So I decided to start a different feature of my blog by reviewing or summarizing books in part or in whole that I have read and may include some insights for us into government and life in this nation.  I start today with the first chapter of Glenn Beck’s #1 New York Times bestseller from 2009, “Arguing with Idiots:  How to Stop Small Minds and Big Government.”  Today’s will address his first chapter titled:  In Defense of Capitalism:  Giving the Free Market a Fair Shake.

Glenn starts out with the story of Samuel Insull.  A poor clerk immigrant from England who went on to become the largest power supplier servicing over ten million customers in thirty-two states with a market value of three billion dollars, a total net worth of one hundred billion dollars and being put on the cover of Time Magazine in 1929.  Then the great depression came.  The debt he had used to finance his company growth was now worthless and those who invested in his company lost their money.  He was taken to trial for fraud but acquitted.

This story is used to prove a point.  Capitalism cannot provide you with anything, not a new house, a new job, or a nice retirement; that is your responsibility.  However, it can foster the environment for those who want to work hard and succeed to have a better chance.  Capitalism also provides for innovation and competition to produce better and cheaper products to improve our standards of living.

Argument #1 – Free-Market Capitalism failed.
Capitalism did not fail; greed (the idea that returns can be had without risk) failed.  In a true free-market system the government would have little if any involvement in the economy.  And I am not suggesting throwing out government regulations regarding safety or health concerns.  The argument is that its not the job of the government to encourage or discourage economic behavior of the citizens.  For example in the housing market mortgage “rates would be set by market participants [mortgage lenders and borrowers), based on the risk and reward, with a clear, understanding that making bad loans would result in bankruptcy” (Beck 4).  What has failed is the thought that “markets can be free when run by an increasingly activist government” (Beck 5).

Argument #2 – We are obligated to care for weakest and only government can do that.
“Soulless capitalism,” success without compassion, was bred by a government that tries to do that job of the responsible civic minded citizens to help each other.  Problems are not solved effectively from the top-down but from the bottom up.   The American’s citizens response to Hurricane Katrina can prove what a better job we do on our own than government does to solve these problems.  Over one billion was brought in by private charities to aid the people.  FEMA handed out $6.3 Billion  with a quarter of that going to fraudulent uses.  Now if I give my money to a charity that wastes it, then I won’t give money to them again, but I have no choice with the government.  In another example, President Cleveland vetoed a relief bill in 1887 to help suffering farmers in Texas.  He trusted the American people do to what was right and they did what was right.  They donated ten times more money than what was asked for by Congress.

Argument #3 – We need a new capitalism with more government control.
Business and government work on two different motivations.  Businesses are in business to make wealth, closely watching expenses, making sure every dollar has a return.  Government exist (in theory) to protect the citizens and their rights who they serve.  Here are some examples of how partnerships of private public entities have worked out in the past.

Fannie Mae & Freddie Mac: Created to buy mortgages from banks so they have more money to lend.  It got so big it was weighting down the budget so they “quasi-government corporation.”  They had an unfair advantage by accessing lines of credit and exemption from taxes.  Also they knew the government would not let them fail.  We bought these companies in 2008 and put their liabilities right back on the books of the government.

The Postal Service:  Here is a series of weird things it must do.  It receives no government appropriations so when you stamp price goes up that’s why.  They must also adhere to very strict regulations that say each piece of mail must pay for itself.  It can borrow money, but increases in rates are decided by an independent commission.  They have to adhere to federal guidelines in pay but are also have mandated monopoly on mail delivery.  They have very little say over their own operation that is controlled by Congress.  They can’t close branches or change delivery dates to try and save money.

Argument #4 – We just need to streamline the bureaucracy.
In this section Glenn outlines the various ways Presidents have tried to streamline the bureaucracies of the federal government, going back to 1905.  Congress usually gets in the way and prevents the ideas of these commissions from being law.  They only one that was successful was under President Carter.

Argument #5 – We need a temporary change until the emergency is over.
When is the last time you have seen a government give back power that the people granted it for an emergency.  Bush was given wartime powers that Obama has taken and used with the same disregard as his predecessor, even when he criticized Bush for using those powers.  One example in the book is how Pennsylvania levied a tax on alcohol with revenues going to help the town of Johnstown after a devastating flood.  The tax has never died in fact it has been raised.  The lesson?  Be careful of giving any government power or authority even if its temporary

Argument #6 – We just need some more regulations.
Regulations are virtually impossible to get rid of once they are one he books.  The biggest example is that of Hein Hettinga who, in 2003, wanted to sell milk for cheaper than his competitors to make more money.  The problem came is that dairy farmers are governed by regulations set up in the 1930s to protect small farmers who sold raw milk.  Does that really have any importance today?  More regulations will just make our free markets worse.

Argument #7 – Politicians can learn to run a government like a business.
The ideas of politicians bring to government about purposes of government are not easily changed.  Look at the generations of politicians manage the money given to them in taxes.  IN 1991 Connecticut had a shortfall of  $2.7 billion (created by fiscal irresponsibility) which they tried to fix by creating an income tax.  It has been raised over the years with other taxes added on as well.  And where are they now?  They still have massive deficits that are just going to get larger.  If you look deeper you see that their spending also increase by 147% over that same time period.  Government only really knows how to get bigger over time.

Argument #8 – Socialism does not work because it was never implemented correctly.
The Founding Fathers knew this about government:  That they could be good almost none of them ever were, even those started with good intentions.  They become to powerful and corrupt.  The people are the opposite though, over time they usually did the right things and made the right decisions.  If socialism worked well in the real world then we would be using.  Perfect socialism is a theory, that has never worked in practice.

Argument #9 – We should do socialism like the French.
This quote by an New York Times writer Roger  Cohen sums up best why this is a bad idea. 

     I lived about a decade, on and off, in France, and later moved to the United States.  Nobody in their right mind would give up the manifold sensual, aesthetic and gastronomic pleasure offered by French savoir-vivre for the unrelenting battlefield of American ambition were it not for one thing:  possibility.
     You know possibility when you breathe it.  For an immigrant, it lies in the ease of American identity and the boundlessness of American horizons after the narrower confines of European nationhood and the stifling attentions of the European nanny state, which often made it more attractive to not work than to work. (One France is Enough, March 4, 2009)

France found the best way to keep people working was with a huge amount of regulation.  Their are large procedures in place to hire or fire an employee.  But when you are locked in with an employee by regulations you are more likely to hire only the person who is best and not take a chance on a new person.  So the young are not well employed (since busiesses are careful on who they hire) which required another set or regulations to fix that problem.

The basic theme of this chapter is not that free-market capitalism has failed, but that government intrusion into free-market capitalism has failed.  By over regulating the different parts of the economy the government creates bubbles that are waiting to be burst when if left alone these markets correct themselves quicker than government can effectively respond.

I touched on some of the major points of Beck in this chapter but I recommend any one to read this chapter for more surprising and researched information.  The back of the book has hundreds of footnotes to show where he got his information.  I hope you all do so.  Have a nice day.

Questions?  Comments?  Concerns?  Class dismissed.