How Capitalism Will Save Us (14 page)
Read How Capitalism Will Save Us Online
Authors: Steve Forbes
When I first studied declining and dying organizations in Michigan in the early 1980s, I thought that layoffs were misanthropic and any company that did not spread the pain equally was immoral. But as I have seen the difficult and complex set of constraints that executives face in organizations of all kinds and sizes, I have learned to avoid pointing the morality finger at those leaders who do layoffs—there are too many times when it puts the remaining business at risk or when because of immovable constraints (such as union contracts, work rules, or the nature of the work) cost-cutting short of layoffs is not feasible…. Layoffs do massive damage to people, I am not defending them as humane acts, but there are too many times when they are the lesser evil.
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REAL WORLD LESSON
Layoffs are moral. The alternative, not laying off people, would mean more companies going under. The result would be fewer jobs, longer downturns, and less prosperity—with longer-lasting pain and suffering
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AN FREE MARKETS BE MORAL WHEN PEOPLE ARE ALLOWED TO GET RICH BY SELLING PRODUCTS THAT ARE NOT GOOD FOR YOU—SUCH AS TOBACCO?
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REE MARKETS ARE MORAL BECAUSE THEY ARE DEMOCRATIC, REFLECTING THE WISHES OF PEOPLE IN SOCIETY
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HAT DOES NOT MEAN THAT EVERYTHING THAT EVERYTHING PEOPLE WANT IS GOOD FOR THEM
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t is a familiar conundrum: Cigarettes are known to increase the risk of cancer. Cigarette packets scream health warnings. Yet people persist in
smoking. Cigarette makers generate billions of dollars in profits. Until the 2008 crash, their stocks continuously increased in value. And they performed better than the general market in the downturn. It is the free market at work. But is it right?
Free-market critics say no. And yet what would happen if smoking were banned completely? Most likely people would simply continue to smoke, as they have smoked for hundreds of years. And people would most likely still get rich from illegal cigarettes—by selling them on a black market. That’s already happening today in states like New York and Michigan, where high cigarette taxes have created a black market for cheaper tobacco. Smugglers are bringing in cigarettes from lower-tax states, such as North Carolina, or from Indian reservations. Law enforcement officials worry that many Middle Eastern smugglers are channeling ill-gotten gains to fund terrorist activities in other countries.
Criminals also profited in the 1920s when the United States banned the sale and distribution of alcohol, another addictive and “immoral” substance. People turned to homemade “moonshine” made by bootleggers. It was not only more potent and dangerous, but more expensive. Hard-core drinkers turned to even more destructive substances like opium.
As Mark Thornton of the Ludwig von Mises Institute has pointed out, banning booze had no effect on the widespread employee absenteeism of the time or on abuse of alcohol. Consumption dropped at first but then rose steadily. Violent crimes such as murder actually increased.
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The expanded black market for booze also helped to bolster organized crime. Prohibition was widely considered to be a failure. Alcohol was legalized again in 1933.
When it comes to cigarettes, the real moral question is: which is preferable, allowing people to voluntarily buy a product with negative health effects—or imposing a ban that is not likely to work? Instead it would criminalize millions of otherwise honest people, in addition to helping real criminals get richer.
But what about drugs? Some libertarians say we shouldn’t ban marijuana and other addictive drugs for the same reasons we don’t ban alcohol and cigarettes. Yet society has opted for criminalization because it has judged drugs to be, on the whole, a greater threat to public health and safety. Experiments with looser drug laws have not exactly been successful.
Even Holland, which legalized marijuana to great fanfare, is now rethinking its liberal drug laws, shutting down some of its marijuana-selling “coffee shops.”
REAL WORLD LESSON
Free markets can sometimes mean making moral trade-offs
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“Isn’t Capitalism Brutal?”
THE RAPThe free market is brutal: Big players with too much power crush smaller competitors. People are laid off without warning or protection. Individuals are vulnerable to ups and downs in remote sectors of the economy that have little apparent connection to their daily existence, suffering untold disruption to their lives and businesses.
THE REALITYDemocratic capitalism can be disruptive and unpredictable. But the process of “creative destruction” is critical to a healthy economy and society. New products and industries render old ones obsolete. Some jobs may be destroyed. But other jobs—more of them—are created. In this way, individuals and resources go where they are most needed by people and businesses, and wealth-producing innovations are developed. Without creative destruction, the economy would stagnate. Living standards would be lower and unemployment would be far higher.
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ealth is produced not by continuing the old ways of doing things but from change, developing products and services that are cheaper, faster, and better—or that do new things altogether. These innovations offer benefits so powerful that they compel people to abandon the “old”—products, services, business practices, and, sometimes, social customs.
A thousand years ago in medieval Europe, advances in agriculture, such as the collar harness, the wheelbarrow, and the axle-based horse-drawn wagon, increased farm productivity. Farmers were able to grow more food than they needed and sell their products to others. They moved beyond subsistence to a surplus economy. Medieval monasteries
also traded with one another, specializing in certain crops and relying on bookkeeping techniques, becoming prototypes of modern corporations. The wealth they generated helped bring about the rise of city-states, undermining the power of the ruling feudal lords.