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Opportunistic Capitalists 1


Opportunistic Capitalists

Wesley Wortman

DeVry University
Opportunistic Capitalists 1

On a clear night, there are innumerable stars with the possibility of solar systems on each

one. On a microscopic level, a colony of microorganisms is an immense number of individuals

that have quickly multiplied on an exponential level. It appears more likely that the universe is a

place of abundance, more than it’s a place of shortage and lack. Shortages in resources are more

problems of mismanagement and location than true shortages. Karl Marx in the communist

manifesto says,

“You are horrified at our intending to do away with private property. But in your existing

society, private property is already done away with for nine-tenths of the population; its

existence for the few is solely due to its non-existence in the hands of those nine-tenths.

You reproach us; therefore, with intending to do away with a form of property, the

necessary condition for whose existence is the non-existence of any property for the

immense majority of society”().

Some people in our society presume that economics is a zero sum game: where the poor are

failing, while the rich are succeeding. After the elections, the February 16, 2009 cover of

Newsweek declares “We Are All Socialists Now”(). The article lists many ways in which the

USA is already socialists and presumes a more socialist balance would be good. From the

Democratic Socialist web page, socialists want “planning and market mechanisms to achieve

equitable distribution of resources, meaningful work”(). From the Communist Party USA, the

desire is “an end to the rule of corporate America and private ownership of the wealth of our

nation Creation of a truly humane and rationally planned society that will stimulate the fullest

flowering of the human personality, creativity and talent”(). The goals and assumptions of both

groups appear similar. Many people find these goals admirable. American Capitalism has not

gone about defining itself in the same way as socialism and communism; but, it has its
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definitions in America’s founding documents and history. American Capitalism is clearly

superior when the myths of its failure and the truth of socialist’s policies are examined. The

recent so called failure of capitalism has been caused by American politicians borrowing their

playthings from the socialist toy box.

Both socialists and communists want to take control of and/or manage private

property. Economist Thomas Sowell in Applied Economics examined many factors effecting

economic development. He concludes that “By making property rights difficult to establish, a

country’s legal system has, in effect frozen its own assets and thereby blocked its own economic

development”(). In the United States, private property has allowed small companies to grow

large. Many of the large companies provide the greatest jobs and benefits to the largest groups of

people. Other countries with many things equal did not see the growth that the United States has

experienced. In spite of our success, socialist policies have had negative results. Granted, private

charity and limited government programs can be positive. President Jimmy Carter assisted with

the start of Habitat for Humanity. The group assists the poorest people to own a home. Veterans

coming back from various wars have been able to depend on their VA loan guarantee. Home

ownership has been subsidized positively in many government and private ways. However, a

festering socialist intrusion has changed the American dream of homeownership into a pending

foreclosure disaster. Politicians, dabbling with the banking system guidelines via legislation and

redistribution of loans, have created a perfect storm.

Fannie Mae became a government sponsored enterprise (GSE) in 1968 as a part of

President Johnson's socialistic Great Society programs. The Community Reinvestment Act

(CRA) was a program started in 1977 under President Jimmy Carter to increase home ownership.

Housing policies have been constantly lobbied and proposed changes have brought threats by

activist groups such as Association of Community Organizations for Reform Now (ACORN).
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Provisions of CRA were changed under President Bill Clinton to make loan requirements more

lenient. Under President George W. Bush, reform that was proposed failed or was not enforced.

Many politicians were either naive or lacked the fortitude to reform financially imprudent

practices. As an example, referring to Fannie Mae in 2003 Rep. Barney Frank: "I do not think we

are facing any kind of a crisis.” In a nut shell, people that could not afford loans were given loans

and bad debt was sold and exchanged by Fannie Mae and other groups. According to Russell

Robert of George Mason University, parts of the government encouraged more bad loans for

their socialist ideology(). Admittedly, there are many opinions to the exact cause of the housing

crisis and plenty of blame to go around but much of it lies with the government. Other examples

of the government manufacturing a crisis are that of the 1970’s energy crisis where price controls

were attempted and several instances of rent control in New York City. In both cases, the results

of central planning were worse shortages and substandard housing. Adopting socialized lending

practices has wreaked havoc on the financial markets. The problem was created by socialist

policies and the government’s prescription is a, likely disastrous, socialist takeover of the banks.

Probably, the biggest myth in the area of socialism is that Franklin Delano Roosevelt got

America out of the depression. Through this argument, some people presume socialism is good

and we need more of it. The conventional viewpoint is that capitalism caused The Great

Depression and by implication capitalism causes all the boom and bust cycles. Other theories

such as the “Laffer Curve”() or the Austrian school of economics have accurately predicted

economic cycles. Austrian economists see the Federal Reserve’s meddling in monetary policy as

the cause of the 1929 crash. Thomas E. Woods book Meltdown again details the current

economic woes as having the same causes. Hoover is presumed to have done nothing about the

economy prior to the depression. From his Politically Incorrect Guide to History “Rexford

Tugwell, an important figure in FDR’s New Deal programs, acknowledged, “We didn’t admit it
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at the time, but practically the whole New Deal was extrapolated from programs that Hoover

started”(). Hoover worked to artificially keep wages high making labor too expensive for the

markets; worked to keep American grain off the international market resulting in surpluses when

other countries produced more; raised the Smoot-Hawley Tariffs reducing exports; and raised

taxes in the Revenue Act of 1932 reducing private investment. The success of FDR is disputed

by Burton Folsom, Jr. in his book New Deal or Raw Deal. From his book in May 1939 the

secretary of the treasury, Henry Morgenthau said the following:

“We have tried spending money. We are spending more than we have ever spent before

and it does not work. And I have just one interest, and if I am wrong…somebody else can

have my job. I want to see this country prosperous. I want to see people get a job. I want

to see people get enough to eat. We have never made good on our promises…I say after

eight years of this Administration we have just as much unemployment as when we

started…And an enormous debt to boot!”().

Remember the socialists and communists wants to control labor, economics, and wealth. Again

from Folsom, FDR worked to control the following: price fixing in the National Industrial

Recovery Act; farmers paid not to produce in the Agricultural Adjustment Act; reduced

effectiveness of charities in Federal Relief Act; weakened dollar as prices of both gold and silver

were manipulated; increase unemployment by the minimum wage act; increased unemployment

by the unionization of GM and Ford since each employee had to be paid more; lower income tax

revenue as excise taxes were raised; and the list continues. Most socialist encroachments have

unintended consequences. According to Thomas E. Woods, the end of the depression was

achieved by the return to capitalism after World War II().

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Some would presume that socialism or communism is more moral because of its stated

belief in the helping the poor. Nobel laureate Alexander Solzhenitsyn is an exceptional critic of

capitalism and socialism because he lived under both systems. Solzhenitsyn said,

“In different places over the years I have had to prove that socialism, which too many

western thinkers is a sort of kingdom of justice, was in fact full of coercion, of

bureaucratic greed and corruption and avarice, and consistent within itself that socialism

cannot be implemented without the aid of coercion. Communist propaganda would

sometimes include statements such as "we include almost all the commandments of the

Gospel in our ideology". The difference is that the Gospel asks all this to be achieved

through love, through self-limitation, but socialism only uses coercion“().

Very few people have ever been seen sneaking into the communist or socialist counties but there

are always people trying to escape tyranny. What resulted from Marx was a government of

oppression where people stood in lines for necessities of life like razor blades. Solzhenitsyn

agreed that capitalism had a better quality of life but he argued that capitalism greatest benefit

was that it was more moral. Worldview Times exposes preachers Tony Campolo and Jim Wallis

as advocating a type of communism in their liberation theology(). Some governments and

citizens believe that they are morally superior by taking money from one group and giving it to

another. Others such as Jim Wallis advance their gospel by demanding more government

programs. Consider the Tenth Commandment "You shall not covet your neighbor's house. You

shall not covet your neighbor's wife, or his manservant or maidservant, his ox or donkey, or

anything that belongs to your neighbor." For clarity, there is a difference between aspiring to be

your best and wanting to be someone else. A spectrum of evil comes from wanting to take over

what another person has without doing what is required to achieve their success. What if the
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government is acting out or at least encouraging coveting? What kind of immoral acts are being

dreamed up to go after the wealthy?

It recent events we have heard almost daily that we need to fix this broken capitalism.

The supposition is that capitalism causes all of these bust and boom cycles. According to

Thomas E. Woods and his book Meltdown, the current economic cycle was predicted by Nobel

Laureate F.A. Hayak(). His cause for the current economic crisis is identified as the Federal

Reserve pushing interest rates lower than the market would have set them. This set in motion

actions by investors that were not based on real market conditions. Officially the Federal Reserve

is not part of the U.S. government but in reality they function in that capacity. The Federal

Reserve was established in 1913 to control the money system and regulate its value thereby

preventing a banking collapse. Folsom in his Book the New Deal or the Raw Deal says the


“In practice, the Fed had raised interest rates four times, from 3.5 to 6 percent, during

1928 and 1929. This made it harder for businessmen to borrow money to invest, which

hindered economic growth. This contributed to the October 1929 stock market crash, the

race by customers to get their money out of the banks, and the closing of many banks”().

Two different authors two different time periods documenting the Federal Reserve, lowering the

interest rates and the other raising interest rates, both demonstrate that financial meddling has

disastrous results. Mark Levin president of Landmark Legal Foundation in his book Liberty and

Tyranny put it this way:

When the individual or even a large business makes a wrong decision, its impact is

limited and more easily absorbed by the free market. However, when the Statist makes a

wrong decision, its impact is far-reaching, for he uses the power of government to impose
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his decision on as many individuals and businesses as possible, which distorts the free

market itself().

What happens when the markets are allowed to adjust without socialist involvement? The 1920’s

was period after World War I during presidencies of Harding and Coolidge. From the Politically

Incorrect Guide to history “these presidents engaged in no large-scare social engineering,

embarked on no vast legislative program like the New Deal or Great Society, and involved the

United States in no major foreign war”(). Harding believed in constitutional government vs.

Wilsons earlier plans to design a new world. The 20’s were a time of reduced taxes, smaller

government, and most of all prosperity. We left capitalism again and embraced socialism in the

policies of Hoover and Roosevelt. Prosperity did not return for over a decade.

Taxes are another great myth of socialism. Their talk goes along these lines, the rich need

to be taxed more because they are benefiting and the poor are not. Taxes are a way, in their

view, to make things fairer. Supply side economics does not fit in the paradigm of the socialist.

Let’s examine the facts. John F. Kennedy described supply side economics as “a rising tide lifts

all boats.” Increased economic growth is said to produce more for everyone. Supply side

economics has also been called Reaganomics. President Ronald Reagan believed strongly in

lowering taxes and reducing the size of government. President Jimmy Carter was a fan of higher

taxes, especially on the rich. A major factor in Jimmy Carter’s unsuccessfully reelection was his

mishandling of the economy. Inflation and unemployment was at the highest levels in years. The

misery index (inflation plus unemployment) was a term that Carter used against Ford; although

Reagan did not talk about the “misery index”, during the 1980 Presidential campaign, the

American people knew it. At the start of the Carter presidency, the misery index was 12.7% and

ended at 19.7%. From President Carter’s 1979 State of the Union address, “Our economy offers

greater prosperity for more of our people than ever before. Real per capita income and real
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business profits have risen substantially in the last 2 years.” Some critics argue that per capita

income was higher during Carter but if you don’t have a job and your money is worth less, it’s

not a positive situation. It’s common for politicians to spin statistics to make political gains.

Carter is making the argument that the poor people are better off now. The economic recovery

for all people did not occur until Reagan reduced taxes and spurred growth. Looking at another

aspect to this myth, did the poor fair worse under Reaganomics? The quote from National

Review online does well to answer this question.

“The number of black families earning more than $50,000 per year much more than

doubled, from 392,000 in 1982 to 936,000 in 1988. The median salary/wage of black

males increased from $9,678 in 1980 to $14,537 in 1988 (in current dollars). Median

means half earned more than that, half less, so more than half of all black males improved

their income by more than 50 percent ().

The above data was obtained from the nonpartisan U.S. Census data. Jeffrey Frankel, a Harvard

graduate, of Economic Policy Institute opposes supply side economics on the grounds of

projected national debt. This is a ridiculous argument now that the current Presidential policies

based on Keynesian Economic Policy (not supply side) will produce the highest national debts

ever seen in history. Also economist Stephen Rose PhD looks at the data that claims the rich are

getting richer.

“After adjusting for demographic changes and for rising employee benefits (counted in

GDP accounts but not by the Census Bureau), median household incomes rose by 33

percent rather than 13 percent over these 26 years. If the median (the number where half

of households earn more and half earn less) was the same as the mean (the average

household), then the median household income would have increased 48 percent. Thus
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households above the median (the richer half) did rise faster than 48 percent — but it is

also clear that not all the growth went to the top decile. A substantial part of the growth

dividend was shared by the masses of the middle class”().

According to his research, all the people in the boat did float. Unfortunately in our society, the

truth is manipulated to win elections and gain power. The idea that you can guarantee outcomes

is false. People make personal finance choices that may be harmful. Buying drugs or too many

visits to Starbucks are both hard on the budget.

James D. Gwartney in the Concise Encyclopedia of Economics uses Russia as an

example of the increase in revenues brought about by cutting taxes.

“Beginning in January 2001, the newly elected Putin administration shifted to a 13

percent flat-rate income tax and also sharply reduced the payroll tax rate. The results

were striking. Tax compliance increased and the inflation-adjusted revenues from the

personal income tax rose more than 20 percent annually during the three years following

the adoption of the flat-rate tax. Further, the real growth rate of the Russian economy

averaged 7 percent during 2001–2003, up from less than 2 percent during the three years

prior to the tax cut”().

Gwartney also sites United States and other country examples. Edward Prescott co recipient of

the 2004 Nobel Prize recipient compared the United States and France’s tax rates. He concluded

that lowering taxes also increases revenue. Murray N. Rothbard an economist opposed

Reaganomics in his own words he says, “

“In 1980, the last year of free-spending Jimmy Carter the federal government spent $591

billion. In 1986, the last recorded year of the Reagan administration, the federal
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government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically

not reducing government expenditures().

Rothbard argues that Reagan did not cut the size of government but his numbers show that as

Reagan lowered tax revenues they were actually higher. Supply side economics does not starve

the government of needed revenue, but actually increases it. The actual amount of spending is

not the problem; it’s the relative burden that it places on the populous. If the economy is

flourishing the government can afford more also. Also inversely if the economy is faltering

government spending should also decrease. Carl Marx and many Americans presume that most

wealth is being accumulated by the rich and they should redistribute it. The actual redistribution

of wealth occurs when money is in the hands of the people and not in the hands of government.

Newsweek magazine declares we are all socialists, Communist Party USA endorses

President Barak Obama(), and the new pastor of Barak Obama is identified as having communist

doctrines(). It’s possible people on the right are just sour grape alarmists but when we examine

history the alarm continues to go off. The results of embracing socialist policies have been a

decade of depression and a current banking crash. The next great socialist takeover is identified

as Healthcare. Pulled from a current news story, actress Natasha Richardson would likely still be

alive if she skied in capitalist Vail Colorado rather than in socialized medicine Canada(). The

claims of collectivism, communism, or socialism have never worked out as expected. What

results is less opportunity and freedom for everybody. The solution to this problem is knowledge.

The successful path is to examine history and learn not to repeat its mistakes. The founders of

this country were better informed about oppressive government and struggled to build a new

system basic on limited government and individual freedom. Reading and understanding original

intent from documents like the Constitution and the Federalist Papers will help us to find our
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way out of socialism and its oppression. An uninformed populace is easily manipulated by

unscrupulous power hungry politician.

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