Mark W. Hendrickson
Mark Hendrickson is an economist who recently retired from the faculty of Grove City College, where he remains a Fellow for Economic & Social Policy for the college’s Institute for Faith and Freedom. These articles are from The Epoch Times and The Institute for Faith and Freedom, an online publication of Grove City College, in Grove City Pennsylvania.
The Paradox of Prosperity
In Friedrich Hayek’s 1954 book, Capitalism and the Historians, the late French philosopher and political economist Bertrand de Jouvenel noted a baffling historical trend: “Strangely enough, the fall from favor of the money-maker coincides with an increase in his social usefulness.”
In surveying the history of capitalism from its inception in the late 18th century to the mid-20th century when he was writing, de Jouvenel was struck by an ironic and counterintuitive phenomenon. By “moneymaker,” he meant the capitalist entrepreneurs who became rich by supplying the masses with more consumer goods. Entrepreneurs generated the economic growth that uplifted standards of living; hence, their “social usefulness.”
De Jouvenel aptly wrote “strangely enough” to characterize the fact that as capitalists raised standards of living in each succeeding generation, the hatred of capitalists increased. This is paradoxical, but true. The more prosperous our society has become, the more the creators of that prosperity and the system that enables it have been vilified. How dare those wicked capitalists break the iron grip that abject poverty had held over the masses of human beings throughout the millennia of history!
This graph of world wealth per capita over the last 2000 years tells an amazing story. (A chart of U.S. per capita GDP growth shows a similar trajectory over the last 230 years.)
Mass poverty was the norm for centuries. That finally began to change in the late 1700s with the emergence of capitalism. The 19th century socialist reaction to capitalism condemned capitalism for not prospering every human being equally and simultaneously. It’s true: some prospered before others. As I have explained before, the reason that there was not faster economic progress for more people in the 1800s was not because evil capitalists exploited workers, but simply that there were not enough capitalists to “exploit” (employ) more workers and mass produce more goods.
Looking at the graph, you can see that economic growth accelerated explosively in the 20th century. (Note that growth became much more rapid after the end of slavery, which debunks the fallacious assertion that America’s great wealth depended on slavery.) In the United States, per capita income rose (in 1990 dollars) from $5,301 in 1913 to $31,178 in 2008 and life expectancy from 53 years to 78 years. In short, more Americans are living longer lives at higher standards of living than ever before due to our capitalist system. That has happened despite the considerable handicaps of bureaucratic regulation, wasteful pork-barrel politics, and government redistribution of wealth. [There is also more prosperity outside the United States than ever. See chart above and my article “Ready for Some Good News?”.]
Despite the astounding success of the free enterprise system in producing unprecedented prosperity, antagonism toward capitalism is growing, and popular politicians are adopting platforms that are essentially socialist. Indeed, the paradox of prosperity that de Jouvenel noticed almost 70 years ago remains firmly intact, for capitalism has never been more fruitful and more hated by its beneficiaries than it is today.
The present fascination with socialism and hatred of capitalism reflects a combination of willful historical blindness, lack of simple common sense, and inexcusable economic ignorance:
Anyone even casually familiar with 20th-century history should know that socialism has failed miserably, causing economic retrogression and impoverishment wherever it has been tried.
Common sense should recognize that since capitalism is a system where entrepreneurs compete with each other to produce what people want, and socialism is a system in which producers produce what the state wants, then obviously people prosper more under capitalism.
Most appalling and bitterly ironic about the many Americans who enthusiastically, even fanatically, espouse socialism in 2020 is that this year marks the centenary of the most important economic discovery of the 20th century. In 1920, the Austrian economist Ludwig von Mises explained with irrefutable logic that socialism must inevitably discombobulate and reduce economically rational production because it obliterates the market-based price system necessary to coordinate production. Shame on the economics profession for remaining silent about this fundamental truth and allowing dangerous economic ignorance to persist.
Fact: It is free-market capitalism that has made us wealthy beyond the wildest dreams of our great-great grandparents. Fact: The socialist alternative simply does not work. For anyone to favor replacing the world’s greatest wealth-creating system with a proven wealth-destroying system is to spurn prosperity, forsake rationality, and court destruction. That is the grim reality of the paradox of prosperity.
Jimmy Lai, The Billionaire Freedom Fighter
Hong Kong police arrested billionaire publisher Jimmy Lai on August 10, releasing him two days later. His “crime” was to express opposition to the mainland Chinese Communist Party’s (CCP) aggression against Hong Kong — both in person and through the newspapers and magazines that he owns.
According to the 1997 treaty returning the thriving island of Hong Kong from the United Kingdom to its historical status as part of China, the CCP promised to respect Hong Kong’s independence from mainland law and governance (“one country, two systems”) until 2047. At that time, formal reunification with the mainland would go into effect. The CCP, however, is reneging on its promises. It seeks to dictate policies to Hong Kong now, and clearly desires to crush dissent.
Because he is one of the most visible figures leading Hong Kong’s resistance, Jimmy Lai is an obvious target. But who is Jimmy Lai?
When I taught the “Entrepreneurship & Enterprise” course at Grove City College, we examined several dozen entrepreneurs, both past and present. The most touching life story was Jimmy Lai’s. His rags-to-riches journey was more amazing than any Horatio Alger story. In the Acton Institute’s superb film, “The Call of the Entrepreneur,” the modest, self-effacing Jimmy Lai shared his poignant life story.
Born in mainland China in 1948, he grew up in the wretched poverty of Mao Zedong’s Communism. His father was gone (possibly killed or imprisoned by the Communists) and his mother’s state-mandated job took her away from home except on weekends. Jimmy and two young siblings had to take care of themselves Monday through Friday, starting when they were only five or six years old.
At age ten, Jimmy worked carrying passengers’ luggage at a train station. A traveler tipped Jimmy with a chocolate bar. Before then, Jimmy hadn’t known that there was such a thing as chocolate or that any food could taste so delicious. He resolved to leave China and find a land where miracles like chocolate happened. Every weekend, Jimmy would beg his mother to help him escape China. Finally, when Jimmy was 12, his mother arranged for smugglers to transport him to Hong Kong.
Jimmy was so happy with the improvement in his life. In Hong Kong he worked 12-hour days in a sweatshop for a place to sleep, simple food, and $8 per month. But most importantly, he now had hope. Having observed that people who spoke English were more prosperous, he taught himself English. By age 20, he was managing that factory.
Over the next six years, Lai hatched plans to buy his own factory. He scrimped and saved. He also read as much as he could about stock markets. Through astute stock investments, he increased his meager capital and, at 26, bought a bankrupt factory. He made sweaters and grew his business into a successful retail chain called Giordano’s that had over 2,000 shops in 30 countries, becoming a billionaire.
Lai could have coasted through the rest of his life enjoying his vast fortune, but China’s 1989 Tiananmen Square massacre was his epiphany. He adopted a new life mission: to bring freedom to the long-oppressed Chinese people. He left the clothing business and, with no prior experience, started a pro-democracy newspaper, Apple Daily. His newspaper enjoys widespread popularity and is the heart of a popular media empire. It is also a major thorn in the side of the CCP, which has brought about a showdown with Lai.
Last week was the third time the CCP has had Lai arrested this year. He knows that at any time police could send him to the mainland, where he could face life imprisonment or worse. If that happens, it will be a clear sign that the CCP is moving into a more aggressive mode. That would be a dark day, not just for Jimmy Lai and his loved ones, but for the whole world.
Despite the threat hovering over him, Jimmy Lai remains unbowed. A devout Catholic convert, he accepts as his Savior Jesus Christ, who sacrificed himself for others. Following in the footsteps of his Savior, Jimmy Lai appears willing to lay down his life in the struggle to secure the God-given rights of his fellow man. (So much for the bogus stereotype of “greedy, self-absorbed billionaires”)! Lai understands that the priceless rights of freedom of religion, free speech and press, free enterprise, and freedom of conscience don’t belong to one country or one race but are universal, belonging to the entire human race. He is truly a global hero. Indeed, he may be this generation’s most famous practitioner of nonviolent resistance, although because he is resisting Communism and is a billionaire, certain “intellectuals” won’t acknowledge his selfless heroism.
“Greater love hath no man than this, that a man lay down his life for his friends.” (John 15:13 KJV). God bless you and preserve your soul, Jimmy Lai.
The Problem with Inheritance Taxes
A recent opinion piece in The New York Times, “Tax the Rich and Their Heirs . . . more fairly,” was both reassuring and refreshing. It was reassuring to know that policy debates about relatively prosaic public policy issues continue to be debated, even though the country is convulsed with violent unrest and pandemic-related stresses. It is refreshing that the tone of the writer, New York University law professor Lily Batchelder, was measured and civil at a time when so much writing is shrill and strident.
That being said, I disagree completely with the author’s contention that inheritance taxes should be increased. On the contrary, they should be abolished.
Calls to raise inheritance taxes stem from two common failings, one moral, one intellectual. The moral error is simple: “Thou shalt not covet.” The intellectual error (often blended with the moral flaws of arrogance and pride) is the self-delusional belief of the social engineer, the top-down planner, that he or she can competently, wisely, and fairly redistribute others’ wealth and build a better society.
The spirit of social engineering pervades Batchelder’s article. Her main rationalization for wanting to raise taxes on inheritances is the typical progressive goal of reducing economic inequality. And yet, such inequality is inevitable in a state of freedom. Economic inequality becomes evil when a corrupt political system keeps the masses poor. As many disadvantaged minority entrepreneurs have proved, there is no “Keep out!” sign preventing poor Americans from becoming rich. By all means, let’s abolish and punish political cronyism, but let’s also realize that most fortunes are built by providing large amounts of economic value for others (making them less poor), and not because the rich have somehow extracted wealth from the poor.
There is antipathy to the element of luck by which some people are born to rich parents and others are not. And yet, attempts to eliminate luck via legislation amounts to tilting at windmills. Do we need a law that children of doctors shouldn’t be richer than children of English teachers? Look, if luck is bad, then being born in the USA is like winning the lottery, which is so grossly unfair that we should give most of our wealth to people with the bad luck to be born into poor countries.
Racial disparities — Professor Batchelder wants to “fix” the current imbalance of wealth between whites and blacks. However, the cure for past racism isn’t to continue to define people according to race; rather, we owe it to all Americans to remove any artificial obstacles to any American honestly getting rich.
Progressive do-goodism — Batchelder wants to use inheritance taxes to “invest in children.” Government bureaucrats “investing” in children? Are they endowed with special wisdom and expertise? On what track record does Professor Batchelder base such lofty confidence in government bureaucracies?
Fear of power — Unfortunately, Batchelder doesn’t see where the true threat of power lies. She invokes F.D.R.’s statement that “inherited economic power” is as objectionable as “inherited political power.” Theoretically, maybe, but in reality, what private fortune wields power even a fraction of that wielded by our massive federal government? Who but Uncle Sam can spend several trillion dollars per year of money that isn’t earned, but forcibly collected? Yes, cronyism is a huge problem, but government is often its cause and facilitator. Inheritance taxes would consign to even more power in government.
Inheritance taxes are wrong in principle and in practice. Like so many of our country’s Founders, I believe that it is none of the government’s business how a person spends his wealth. It isn’t illegal for the rich to assemble the world’s most expensive art or classic automobile collection, buy up the most land, or make a Bloomberg-like run for the presidency. And the law allows the super-rich to leave fortunes tax-free to spouses, churches, museums, foundations, etc., so why not to their children (or anyone else)? You say that rich heirs don’t need all that wealth and others in society do? That is often true, but who are we to decide what someone else should have? It’s not our property, but theirs. (See Luke 12:13,14)
Article I of the U.S. Constitution enumerates the powers of the federal government. That list does not include the power to decide how wealth should be distributed among citizens. Property rights were reinforced by the Fifth Amendment, which was designed to protect personal property from being plundered by a democratic majority, and by the Tenth Amendment, which reiterated the principle that federal power (and therefore spending) should be confined to those few purposes explicitly enumerated in Article I.
Here is an old-fashioned but forward-looking idea: Instead of devising ways for the government to take more wealth from citizens, “we the people” should strive to shrink government and its expenditures. In the long run, our solvency, our prosperity, and our liberty will require this.
Self-Exposure: The Left in Their Own Words (and Deeds)
We can learn a lot if we listen to what public figures tell us. I’ve saved a few choice quotes from the Left over the past year, but lately the revealing statements have been coming in droves, so let’s review a few.
In an interview last fall, Hillary Clinton, still smarting over her loss in the 2016 election, longed for the good old days when there were only three commercial broadcast networks and a few dominant national newspapers. Back then, she said, “It was a much more controllable environment.” These days, she lamented, “. . . it’s a lot harder for Americans to know what they’re supposed to believe.” Somehow, I doubt most Americans believe that the role of the media is to tell us what we are supposed to believe.
Speaker Nancy Pelosi shares Clinton’s displeasure with the notion that Americans can make up their own minds on vital issues. In fact, she seems to distrust democratic elections. Last November, after failing to persuade Congress to remove Trump from office for his phone call to Ukraine’s president, Pelosi scolded her Democratic colleagues in the House. The Speaker said that it was a “weak response” to “let the voters decide” whether they wanted Trump as president in the 2020 election. She called that a “dangerous position.” (By the way, Politifact accused Trump of a falsity by tweeting, “. . . Pelosi just stated that ‘it is dangerous to let voters decide Trump’s fate.’” Yes, the president paraphrased, and so he shouldn’t have used quotation marks, but he restated the essence of Pelosi’s message accurately.)
In my previous article, I wrote about the seething hatred on the left and the nihilistic, destructive behavior resulting from that dark state of thought. The green movement is stewed in the rantings of misanthropic environmentalists who characterize the human race as a “disease,” “virus,” “vermin,” “cancer,” etc. Then you have a Bernie Sanders groupie getting his kicks from proclaiming, “Guillotine the rich. ” Denver City Councilwoman Candi CdeBaca, a Democrat . . . re-tweeted a California woman’s tweet that said, “For the record, if I do get the coronavirus, I’m attending every MAGA rally I can.” Also, there is this appalling two-minute video compilation showing everything from Pelosi wondering why there aren’t more riots to various celebrities and talking heads yearning to burn down the White House and assassinate President Trump.
Most recently, there was the ugly incident in Portland when a Trump supporter was shot to death and some not-so-peace-loving protesters cheered when one of their mob used a bullhorn to exult, “I am not sorry that a f—— fascist died tonight!” Wow. That clearly illustrates an important difference between left and right. Every conservative I know agrees that passing counterfeit currency (George Floyd’s deed that got him embroiled with the police) wasn’t a capital offense, that his death was a tragedy, and that his death was wrong. The heartless comment in Portland indicates that leftists believe that being a Trump supporter is a capital offense. How long can democracy survive such fascist fanaticism?
Indeed, this summer’s riots have elicited all sorts of revealing nonsense from the lips of the Left. Someone named Vicky Osterweil has gained popularity on the left for publishing In Defense of Looting. In her NPR interview promoting the book, she makes such stunning observations as, “. . . without police and without state oppression, we can have things for free” (thereby ignoring, but not repealing, the first law of economics: TANSTAAFL — “There Ain’t No Such Thing As A Free Lunch.” Ms. Oserweil also said, “It’s just property. It’s not actually hurting any people.” Uh, excuse me, try telling small business owners whose dreams and livelihood have gone up in rioters’ smoke that stealing or destroying property doesn’t hurt people. How would she like it, I wonder, if her home or business, or her parents’ home or business, were looted or torched?
Chicago Mayor Lori Lightfoot sounded like a law-and-order public official when she ordered police to arrest protesters on the block where she lives because, “We have a right in our home to live in peace.” Of course, like most leftists, she doesn’t really have a heart for the common people because she gave the Chicago police no similar orders when the protesters were active in other neighborhoods. In fact, Chicagoans, many of them Democrats, are moving out of the city because they fear for their safety and feel that Mayor Lightfoot has failed to do her job.
By the way, one Chicago citizen, wanting to show her progressive bona fides, stated:
“I think people forget that people do live here, too — it’s not just the Guccis and the Jimmy Choo stores. And I completely support it all [i.e., the rioting]. You stealing shoes means nothing to me — that doesn’t hurt me at all. It’s just the fact that that brings more crime, and that does endanger me.”
Go ahead and plunder the rich, she is saying, as long as you leave me alone.
How incredibly heartless and morally obtuse! The rich are people and often American citizens, too. If we are to be equal in the eyes of the law, those people’s lives and property must be safe too as well.
Portland Mayor Ted Wheeler showed that he’s not the sharpest tool in the shed when he said of President Trump, “. . . we know you’ve reached the conclusion that images of violence or vandalism are your only ticket to reelection.” Well, then, sir, if that is the case, why haven’t you not been doing everything in your power to reestablish calm and order so that your mortal political enemy can’t benefit from violent images emanating from your city? In fact, Mayor Wheeler has failed in his misguided attempts to appease the thugs, and now the thugs’ attacks against his condo have caused Wheeler to announce his intention to move.
And then there is presidential candidate Joe Biden. He showed his true colors during a typical “confuse-the-issues-with-lies-and-half-truths” speech in Pittsburgh on August 31. Buried within the touchy-feely baloney was this ominous nugget: “Does anyone believe there’ll be less violence in America if Donald Trump is reelected?” Tell us, Joe, was that a threat? Is that what your leftist buddies have told you? Have they promised you that they will hold the riots in check if you are elected so that you can move full-speed ahead with the socialist agenda?
Finally, I owe my readers a follow-up to my recent article on Kamala Harris and her misuse of the Good Samaritan parable. Sen. Harris showed her compassionate heart in June when she tweeted an appeal for people to give financial support to people in need in riot-torn Minneapolis. Did Ms. Harris start a GoFundMe campaign to help innocent citizens whose businesses had been vandalized, robbed, and destroyed? No. Instead, she raised bail money for those who had been arrested for vandalizing, robbing, and destroying those businesses. I think Ms. Harris needs to go back to Sunday School and get that good Samaritan story straightened out. The Samaritan gave his money to help the innocent victim of an attack, not to start a legal defense fund for the attackers.
Friends, I leave it to you to decide whether the pattern and tenor of the above sentiments accurately reflect the values of today’s progressives, or whether you believe that I have taken them out of context. Please don’t forget to vote in November. And choose wisely. *