It would be better to say that absent the weak dollar there’s no rush to housing mainly because housing wouldn’t have looked so attractive to banks. If not, credit flows to producers over the sink of wealth that is housing such that banks don’t get into major trouble; their troubles magnified by bailouts that turned what would have been a downturn into a full-fledged crisis. Brook and Watkins are way to smart to think the answer lies in the academy, but they seemed to write just that.
So while the policy analysis was arguably the part of the book that was weakest, or least strong (it was said that the pages of the Federal Register exploded under Bush, but no numbers were provided to support the claim), its chapters on philosophy were absolutely great. Brook and Watkins write The Objectivist column for the Opinions channel that I edit at Forbes, and the clarity of their thought is mostly unmatched. It surely revealed itself in Free Market Revolution, and that’s why the book is such a good read.
About ExxonMobil’s profits, the authors remind the reader that if it weren’t for the possibility of them, the energy giant “wouldn’t have risked billions in capital to find, extract, refine, and distribute oil.” ExxonMobil acted in its self-interested profit motive, and the signal that it acted well is and was those profits. As the authors write, “Over the long run and in a free market, businesses that flout the principles of rational selfishness are penalized economically. Evaders miss opportunities.” Yes, they do, and as consumers we miss out on rising standards of living, health innovations, and jobs when businesses don’t selfishly pursue the profits that attract similarly selfish investors (no jobs without investment) who want to back winners.
As for free trade and the resulting division of labor, the authors are brilliant. They help the reader understand that the division of tasks leads to the greatest amount of specialization, and with specialization comes the greatest amount of production. They note that an absence of free trade forces self-sufficiency; the latter code for poverty. If this is doubted, readers need only imagine what their standard of living would be if in addition to their existing job, they had to produce in a solitary manner their food, clothing and shelter.
So essential for a book that properly elevates the economy of the mind, the authors remind us that free trade allows us to “leverage human intelligence.” This is so important, and is perhaps best explained through food. Though Americans could still live and eat well absent foreign influences, we surely eat better thanks to the food knowledge brought to us by Mexicans, Italians and Chinese.
Of course for individuals to trade, money is necessary. There they point out that prices are the language of the economy, and stable money made stable by gold is what has allowed the wealth-enhancing act that is trade to flourish like never before.
Returning to profits yet again, members of the media, academic and political elite turn their noses up to them, but the authors gently point out that profits are “a green light to production: They signal to a businessman that he is creating wealth and give him the means to expand his productive activities.” Here they point to the profit and loss signals that reached horse and buggy manufacturers in the early part of the 20th century versus automakers. If not for businesses putting profits above all else, our migration to the massive advance that was the automobile would have been slowed.
Those who support the regular bailout of banks ought to keep the above in mind. The “seen” is banks being propped up on the backs of others, but the “unseen” is the proverbial car that would replace the horse-drawn buggy in the banking space. How much has finance lost thanks to the false view that banks cannot be allowed to fail?
Some will say that sure, profits are fine, but don’t they come at the expense of employees who suffer the business owner’s worship of the bottom line. Not at all, and usually it’s the opposite. Indeed, the authors write about Henry Ford and his payment of above market wages to Ford employees. He didn’t do this because he wanted to reduce his profits, or given the historically false view that he wanted his employees to be able to afford the cars they helped manufacture, but because as Brook and Watkins write, “He had to: Turnover at the company was 370 percent in 1913.” In short, Ford knew the path to profits was well paid employees.
As for the widely held belief that absent competition businesses will raise prices on consumers, the authors confidently remind the reader that it’s the opposite that always reveals itself. Writing about John D. Rockefeller’s Standard Oil, they note that once it achieved what would have been ephemeral market dominance even without the DOJ’s breakup of the firm, “it couldn’t have raised prices significantly even if it wanted to – not without inviting competition.” Absolutely. Successful businesses as a rule regularly seek to lower prices to keep out competition, but as the authors write in their brilliant takedown of antitrust laws, it’s a no-win situation for businesses: if they charge too much they’re gouging, charge too little they’re acting as pricing predator, and then if they charge the same they’re colluding.
Antitrust is loathsome on so many levels, and the authors’ recount of what Whole Foods CEO John Mackey was put through by the feds amid his purchase of competitor Wild Oats was chilling. E-mails examined by the FTC, $30 million in legal fees to prove Whole Foods wasn’t a monopoly. As Brook and Watkins make plain, only governments can create monopolies, whereas success in the private sector always leads to the new competitive entrants. What’s tragic, however, is what Mackey’s story possibly signals about the unseen. Specifically, how many companies have never merged, and how much efficiency and innovation have we lost thanks to companies shying away from mergers out of fear of the federal government?
Of course as the authors remind us throughout Free Market Revolution, much of this intervention by government officials is rooted in the false view that “altruism” is our path to happiness, that however much an individual is sacrificing, “his duty is to sacrifice more.” Work more so that those who don’t want to work can eat, be cared for by doctors, and have shelter. Pay more taxes so that poorly run banks and car companies can be propped up with your money.
We’re told that the above is good for the economy, and because it is, good for us. Happily the authors breezily expose the absurdity behind that thinking. Essentially they remind readers that what we call the “economy” isn’t a living, breathing blob, rather it’s just a bunch of individuals. So when “a rationally selfish individual is told that by surrendering his paycheck he will help ‘the economy’, his attitude should be: ‘To hell with you, it won’t help my economy!’”
The above refrain would ideally be seared into the minds of all Americans. We’re individuals, and we’re not helped individually when the government takes from us to give to others. Furthermore, most of us understand that when we impose our “needs” on others in a coercive way, we’re not helping them. If this is doubted by readers, they need only ask themselves if they view their problems as a claim on the resources of their neighbors such that they should feel free to walk in and take what they need. Most would say no, and the beauty of Free Market Revolution is that it reminds readers that using the government to take care of your needs is no different than going next door to steal from your neighbor.
And that’s really the main point of this excellent book which promotes the ideas of Ayn Rand. The authors aren’t asking for anything revolutionary, instead they’re asking readers if they really feel they have a right to that which is produced by others; the latter procured by governmental force that includes guns. Call this reviewer naïve, but it’s hard to imagine Americans really believe they possess these rights. If they don’t, then the happy path back to pure capitalism sought by Yaron Brook and Don Watkins is perhaps within reach. The thinking is so basic, yet so profound and so essential. Buy the book to see why.