Steve Forbes

Since I'm on a finance book kick, I decided to finish off another work that has been lingering on my nightstand for the past few months. The book How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today's Economy by Steve Forbes and Elizabeth Ames offers a defense of capitalism in response to the 2008 financial crisis.

Forbes and Ames argue that capitalism, despite its imperfections, is the best system for fostering innovation, creating wealth, and improving living standards. They challenge the criticism of capitalism following the crisis, advocating for free-market principles as the solution to economic problems rather than the cause. It's an interesting read, but there is nothing particularly earth-shattering here. The lessons are basic to anyone who has studied economics.

That said, the questions the authors pose (and answer) in the book's core chapters are worthy of a quick summary. Here are the key takeaways I derived from them. Warning, spoilers follow! If you want to read the book and derive lessons on your own, stop now!.

Key Takeaways

Chapter 1 - "Is Capitalism Moral?"

• Capitalism promotes exchanges (voluntary) that benefit both parties.
  
• Capitalism incentivizes innovation and efficiency which improve standards of living and wealth.
  
• Moral issues arise from individuals' actions within the system, not from capitalism itself.

Chapter 2 - "Isn't Capitalism Brutal?"

• Capitalism, at its core, is about competition. Competition drives improvement and efficiency. What is harsh about that?
  
• The "brutality" often attributed to capitalism is usually a result of market distortions or lack of proper safeguards.
  
• True capitalism includes mechanisms for failure which are necessary for progress and adaptation.

Chapter 3 - "Aren't the Rich Getting Richer at Other People's Expense?"

• No. Wealth creation isn't a zero-sum game. Wealth creation benefits more than just the wealthy.
  
• Value creation can lead to wealth disparity; but it doesn't mean we aren't better off for it.
  
• Inequality should be addressed through opportunity and education, not redistribution.

Chapter 4 - "Aren't Higher Taxes the Price We Pay for a Humane Society?"

• High taxes can disincentivize productivity and innovation, potentially harming society in the long run.
  
• Private spending is often more efficient than public spending.
  
• We need to strike a balance between funding essential services and maintaining incentives for economic growth. (This is tax policy -- "soak the rich" policies may sound good, but don't work in practice.)

Chapter 5 - "Don't Regulations Safeguard the Public Good?"

• Regulations are necessary for protecting individuals and the environment.
  
• Excessive regulation can stifle innovation and growth; can also have unintended negative consequences, harming the public good.
  
• Smart regulation that addresses real risks without unnecessary constraints on businesses.

Chapter 6 - "Aren't Free Trade and 'Globalization' Destroying American Jobs and the Economies of Other Nations?"

• Free trade and globalization can lead to job displacement (think: auto industry), but they also create lower prices for consumers.
  
• The net effect is often positive, contributing to economic growth (and global poverty reduction).
  
• Retraining and education is needed.

Chapter 7 - "Is Affordable Health Care Possible in a Free Market?"

• A free-market approach to healthcare can increase competition, innovation, and efficiency, potentially lowering costs.
  
• Challenges: Ensuring access, demand and supply.
  
• Solutions: Private industry is more efficient at delivering services than the public sector.

Chapter 8 - "Isn't Government Needed to Direct the Economy?"

• Sure, some government oversight is necessary. Excessive intervention can hamper efficiency and growth.
  
• Market forces (supply and demand) can better allocate resources than centralized planning.
  
• The role of government should be to set clear rules and ensure a level playing field.

The Ghost of Ayn Rand

While reading this book, I couldn't shake the feeling that Ayn Rand was looking over my shoulder. Forbes and Ames essentially advocate for a purer form of capitalism, hinting alignment with her assertion that true capitalism has never been fully practiced. While the authors never explicitly reference Rand's ideal, their critique of the economy and advocacy for free-market principles certainly align with it. They argue that the closest approximations to true capitalist systems have yielded significant economic successes and innovations, implying that the failures attributed to capitalism often stem from governmental interference, rather than from the system itself.

Conclusion

All in all, it's clear that Forbes and Ames are vocal defenders of capitalism, echoing sentiments that might have Ayn Rand nodding. The book, while not breaking new ground for the economically literate, reiterates some fundamental truths about the resilience and adaptability of unfettered capitalism. The key takeaways do serve as a reminder of core principles in an era where capitalism is under attack. The real test, however, lies in the application of these principles. Post-2008, we've seen a mixed bag—innovations and growth in some areas, with persisting inequalities and challenges in others. The future, with the advent of digital currencies like Bitcoin, presents a new frontier, one that could potentially embody the purest form of the system Forbes and Ames (and Rand) advocate for. Whether we achieve this ideal, or get caught in the quagmire of government overregulation, will depend on whether we can effectively learn from the past.

I'm not holding my breath.… (más)