Letter to a social justice activist

Dear Reader:

Thanks for commenting on my essay, “Farewell to factories, welcome to socialism” published at my website (res33blog.com). I always welcome comments from readers. I’m interested in how people react to my writings. In this case you begin with the accusation that my essay “weaves some distortion of a political philosophy with some serious lack of facts.” I assume the “political philosophy” to which you refer is capitalism because you say that I “seem” to believe capitalists take all the risks of financing their businesses and reap all the rewards “without help from all the various levels of government.” I didn’t say that, but we need to define some terms.

First, philosophy means pursuit of wisdom including reality, knowledge and values based on logical reasoning; something I try to follow when discussing political issues. You seem to be driven by emotion focused on narrow, local social issues.

Capitalism is a working economic system—not a philosophy— where the means of production and distribution are privately controlled. The development of capitalism “is proportionate to the accumulation and reinvestment of profits gained in a free market” (dictionary definition).

I believe, however, that we are losing free markets in America because the scope and power of governments has so subverted them. Thus, especially with large corporations, we have crony capitalism—the collusion of business and government that distorts markets. You mention General Electric, a classic example of a crony company getting special privileges from the federal government.

You say that I “neglect to credit labor with their role in producing profits through their skills.” Commenting on what I saw and heard in Prof. Seider’s film it was not my intention to present a dissertation on labor and management. Of course labor has a role in “producing profits.” But workers are rewarded for their contributions with wages and other benefits offered. They voluntarily contract to accept the conditions; it’s also notable that they assume none of the risks involved. Incidentally, some companies even offer workers “profit-sharing.”

You (and the film maker) imply that the owner of the Sprague Electric Company moved the plant from North Adams overseas for “more profits.” Mr. Sprague’s decision to move his operations from Massachusetts (a highly taxed and regulated State), as I think he said in the film, were to reduce his costs to stay competitive in the world economy.

Business profits (and losses), however, are powerful incentives for owners to stay competitive, be more efficient, provide better quality service, innovate, and reinvest capital and labor. Still, corporate profits are usually less than 6 percent. Some years companies have business losses. Further, reputable economists believe that in the long run, after all the business risks and losses of people who run their own businesses “no net profit at all may be left over, and that there may even be a net loss.” (Economics in One Lesson, by Henry Hazlitt).

You make a major point in your comments about the value of public institutions in providing trained labor through community colleges that benefit businesses. Of course, employers in many cases want skilled workers. But skills can be taught on the job. In fact, before government started dumping billions of dollars in public schools, that was the preferred way for workers to learn a job—even highly skilled ones. For example, I and some of my high school classmates were trained to be tool-makers by the Bendix Electronic Division at Sidney, New York in 1951.

Incidentally, I found the essay at the website below appropriate to this discussion. I received it as I was writing this letter. It was written by a highly respected scholar (and friend of mine) at the Pope Center for Higher Education Policy in Raleigh, North Carolina.

Even more important to successful employment is individual character, personal skills and willingness to learn—traits lacking in many of our current pampered, self-absorbed young people who aren’t motivated to work and expect to be rewarded for little effort. In addition, our progressive public schools are failing to produce educated people, especially with good knowledge of English, civics, history and economics.

I could go on with more commentary on your response to my blog, but I know it won’t help reconcile our political differences and world views. A final thought.

Earlier I cited Henry Hazlitt, an economist, journalist and “libertarian philosopher.” His little paperback book has been praised as a classic “Economics Primer.” He begins Chapter 1 with: “Economics is haunted by more fallacies than any other study known to man.”

One primary problem is “the special pleading of selfish interests.” A second major factor that brings on economic fallacies is the tendency of people “to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups.”

Hazlitt concludes by noting that the problems we have are not economic, they are political. “Sound economists are in substantial agreement concerning what ought to be done. Practically all government attempts to redistribute wealth and income tend to smother productive incentives and lead toward general impoverishment.” (One of the few government projects, that comes to mind, as a benefit to all of us for the long-term is the Interstate Highway system). Mr. Hazlitt continues:

“It is the proper sphere of government to create and enforce a framework of law that prohibits force and fraud. But it must refrain from specific economic interventions. Government’s main economic function is to encourage and preserve a free market.”



About R. E. Smith Jr.

Mr. Smith writes essays and commentary on politics, American history, environment, higher education and culture. He's been published in print media and at blog sites for about 25 years. Smith's formal education includes B.S. and M.S. degrees from the State University of New York and Syracuse University. He has earned a 21-credit hour Certificate in Professional Writing from the University of North Carolina-Wilmington. Training/work experience: NYS Ranger School; U. S. Army, Corp of Engineers; soil scientist and forester with USDA; Assoc. Professor at SUNY; real estate agent; small business owner.
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