HuffPo & The Untenable Anti-Capitalistic Mentality

Lynn Parramore has co-authored a blog article over at HuffPo Canada entitled Capitalism’s Dirty Secret: Corporations Don’t Create Good Jobs Anymore, They Destroy Them.

Her biography mentions that “she holds a doctorate in English from New York University, where she received a teaching fellowship and taught essay writing and cultural theory.” Judging from this article, I’d reckon that she could teach a few things about writing fiction, too.

She begins her tirade against capitalism with the following assertion:

For the last four decades, U.S. corporations have been sinking our economy through the off-shoring of jobs, the squeezing of wages, and a magician’s hat full of bluffs and tricks designed to extort subsidies and sweetheart deals from local and state governments that often result in mass layoffs and empty treasuries.

From the outset, it is clear that she is painting with a wide brush stroke here. It should be obvious that no two corporations are identical. Yes, some are run by crony capitalists and thrive parasitically off taxpayers thanks to their fascist ties to interventionist governments. Others are not.

We are then presented with her interpretation of the free market position:

We keep hearing that corporations would put Americans back to work if they could just get rid of all those pesky encumbrances — things like taxes, safety regulations, and unions. But what happens when we buy that line? The more we let the corporations run wild, the worse things get for the 99 percent, and the scarcer the solid jobs seem to be.

Her thesis is then revealed as follows:

But the truth is that unfettered corporations are just about the worst thing for creating decent jobs. Here’s a look at why, and where the good jobs really come from.

Progressives like Lynn Parramore habitually demagogue and obfuscate issues. This is no exception. What, exactly, is a “decent” job? What is a “solid” job? A “good” job? I’ll tell you. In this case, it is whatever Lynn Parramore believes it is. Stated differently, its definition is subjective and confined to the realm of arbitrariness. It is a meaningless appeal to the emotions.

Corporations are kind of like wild horses. They can run you down. Or sweep you around in circles till you’re exhausted. And in today’s world, they’ll surely run off and take your jobs to China or someplace else if you don’t learn how to tame them.

This is simply a restatement of her thesis – using a horse metaphor. A ridiculous horse metaphor, at that. Perhaps I was wrong about her fictional prowess.

Bad things happen when corporations are unconstrained by strong national policies that force players to think long term, behave decently, and refrain from dumping their short-term costs on the rest of us. They tend to focus single-mindedly on maximizing profits for shareholders at the expense of all else — including jobs. Executives set their sights on a path to short-term boosts in share prices paved with layoffs, wage cuts, and jobs moved overseas, while slashing research and development and investing in the skills of their employees.

Yes, the entrepreneurial profit motive drives the actions of businesses. But who, ultimately, determines whether profits or losses are realized? Consumers. Businesses strive to maximize profits and share prices by satisfying the wants and needs of consumers. Dumping costs on fickle customers is therefore a bad approach to maximizing profits. The same is true for reckless job cuts. The sovereignty of the consumer, then, obligates corporations to think long term and behave decently. As the Chinese proverb goes: “A man without a smiling face must not open a shop.”

Government bailouts of private corporations, on the other hand, allow corporate welfare beneficiaries to escape losses in the marketplace by dumping them on taxpayers. This undermines the free market process. It usurps the sovereignty of the consumer. However, one must realize that bailouts are perpetrated by governments, not corporations.

The author proposes “taming” corporations with “strong national policies.” This is a plea for more Big Government interventionism. More bureaucrats. More regulations. Higher spending. More debt. The circular logic inherent in this proposal should also be noted. She is saying: “Corporations are run by bad people. In order to solve this problem, we must give more power to a government made up of people.” Nice try.

The U.S. Department of Commerce found that from 2000 to 2009, U.S. transnational corporations, which employ about 20 percent of all American workers, cut their domestic employment by 2.9 million even as they boosted their overseas workforce by 2.4 million. The result was an enormous loss of jobs nationally, as well as a net loss globally.

In the 1990s, these companies added more jobs at home than abroad. What changed? 1) The rise of India and China, with 37 percent of the world’s population, as hotspots for off-shoring; and 2) the availability of tens of millions of workers in these places, many with college degrees, to do the jobs previously done by American workers.

Since we’re speaking in horse metaphors, this is the point at which the article should be condemned to the glue factory. She correctly points out that many jobs are being exported overseas. But her argument is that a deficiency in corporate regulation leads to the destruction of jobs through off-shoring. The burden of proof in this case consists of her providing evidence as to why this is the case. She should be attempting to demonstrate that changes in regulatory practices between the 1990s and 2000s precipitated these job losses. Instead, she ignores the issue in question. She has committed the logical fallacy of ignoratio elenchi.

We are subsequently treated to this insightful gem:

And yet Big Business still trumpets itself as the American Job Creator Fairy. Apple has released a report claiming to have created half a million domestic jobs — a highly dubious number which takes credit for everything from the app industry to FedEx delivery jobs (never mind that drivers would be hauling someone else’s gadgets if Apple went out of business).

Exactly, Lynn. To hell with Apple and their stupid jobs. After all, if aggregate demand is high enough, someone else will create them, right? Sheesh.

She continues:

While a company like Apple whistles “God Bless America”, executives are not going to talk about the job losses induced by off-shoring, nor the horrifically abused foreign workforce that moving jobs to China has produced.

As far as the author is concerned, the people of China surely led bucolic lives until the evil capitalists arrived with their jobs. The reality is that this “horrifically abused foreign workforce” prefers employment with long hours, low pay, and relative squalor to the alternative of death by starvation. As capital accumulation contributes to increases in the marginal productivity of labour, we shall see improvements in the working conditions, real wages and the quality of life of these workers.

Corporate executives have lost the sense that they owe anything to the public. They have forgotten that the 99 percent, as taxpayers, have made huge investments in them. They fight to lower taxes as if all the money “belongs” to the companies. They fight regulations as if the public doesn’t have the right to interfere in their business.

All nonsense.

First of all, recent data suggests that a majority of Americans pay no income tax. This “huge investment” by 52 percent of the 99 percent is a sneaky bit of hyperbole. Also, in the author’s worldview, the moral precept “thou shalt not steal” is substituted with “thou shalt not steal, except by majority vote.”

Despite the anti-government rhetoric from conservative leaders, the truth is that the government, elected by the people, plays a critical role in creating the conditions in which companies can succeed and good jobs can flourish.

If you’re hoping that at this point she refers to enforcing contracts, protecting private property, and mandating sound money, think again.

The government is able to invest in human capital through key services like education. What’s the point of a job if you don’t have an educated worker to fill it? The government also creates job-friendly conditions by investing in infrastructure. How can you get to work if your roads and bridges are falling apart? And it boosts job creation through investing in technology. How could Google create its amazing search engine without state investment in the creation of the Internet? When the government invests in the knowledge infrastructure, businesses can then employ and train people who can, in turn, engage in the kind of organizational learning that leads to that wondrous thing called “innovation.”

Parramore implies that if governments do not perform these things they will not be done at all. This is rubbish. For example, she suggests that skilled workers could not be educated without government involvement. If this is so, how were people educated before the creation of the Federal Department of Education in the 1970s? Were there no skilled workers in the United States before that time?

In addition, the author channels her inner Elizabeth Warren when she justifies expropriation by majority vote on the basis of an imaginary social contract. Tom Woods, citing Robert Murphy and Murray Rothbard, has already exploded this juvenile misconception.

Finally, the author concludes by treating us to a politcally-correct American history lesson straight out of your typical sixth grade textbook:

We learned this once before. After Wall Street financiers ran amok to cause the Great Depression in the 1930s, the government responded by putting in place regulations on banks and corporations, a highly progressive tax system, and a robust social safety net. President Franklin D. Roosevelt created the conditions in which good jobs were possible with programs like the Civilian Conservation Corps and other New Deal initiatives. He focused on the development of highways, railways, airports and parks, investing in the future rather than focusing solely on short-term profits. The GI Bill, rather than leaving graduates with big debts, left them well educated and therefore with a chance of to provide a middle-class life for their families and to retire with dignity.

The truth is that, as president, FDR enacted a series of socialist policies that prolonged and worsened the depression. In fact, the economy still hadn’t recovered by the time World War II began.

By contrast, during the depression of 1920-21, the federal government enacted the very same conservative policies that Parramore abhors. Interestingly, as its name suggests, the depression ended relatively quickly. It also paved the way for the Roaring Twenties.

For a more thorough discussion and scholarly explanation, see Robert Murphy’s Politically Incorrect Guide to the Great Depression and the New Deal or Murray Rothbard’s America’s Great Depression (available for free here).

After victory in World War II, America was able to emerge as the world’s most powerful nation because it had a large middle-class and a strong industrial and technological base. The horses of Big Business were tamed, and they could be harnessed to do useful things for society. Then came the Reagan Revolution and Big Business freed itself from the regulations, unions and taxes that had curbed its worst instincts and it began to shred the nation’s economic and social safety net. The gap in income inequality grew, and jobs were eliminated and outsourced. Long-term investment in innovation and human capital slowed down, while fraud and financial speculation took off.

Let’s set the record straight regarding these bogus Reagan Revolution claims. Under Ronald Reagan, taxes increased and regulations intensified. He also drastically increased spending, ran record deficits and pursued a foreign economic policy in stark contrast to free trade and free markets. In other words, he did the exact opposite of what the author claims. Murray Rothbard explains this in detail here.

So there.

We are left, then, with an incorrect conclusion unsupported by evidence and riddled with innaccuracies and falsehoods. This article is nothing more than an impotent diatribe rife with logical fallacies and devoid of any economic or historical understanding.

It only goes to show that it is the anti-capitalistic mentality, not free market capitalism, that is untenable.

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  • About Gregory Cummings

    Gregory Cummings writes about Canadian monetary and economic policy. His writing has been featured at the Ludwig von Mises Institute of Canada and the Ludwig von Mises Institute's Mises Daily publication. Read more.

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