VitalAccurateThinking

Steffy: The free market lacks compassion

It is articles like these that make the Chronicle's Loren Steffy such a mixed bag as a business and economics reporter. The issue I have with Steffy is he misapplies the most fundamental concepts of capitalism and what it means to practice capitalism. For example:

A few months ago, I found myself discussing the minimum wage with a couple of friends.

One argued, as many people do, that the minimum wage is an unnecessary control and that the free markets should set the price of labor. If that's $1 an hour, so be it.

Good so far, because capitalism is about free markets and the voluntary exchange of goods and services. The key word is "voluntary". Then Steffy goes on to argue this:

I found myself thinking of the discussion when I read a recent story in Bloomberg Markets magazine by my former colleagues Michael Smith and David Voreacos.

The story, "The Secret World of Modern Slavery," documents what are basically forced labor camps in Brazil and Peru.

It outlines in shocking detail how workers are lured into camps deep in the Amazon, then essentially held without pay for months while forced to work in horrific, disease-ridden conditions.

It reminds us that capitalism without limits is nothing more than a theory. As a practice, it needs boundaries, protections against the darkness of such abuses. Humanity is more than a balance sheet entry.

Let the market decide the value of human work? Without our guidance, the market that provides us all with so much can — and in some places does — rationalize slavery.

The market speaks without compassion, without concern for human suffering, without regard for exploitation.

Steffy somehow thinks this is capitalism when it is clearly illegal and anti-capitalist. That is why real capitalists, like me, argue that the markets should set the labor rates in a free, competitive manner without coersion or collusion. Therefore, it is the place of governments to ensure that competition is assured and that people are free from coersion. Further, effective capitalism will also destroy companies that engage in illegal practices.

I imagine I could make the same argument regarding the freedom of the press, an issue surely close to Steffy's heart and checkbook. There clearly have been ethical lapses and outright journalistic scandals at some of the oldest and most respected journalistic institutions. Dan Rather, Walter Duranty, Eason Jordon, and Jayson Blair come to mind, among others. And yet, I doubt that Steffy would argue that fraud and scandal is central to mainstream journalism and that legal penalties should be meted out for the abuses. In the same way that Steffy would certainly circumscribe the scandals outside of journalistic standards, I circumscribe the iron slavery situation outside of capitalistic standards.

I leave Steffy with this comment from Adam Smith, the father of capitalism and author of both Theory of Moral Sentiments and The Wealth of Nations:
"a free enterprise system degenerates unless individual business people practice intentional virtue"

I suggest that Steffy ready both. Maybe he will then avoid the thought errors that are pervasive in his articles.

posted by Jim VAT @ 9:13 AM