This week, The Guardian, a major U.K. newspaper, published two videos by two different economists. In both videos, the narrators advocate replacing our traditional capitalist market economy with a much more collectivist one.
Video 1 and Video 2 make articulate, passionate arguments. While I enjoyed watching them, I fundamentally disagree with their arguments and conclusions.
Video 1 asserts that society would be better off if the government provided far more services — particularly welfare, transport and banking services. The narrator argues that by providing these services, the government would free up money that people would otherwise spend on these services, which they could then spend on goods and services that directly relate to their personal happiness. He goes on to argue that reducing artistic licensing for music, film, and other art forms would allow for these goods to be acquired at no real cost.
His conclusions have major flaws. First, he neglects to inform us of how society could afford such a dramatic expansion of state services. It seems to me that in the diminished private sector that he seeks, there would be less taxable revenue available to the government even as the demands on the government increased dramatically. Put simply — his math doesn’t add up.
I also fundamentally disagree with his assumption that expanding the state would benefit society. I suppose that ultimately this is an ideological disagreement between us — I believe that the private sector is more productive than massive state structures. Effective private sector services ensure that personal interest is translated across the spectrum of provider-consumer interactions — i.e., that all parties have a tangible interest in improved services and outcomes. In contrast, in the public sector, the provider has no personal interest in ensuring that the consumer can access a high-quality service.
As an extension to this point, the narrator’s belief that “free” music would lead to a dramatic expansion of artistic creativity seems to me to be a complete falsehood. In the absence of a profit incentive for music, film, and the like, many talented individuals would simply leave that marketplace. As a result, their creative talents would be lost to society. Today’s artists aren’t prohibited from providing their music for free if they so desire. The fact that most decide to seek profit from their work is a sign of the critical importance of capitalism in spurring creativity and expanding consumers’ opportunities.
The narrator’s call for community banks that “do not speculate” also troubles me. Clearly there are flaws with the current banking system, but limiting banks to basic investment requirements would destroy the capital base that allow banks to provide loans to individuals. Such limitations would have a direct and catastrophic impact on businesses, which rely on loans to expand employment and productivity. Effective banking requires the pursuit of profit. Money — the value for a good/service — does not come from the ether; it is found in the effective pursuit of greater opportunity and strong capital flows.
