the author picks and chooses historical events that best support his theme. The ideas and arguments of immortal economists like Adam Smith, Ludwig von Mises1, F.A. Hayek, Milton Friedman, and Murray Rothbard provide structure and authority for many of the author's views. By the end of How Capitalism Saved America, it will become readily evident to the reader than when our leaders made use of free market solutions we thrived, but when they chose to have government answer we floundered.

Some readers may greatly profit from the author's discussion of historical events which are practically forgotten today. Di Lorenzo informs us that the failure of the Jamestown settlement in 1607 (and the accompanying starvation of its inhabitants) was largely due to an absence of private property rights. They had no incentive to farm, as what they harvested they could not keep, so they chose not to produce at all. In 1611, when a "high marshal" was sent to the colony, its fortunes immediately reversed after the marshal allocated three acres of land for each man's personal cultivation.

What this reviewer appreciated most about this book is the way in which the author debunks popular myths. What is more intrinsic to being American than having the opportunity with which to better one's lot? Di Lorenzo illustrates that even the poorest of the poor continue to have the chance to rise through our capitalist system, and they frequently make use of this opportunity.

"The critics suggest that there is little or no room for the u2018poor' to advance, that class of people is essentially stuck in the bottom 20 percent. But this is unequivocally false. In reality, the bottom 20 percent (like all other quintiles) is constantly made up of different people. A family in the lowest income quintile today, as recorded by the census data gatherers, will typically move up into a higher income category over the next five or ten years and be replaced in the lower category by a different family…"

Readers would be wise to remember the next time they are challenged with the mantra, "social justice," to retort that the only way to achieve it is through, "capitalism."

Capitalism, through its cheaper goods and higher wages, has distinctly benefited the working class. A hundred years ago, the fattest of the fat cats could not purchase the same type of goods that your average retail worker can purchase today, and the fact that such unbelievable wares are available is strictly due to the incentives created by a capitalist system. In a socialist economy, they would never have been invented or discovered in the first place.

We find as well that those dubbed "robber barons" were not as they enriched far more often than they robbed. Men like James J. Hill, Cornelius Vanderbilt, and John D. Rockefeller were brilliant entrepreneurs who employed thousands and gave stability to countless American families. The charitable organizations and nonprofits they bequeathed remain viable today and many of their innovations benefited all Americans–not just those they directly employed.

This review would not be complete if it did not mention the non-partisan nature of How Capitalism Saved America. Di Lorenzo attacks all interventionists regardless of their political orientation. He excoriates the Republican Hoover Administration for its part in causing the Great Depression and then turns to examine the ways in which the Democratic Roosevelt Administration exacerbated the problems inherited from Hoover. The period appears to be an age where the temptations of state intrusion into the economy appealed to a majority of our legislators. The author views Roosevelt's New Deal as being merely a continuation, and logical outcome, of the policies enacted by the previous administration.

Herbert Hoover, in contrast with his reputation, was in no way a devotee of laissez-faire government. Here the author effectively juxtaposes him with President Van Buren who was in many ways his presidential antithesis. Hoover stood opposed to "destructive competition" and believed that some people in America made far too much money. He was one of the first to try hyperactive state solutions as a response to economic problems. As we now know, his interference made things infinitely worse. There were many examples of governmental futility during the administration, such as the Railway Labor Act where he empowered unions over employers (which would become a way of life under Roosevelt). Hoover believed anti-trade tariffs actually benefited American workers and nowhere was this more the case than with his visible support of the Smoot-Hawley Tariff. He seemed to create "more government" wherever he could as he formed the Bureau of Aeronautics and created a policy distributing licenses to radio broadcasters. Giant public works programs marred his presidency in the same way they marred Roosevelt's:

"In 1929 Hoover devoted a sizable chunk of the federal budget–half a billion dollars, or 13 percent of the total budget–to public works spending. At the same time he pressured state governments to increase their own public works spending. By 1931, total government public works spending would be as high as at any other point in the decade…"

In lieu of this fact, it is easy to highlight the senselessness of both Roosevelt and Hoover with the hilarious words of Harry Hopkins, "I've got four million at work [in federal jobs] but for God's sake, don't ask me what they are doing." Only through a "don't ask and don't tell policy" have a couple of generations of historians been able to venerate The New Deal and the gigantic figure who embodied it.

Specifically, for those who have not read Jim Powell's FDR's Folly, the chapter, "How the New Deal Crippled Capitalism" issues a proper indictment of the conventional wisdom that Roosevelt's terms in office saved the country and capitalism itself. While not as in-depth (obviously) as Powell's book-length treatment, this author's facts, charts, and argumentation are more than enough to dash our society's unwarranted worship of Franklin Delano Roosevelt. Unemployment never fell below 14.6 percent between 1932 and 1940 and between "1930 to 1940 net private investment was minus $3.1 billion." What The New Deal really represented was masterful electioneering and showcased, once again, that while FDR was a brilliant politician, he knew little about how to improve the economic health of our citizenry.2 Di Lorenzo's narrative debunking the legend is brief but powerful.

Perhaps the best quotation in the book belongs to Thomas Jefferson when he said "that government is best which governs least." If politicians accepted this view today then the jangling cries of thousands of progressive activists (who confuse government programs and meddling with moving forward) could easily be discounted. Capitalism made America what it is and Di Lorenzo's work provides a great service by reminding everyone of how integral free markets have been to our liberty and advancement.

Notes:

  1. Di Lorenzo dedicated the book to Ludwig von Mises.
  2. The confusion of FDR on economic matters is nowhere more visible than in this exchange from FDR's Folly: "FDR imagined he could fix the world gold price from his bedroom. Morgenthau reported that when he visited FDR on Friday, November 3, he suggested a 10- or 15-cent rise from the previous day, and FDR decided on a 21-cent rise. Morgenthau asked the rationale for 21 cents, and FDR reportedly replied that ‘three times seven’ is a lucky number." pp. 71–72

June 14, 2004