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July 14, 2019 - Freedomain Radio - Stefan Molyneux
29:57
Capitalism Needs Regulation - Why Max Keiser is Correct and Libertarians are Mistaken!
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Hi everybody, this is Dan Mullen, Newcombe Free Domain Radio.
It's time for a little couch criticism.
This is an article called Capitalism Needs Regulation.
Why Max Keiser is Correct and Libertarians are Mistaken.
This is by Jason Hamlin, November 1st, 2011.
So this is a discussion of Jeff Berwick's appearance on the Max Keiser Show, which I haven't seen.
And it says the end of the interview featured a brief disagreement between Max and Jeff regarding whether the markets need a, quote, referee.
I have generally been of the libertarian mindset for most of my adult life, but this question provoked a debate that led me to disagree with Jeff, an arco-capitalist, and some libertarians that are revered in the precious metal worlds.
So he says the system is broken, the government has been corrupted, there's been a great overreach into our personal lives, he's a small government guy, Americus, the non-interventionist military policy, repeal of the Patriot Act, an end to the war on drugs and many of the other common sense positions trumpeted by libertarians.
So he says, but many of the free market capitalists and libertarians completely lose me when they fail to acknowledge the role that corporations and private enterprise have played in the deterioration of our political and economic systems.
They see the government corruption and nothing else, as if wearing blinders to the entire other side of the coin.
They make the case that the government is to blame for everything, while failing to acknowledge the role private enterprise has played in the meltdown of our financial system and political process.
It is an odd form of intellectual denial.
Well, I can only speak for myself, my friend, and I appreciate these arguments, but the role private enterprise has played in the meltdown of our financial system The government controls the money supply and the government controls the interest rates.
These are the two most fundamental aspects of any free market system.
The money supply, because obviously inflation of the money supply produces inflation in the price of goods, and as Rothbard and Mises and others have shown, I think amply demonstrated many times, It sends really crazy signals out to the entrepreneurs in the free market.
When you get a overprinting of the money supply, there's an artificial boom which causes people to allocate their resources as if people were spending and not saving.
When people spend a lot and don't save, then interest rates go up because savings is capital is loans.
And if there's a shortage of that, the interest rate, which is the price you pay for capital, goes up.
Shortage breeds increased price.
So in a free market system, when people are spending a lot and not saving, interest rates go up.
And that's an indication that you should go and supply people with their wants.
When people are saving a lot and not spending, their interest rates go down because there's an excess of capital to be loaned out and therefore there's more capital than there is relative to the demand that was prior.
And so, anyway, we sort of get the idea.
But when you have the government controlling the money supply and, as it always has to, then control the interest rates, this entire system goes completely out of whack.
So I can't think of any financial institution that exists outside the monetary system and the government's control of interest rates.
So there is no free market!
There is fascistic, social, communistic, centralized planning control over the two foundations of the economy.
The two foundations of the economy, the money supply and interest rates.
If the money supply and interest rates are controlled by the government, there is no free market.
There is no free market.
There is only a body riddled with cancer.
If you have a body riddled with cancer, you might have 80-90% of the body that's not riddled with cancer, but it's still going to die.
And so there are vestiges of voluntary transactions, but the foundation, the environment of the market as a whole is completely controlled, regulated by the government for its own purposes.
The government wants to control interest rates because it likes to print money because that allows it to bribe voters.
But it doesn't like the resulting increase in interest rates that is driven by inflation because then it has to pay more in its national debt and it can't continue to bribe voters.
It wants to print money and keep interest rates low, which is exactly what you've seen from QE1, QE2, and the soon-to-be QE3.
Please don't talk about how financial institutions that are private and free market have somehow brought about this crash in the economy.
It simply means that you don't understand.
I mean this with all respect, but you don't understand the degree to which There is very little free market left, and in its foundations, money supply and interest rates, in its foundations, it is completely fascistically, centrally planned, communistic, whatever you want to do, it is centrally controlled by the state and by its, you know, ugly stepchild, the Federal Reserve.
So, yeah, it is an odd form of intellectual denial.
I just don't think it's on the part of libertarians.
He says, after all, it was the banks and large corporations that bought off the politicians with campaign contributions.
Donations to their charities, promises of cushy jobs once they leave the public sector, and all of the other influence yielded through the K Street Mafia that are now estimated to outnumber elected congressmen by more than 25 to 1.
That's the people who lobby.
Well, you just have to ask yourself that basic question.
Why doesn't a pharma company lobby GM?
Why doesn't GM lobby Starbucks?
Why doesn't Apple lobby Microsoft?
Why are they drawn toward this black hole gravity well called the state?
Why is it all around Washington?
Why are they giving money to politicians?
Because politicians control the weapons.
Politicians control the laws, which is the opinions with the guns that are pointed at the bewildered and ignorant and confused population.
So, and the campaign contributions are almost all legal.
So, to me it's like this.
If you have a soccer game, a football game, or whatever game involves a net, hockey or whatever, lacrosse, and the regulations change so that suddenly the net is twice as wide as it used to be.
Suddenly the net is twice as wide as it used to be.
You tell me what coach is going to sit down with his team and say something like the following in some sort of Al Pacino-style voice.
He's going to say, listen, I know they've just widened the net by two times, but I think that's crazy.
I think that harms the game.
I think that is detrimental to the game.
I think that sucks.
So what we're going to do, what we're going to do is we are going to aim for the old-size net.
Even though the net is now twice as wide on the enemy side, we're going to aim just for the middle.
And anybody who scores a goal outside of just that middle part is off the team.
Off the team!
Because I'm going to keep this sport of lacrosse pure!
I'm going to keep hockey the way it was meant to be played!
We're going to shoot for the middle of the net and not take these cheap, shoddy goals on the side!
Because I care about the spirit of this game, blah, blah, blah.
Anyway, you get the idea.
You get some long rant that shows up on YouTube and drunken people go, woot.
But can you imagine any coach saying that?
No.
They'd say, oh, the goals are now twice as wide.
So what we have to do is we have to adjust our play.
We have to do X, Y, and Z to take advantage of this reality.
And any team which said, we are now going to shoot just for the middle of the net and not for the whole net would lose.
And are you really going to blame the coaches?
Are you really going to blame the players?
When the rules change to that degree where anybody who follows the old rules is ridiculous, a fool, and out of a job?
Of course not!
I mean, please!
People, just...
If you ask me to kill someone that you don't like and you corrupt me into doing it by paying me $50,000, just like banks, corporations, and the lobbyists buy corruption from politicians, is it solely my fault for committing the crime?
Or do you also share the blame in paying me to do so?
But it's not illegal to lobby politicians.
It's not.
So comparing it to a murderer is... It's like widening the net.
In a hockey game, or a lacrosse game, or a soccer game.
It's not illegal to lobby.
I mean, there may be some grey areas, maybe a few people push the line in this murky world, but it's not like killing someone, please.
We should not pretend that the corporations, he says, are innocent victims and only the government is to blame.
These multinational corporations aggressively moved in to rig the system.
Buy off our elected representatives and create an environment where it is nearly impossible to get elected without corporate sponsorship and the political paybacks that are expected for said sponsorship.
Now, as soon as somebody uses the word multinational, it's like using the word shill on YouTube.
It just means that you're kind of using one of those words that gets into people's heads like a mosquito in the brain.
Aggressively moved in to rig the system?
Well, I mean, that's kind of testable, right?
Which is that you can say, did government power expand and then corporations' lobbies increased?
Or did corporations' lobbies increase driving the political process?
Now, there's one area, and this ties into something that I talked about in my last show, there's one area where I think that that did happen.
So people talk about the robber barons and the Sherman Antitrust Act and so on.
That there were these terrible monopolists and the government had to move in to restrain them and restore fairness to the marketplace because they were harming the Customers and so on.
And this is, I mean, that's a kind of fairy tale that it really doesn't take more than a moment's thought to dispel.
And please, I'm not saying anyone here is dumb.
I'm not.
It's just propaganda is really hard, and you have to work very hard to swim against the constant, insistent, downstream, brain-deadening, narcoleptic effects of propaganda.
Don't think about things in terms of history and grand movements and monopolies and the poor consumers and all of that.
Just think about your own life.
Start with your own life.
Start with your own life.
That is how we gain wisdom.
Not by reading books, but by looking at our own lives.
I'm sure that you've had a bad experience with a restaurant.
I'm sure you've had a bad experience with some company.
I'm sure you've had a bad experience with a bank or whatever.
Now, if you have a bad experience with a bank, do you start lobbying the government for law to change?
If you have a bad experience with FutureShop, do you lobby the government to place restrictions and controls or maybe break up FutureShop?
Of course you don't!
Of course you don't!
You just don't shop there anymore.
You just close your bank account.
You go to Best Buy or The Source or wherever, right?
You change your behavior.
You don't try and control the legislature.
You just change your behavior as a consumer.
And that's the answer to the question of this robber baron thing.
The customers were not unhappy with the robber barons, otherwise they wouldn't have been so successful.
The only people who bring suit against these monopolies are the competitors who can't compete with them in the relatively free market, and so they go the political route.
The Netscape route.
The Patent Troll route.
And that's how these things come about because large companies who are failing to compete with existing, like new upstart companies have taken over their market share, they have the political power and pull and context to go in and start getting laws passed against the new upstart company that's doing so well.
It's never the customers who bring these things, it's never from complaints from the customers, it's complaints from competitors for unfair trade practices and so on.
And this is sort of important to recognize.
They moved in to rig the system?
What the hell does that mean?
I mean, how can Microsoft rig the system?
They have no power to rig the system.
They have no army.
They have no police.
They have no law courts.
They have no prison system.
They have no navy.
They have no weapons of mass destruction.
They have no CIA, no FBI, no Homeland Security, no TSA, no nothing.
How are they supposed to be rigging this system?
No.
The guns exist.
And one corporation is going to try and grab control of the guns, because if they don't, then they're exactly like the sports coach who's saying, shoot only for the middle of the net, not for the whole net!
Look, I don't know much about this guy.
Jason Hamlin.
Let's see if there's a bio down here.
No.
No bio.
But I'll tell you something.
And if there's one thing in a sense that I could do with people who talk about the economy or that, I really wish that people would spend more time in as, as entrepreneurs in the free market or what's left of the free market.
I really wish people would like, so the people who, you know, crab about corporations In my career as a software entrepreneur and as an executive in the sales and marketing and technical areas of software, I probably worked with 50 to 70 of the largest corporations in the world.
Now, I mean, I'm no business genius.
I wasn't rewriting their business plans or anything, but I worked at a pretty close level in a pretty involved way with some fairly core aspects of their operations.
For, I don't know, 15 years, I worked with these major corporations.
I've actually, I mean, I've actually worked with them.
I've been in business with them.
I've met them.
I've sat across the table with them.
I've looked in the eye of the people.
And this is true of the public and the private sector.
I've worked with government departments as well.
And a lot of times when I hear people talking about the economy and the free market and this and that and the other, It strikes me like somebody writing a book about the black experience who's never met a black person.
It seems like it's just book learning.
It's not real world stuff.
Being in the free market, you know how hard it is to get and to keep customers.
You know how cooperative you have to be.
And you know how a lot of the people, if not most of the people, in corporations are good, nice, well-meaning people trying to earn an honest living doing an honest job.
This is also true to a large, not quite as large a degree, but to a significant degree in the public sector as well.
So when people talk about how, you know, multinational corporations have moved in to rig the system, What it says to me is that they've never been in the business world at the sales level, at the marketing level, or even at the technical level, and dealt with all of the challenges of voluntary economic interactions in that sense.
It tells me that they've been an academic, or maybe they've been an employee, or maybe they've made it to mid-management, but they've just never been really customer focused.
They've never done liaisons with other companies.
They've never actually worked with these people.
And, you know, I could be wrong.
I could be talking completely out of my armpit.
And my friend, if I am wrong, Jason, please, you know, let me know.
Come on the show and tell me how I'm wrong.
That's fantastic.
But this is all just book stuff.
This is all just lefty, socialist-y, kind of.
And I know it's libertarian and so on, but people can just start saying, well, multinational corporations have rigged the system.
No, they buy off our elected representatives.
The question is why?
Why do they donate it?
because the elected representatives control the guns, they control the weapons, they control the money printing, they control the contracts, they control trillions of dollars and billions of bullets.
The politicians may have allowed themselves to be corrupted, but the corporations certainly share in the blame for turning the American political process and lawmaking bodies into an auction to the highest bidder.
The American political process This corruption has spread to the regulators, he said, who are often promised high-paying jobs after they leave governments by the very corporations they're supposed to be regulating.
This is called the revolving door.
Sure.
Understand, understand, understand.
That makes sense.
The referee has been bought off.
One solution would be to fix the regulation system by hiring new regulators.
Won't work.
Seeking to eradicate the corruption from the system and building safeguards against future corruption.
Won't work.
You cannot widen the net and ask people to aim at the old net size.
I mean, you can try, but it's ridiculous.
The incentives, the game, the game has changed.
Look, it certainly is true that there are people in the corporate world who will try to lobby politicians to get preferential advantage.
Of course they will.
But that's the game that has been set up.
That is how you profit.
in a free market environment, right?
So there's this whole argument about discrimination in the free market.
So if I'm some, you know, racist pig head who hates blacks, I'll never hire blacks.
Ah, and women.
I hate women.
I hate the Chinese.
I hate this and that.
I want, you know, Western European wasps and men.
And between this age and that, well, I can do all of that.
But I'm cutting down my talent pool to a tiny proportion, which means everyone else gets more talent, gets more creative thinking, as people come from different cultures, different experiences.
So I'm going to have myself at a disadvantage.
So libertarians will always argue that racism, discrimination, that the costs of discrimination are borne by the discriminator in the free market.
And what that's saying is that there are economic incentives which change behavior.
Over the long run.
Well, exactly the same thing is true when you create a system where the government can make or break your organization or add significantly to your profit.
So anyone who says, I'm not going to play any game of politics.
I'm not going to donate to anyone's campaign contributions.
I'm not going to get involved in any kind of lobbying.
I'm not going to start making any kind of sweetheart deals with any kind of regulators.
They are at a huge competitive disadvantage and they will be punished accordingly in the system that has been set up.
No.
No.
That is not the answer.
Nobody is talking about getting rid of regulations, i.e.
that a better solution would be to get rid of the referees and regulations altogether.
No.
No.
That is not the answer.
Nobody is talking about getting rid of regulations, i.e. that which regulates the darker side of human nature.
Nobody's talking about getting rid of it.
We don't have that as it stands.
Thinking that it's there right now is completely ridiculous.
You know, the SEC was warned for years about Bernie Madoff.
People sent in letter after letter saying this is mathematically impossible.
This can't be happening.
It's a Ponzi scheme.
Year after year, this went on.
They did nothing!
Nothing!
Come on, we don't have any kind of regulation at the moment.
So the idea that we want to get rid of regulations is ridiculous.
First of all, there aren't any regulations.
There's bribery and corruption at the moment.
There aren't any regulations at the moment.
I mean, people got to understand that first.
And secondly, I'm proposing to introduce actual regulation into human interactions, particularly at the economic level.
Many support taking our dog-eat-dog... This is another thing where people say dog-eat-dog.
Dog-eat-dog system where the number one overriding objective is to increase profits above all else and then telling the participants to simply have at it with no rules or regulations.
Because, you know, if the government doesn't do it, it simply doesn't get done.
You understand?
This is the basic logic that people have.
There's people who just so... Their brains are worn like loose tracks with status propaganda.
They can't think of anything else.
Right?
The government has regulations that say your meat should not be... It should not be rancid.
And therefore, if we get rid of that, people will ship rancid meat all over the country!
It's like if the... Free markets are self-regulating.
Competition is the best referee in spontaneous order.
So he's read Mises, Rothbard, Rockwell, blah, blah, blah.
The consumer's best protection from exploitation and other shenanigans has always been competition.
I'm not sure I perfectly agree with that, but that's Jeff's quote from the show.
So this guy writes, this is true in the smaller and less significant cases, but it does not apply across all sectors.
Yes, if my cell phone service provider suddenly starts adding ridiculous fees and overcharging, I can go to a competitor.
If other customers do the same, the provider goes out of business.
Similarly, if my mechanic seems to keep finding new things to fix every time, blah blah blah.
But what about an instance where a chemical company decides to dump toxic byproducts into a creek that flows through a small town?
Over the course of several years, residents start getting sick, contracting cancer, and dying.
Under Jeff's desired system, there would be no regulations to prevent the chemical company from dumping, and no referee to address the injustice, until it is too late!
Well, I think I can speak for Jeff here.
It's not a system.
People who say we should not use violence to solve our problems, they're not proposing a system.
Right?
If I say that women should not be raped, I'm not saying how women should be wooed.
I'm saying we can't woo them if we're raping them, but I'm not saying anything.
I'm not saying how marriage should be entered into or contracted with or annulled or how child custody should be handled or who should date who and what age differences.
I'm not saying anything like that.
I'm saying you shouldn't rape women.
It's immoral.
That's not a system.
It's an objection.
That is a moral stand.
It's not a proposed system.
We're not proposing anything when you say women shouldn't be raped.
So chemical company toxic byproduct into a creek.
Well, if I'm living in a town and upstream some chemical company starts building itself, I mean, I want insurance.
I'm going to buy insurance.
I'm going to ask that insurance company to test that water regularly.
And to make sure that it's clean.
And that means that the insurance company is going to go talk to the chemical company, and they're going to say, listen, we'll pay you X amount to not build here, we'll pay you X amount for scrubbers, and we'll still make money, blah, blah, blah, right?
There's six million different ways.
To set up a situation and say it can't be solved is the most astounding arrogance that I ever see in the internet, or in person.
This is just one way it could be solved.
I've got an article called The Stateless Society and Examination of Alternatives goes into this in more detail.
You just get insurance.
You insure yourself against air pollution and water pollution or ground pollution or whatever.
And then that insurance company has an incentive to go out and make sure that you don't get toxic waste in your backyard because then they have to pay out all these claims.
So they've got a huge financial incentive to make sure you don't get polluted.
I mean, that's just one of 10 billion ways in which it could be solved.
But nobody's saying that there would be no Regulation or refereeing?
We're just saying that the government doesn't do it.
Government can't do it.
Government, because violence doesn't solve problems.
How exactly would the free markets regulate themselves in this case?
Would competition provide the necessary referee, as Jeff states?
Well, the locals that were directly impacted by the dumping of toxins might be able to stop buying products from that company, but they'd probably represent less than 1% of the company's revenue, blah blah blah, boycott.
Sue the company?
Yeah.
Well, of course, in a free society you would have suing, but you wouldn't need a government.
I mean, because you would have economic ostracism.
Anyway, we can get into all of this perhaps another time.
How about a bank that takes extremely risky leveraged bets with deposit money and loses it all?
Loses it all.
Jeff would like a system with no regulations to prevent this and thinks the market would magically sort it out through competition.
Sure, banks would go under and people would no longer bank there in the future, but what about those that lost their life savings?
Tough luck!
You buy insurance!
You buy insurance for your bank going under.
And then the insurance company has a significant interest in making sure that the bank has sufficient reserves to meet depositor requirements and doesn't over leverage its investments.
It's simple.
You buy insurance for risk.
Insurance is your hedge against risk.
Now you can say, listen, I don't want to pay an insurance.
I want to go with Joe down the street who's giving me a thousand percent a year.
Well, then you take your risk.
Right?
It's like going to the casino.
If you go for something with higher odds, you're more likely to lose your money.
That's just the reality.
And what's going to happen when the existing system collapses?
Anyway.
So, this is People can't assess risk and they can't figure out whether they need to hedge against that risk.
People are incredibly intelligent when their own money is on the line.
When other people's money is on the line, they're economically ridiculous, except for their own immediate self-interest.
One of the signs that your bank is over-leveraging is you're getting too much money and interest.
Hey, for your savings account, we're going to give you 15% interest per year.
You immediately know that they're speculating.
And if they're not giving you that amount of money, but their corporate profits are really high, you know they're speculating.
It's immediately obvious when banks are speculating.
Because, of course, nobody's going to want to bank with a bank that doesn't release their financial statements.
And if you do, then you're taking your own damn risk.
And if you lose your money, well, you went to Vegas and you lost your pants.
That's what happens if you go to Vegas sometimes.
There's nothing to be solved about that.
There's just people who like risk.
Anyway, I will post a link to this article below.
But no, insurance, insurance, insurance is the key.
Insurance and ostracism is the essence of a free society economically.
Insurance against malfeasance or problematic behavior creates companies with incentive to prevent and not cure ailments.
Right?
I mean, this is very, very important.
If people think the government is going to protect people from toxins, they should talk to the tens or hundreds of thousands of Gulf War vets who are currently sick because they were exposed to so many toxins in the military.
That's what the government does.
Or how about the toxin called SSRIs?
Are we protecting children from that kind of toxin?
Their brain development?
Or how about adults and their brain development or brain maintenance?
Suicidality and violence for a completely... I mean, this is the new sin.
Mental illness is the new sin.
It's an imaginary illness.
Anyway.
So anyway, he goes on to talk about a resource-based economy and so on.
Look, you know, it's a lot to ask from people.
It's a lot to ask from people.
But if you're going to write about the black experience, get out of the library and go meet some blacks.
You know, go hang out with some blacks.
Go spend some time with some blacks.
You're going to talk about the market economy.
Spend some time as an entrepreneur in the market economy.
Build a business.
Work with companies.
Deal with customers.
Deal with employees.
If you've only been an incompetent employee, of course you're going to feel that everybody needs a union and protection.
But if you've been a manager and hired, and I hired, I don't know, probably 100, 200 people over the course of my career, fired some, and managed many, many people, If you've been in that position, you know how dependent you are on the employees.
Competent, good employees, and how hard it is to replace them if they want to go, and how much you'll do to keep them happy.
I mean, you just, you don't get that from reading academics.
You don't get that from reading books.
You don't get that second or third hand from people who themselves have likely never been in the free market.
This includes most academics, even the free market academics.
Most of them have never been in the free market.
You know, if you're going to talk about the black experience, go out and meet a few blacks.
And if you're going to talk about the free market or market, go out, start a company, be an entrepreneur, and actually experience what it's like to be there.
Because when you've actually been there for many years, you can see this kind of book learning so far away that it's...
It's pretty obvious.
And I think it's something that, I mean, it's something that I've sort of asked of people over the years.
It's like, oh, you're going to talk about the free market and companies and the power of the employers and outsourcing and offsourcing.
Well, have you actually worked in the free market?
Have you actually experienced these things?
Or is this all just stuff you've, you know, you've read out of books?
Have you actually ever met a black guy?
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