The Bahamas and "the middle road between the extremes of capitalism and socialism" - another response to Avid Reader

by Rick Lowe (http://www.weblogbahamas.com)

Thanks to Avid Reader for having written again to suggest there are benefits to "the middle road between the extremes of capitalism and socialism" telling us that he or she seeks that "elusive Utopia where capitalism with a human face resides".

One would say both major political parties here are somewhere between capitalists and socialists, using the mixed economy economic model, and the country does not appear to function very well in numerous areas as Avid Reader pointed out a couple weeks back.

But neither capitalism or socialism have a "human face". As Ludwig von Mises tells us, in economics there is "Human Action".

Put another way, Adam Smith, the so called father of economics, said that; "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages" (The Wealth of Nations, Book I Chapter II).

And this Human Action, as described by Smith, is the central point of my position and that of The Nassau Institute.

Avid Reader makes the point that the state should take care of us in times of need.

Many of us, (including Avid Reader), complain bitterly about government and the grief it causes, albeit unintentionally. Yet he or she calls on them to fix the things they already control by doing more. What makes us believe that they will succeed in "helping" us this time with further government initiatives like unemployment insurance? Particularly when it is in essence another Ponzi Scheme that will leave future generations worse off.

In addition, unemployment premiums paid by both employers and employees is a tax on labour. The premium deduction for employers is a cost that must be passed on to consumers, for the employed person it is a reduction of income. Also harmful it creates dependency over time, and a disincentive to find employment. The cost of a new government bureaucracy with its attendant inefficiencies and possible corruption has to be paid for. Tax increases inevitably follow.

Any right thinking person is concerned about helping the less fortunate, but history shows us that this is more easily accomplished by growing the economic pie with sensible economic policy than with policies that destroy wealth. Policies such as those offered by welfare states, or those that prevent people opening a business or high taxes etc discourage the entrepreneur and reduce economic growth.  

Witness the many private trusts in the United States that are established by wealthy people to assist others because of their ability to grow the economic pie. I can also personally attest to the generosity of many Bahamians that have been able to succeed and thereby grow the economic pie when I served in the Rotary Club of East Nassau for 19 years.

The letter writer also seems to suggest that our policy recommendations are limited to Dr. Milton Friedman.

Having read various books and articles by economists like John Maynard Keynes, Milton Friedman, Friedrich Hayek, Ludwig von Mises, Thomas Sowell, Lawrence Reed, Arthur Seldon and numerous others, we have come to the conclusion that with economic policy it is not whether a public (government) policy comes from the left or right that should matter any more. What is of paramount importance is if the prescribed policy is right or wrong, or works or does not work. A quick read I would highly recommend for Avid Reader is Henry Hazlitt's Economics in One Lesson.

Is the Free Market or Capitalism perfect? Of course not. But, it has brought more people out of poverty than any other system I have had the opportunity to read about.

Finally, Avid Reader also suggests once more that we are resistant to change and want to preserve the status quo.

Please be assured Avid Reader, The Nassau Institute and our membership are all about changing the status quo and our web site (http://www.nassauinstitute.org) is a growing testament to the changes we advocate in favour of the Free Market.