What Have The Capitalists Ever Done For Us?
If you’ve spent more than two hours with me, chances are good you have heard a Monty Python quote or two, or ten. Heck, at this point, spend more than two hours with my children, especially my 13-year-old daughter, and you’ll hear one. Of course, we love the knights who say “Ni,” we love the black knight who suffers a minor flesh wound, and the dead parrot sketch and the Ministry of Silly Walks make us laugh every time. But at this particular moment, at the top of the hit list is the sketch in which Bible-era anti-Roman revolutionaries meet in secret to discuss how terrible the Romans are and to plot their overthrow. John Cleese’s character asks the group rhetorically, “What have the Romans ever done for us?!” And of course, after a few seconds, unexpected answers start coming back from the crowd until finally, Cleese has to qualify his question this way: Alright, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, the fresh water system, and public health, what have the Romans ever done for us?!?
Perhaps one reason why this scene strikes such a chord with me right now is because its getting more and more difficult as the presidential election heats up to ignore how much capitalism is under attack from one side of the political spectrum and being taken for granted by the other side. One side claims to want to dismantle a corrupt system, and the other side suddenly is against free trade and comparative advantage.
Before I endeavor to lose all my friends on the left and on the right in a single letter, allow me to just say that the point I am trying to make is not that one side is necessarily more virtuous than the other, but that actions have consequences, and because I’m hopelessly old-fashioned (I often get tears in my eyes when I hear the national anthem; it’s not the least bit convenient), I felt compelled to write something for the 4th of July holiday.
Capitalism, that crazy notion of private ownership of the means of production and their operation for profit, is of course, the economic system that helped catapult the United States to the top of the economic heap during the 20th century.
Not surprisingly, Winston Churchill may have said it best when he told the House of Commons that the inherent vice of capitalism is the unequal sharing of blessings.
In capitalism, we typically see great stacks of blessings bestowed upon those who possess market skills and tools. How they acquired those skills and tools, whether education, hard work, or dumb luck, doesn’t matter to the market. And as the global economy rewards specialization and scalability, the most skillful reap the largest rewards by far.
In socialism, we observe a range of economic and social systems characterized by social ownership of the means of production and workers’ self-management. In what is being touted as socialism today, we would see fairer, more equal outcomes with less dependence on the market for distribution of wealth and more dependence on some super-imposed arbitrary system created to maximize a certain good, say equality, instead of individual husbandry and conservation of resources. Today’s self-proclaimed socialists decry our capitalist system as corrupt and rigged. I think what they really mean is “unfair.” And you know what? They’re right! It’s not fair. But it does produce economic gains and boost the standard of living for more people than any other system.
Churchill immediately added that the inherent virtue of socialism is the equal sharing of miseries. The problem is that focusing on dividing the pie instead of growing the pie tends to lead to situations in which there’s not enough pie to be divided.
Such are the politics of resentments and differences.
So capitalism good, socialism bad, right? If I’ve seen ten emails and tweets bashing Bernie Sanders and Alexandria Ocasio-Cortez, and now Joe Biden, I’ve seen 100. Curiously though, capitalism, at least in its global free market form, is also under attack from places you wouldn’t expect it, namely a Republican president of the United States. I have to admit, I thought tariffs were one of those trade terms that you only read about in social studies books in those boring chapters about the Great Depression that usually got glossed over because it was almost the end of the year. I could never have imagined the champion of the historically more business-friendly political party would proclaim himself “Tariff Man!”
Defenders of these tariffs point to legitimate concerns over intellectual property theft and other trade complaints such as government subsidies and currency manipulation. From their perspective, tariffs are a legitimate negotiation tool. But more worrisome is the rhetoric that characterizes our trading partners as winners in a game in which there is only one winner—the exact same argument that capitalism’s critics employ with increasing effectiveness. The notion that we are losing by trading internationally is nuts. If I go over to the new local brewery tonight and order an IPA, I run a trade deficit with the brewery owner. But that doesn’t mean I don’t get anything out of the transaction.
The tariffs are no longer tucked away under the Smoot-Hawley chapter of my eighth grade social studies book—they are coming soon to an auto dealership or a home improvement store near you and the effects are making their way into the broader economy at this moment. Supply chains are a part of everyday life in virtually every industry and the knock-on effects are on the way.
It’s not as if there aren’t “socialist” ideas that have become a part of the fabric of what we expect from each other as a society. Put public education, a municipal fire department, and the Federal Reserve in this basket. I once attended a banking conference in the wake of the Great Financial Crisis where a group of bankers did everything but throw tomatoes at a visiting Fed official because of all the new post-crisis capital requirements. His response was that if they didn’t like the new federal requirements they should go back to their bank branches and use razor blades to scratch off all the stickers that read “FDIC Insured.”
But such are the politics of resentments and differences.
Maybe I’m all worked up over nothing other than standard political rhetoric designed to inflame and provoke, but I do worry that we, as Americans, are becoming increasingly careless with our golden goose. It’s more fragile than we realize and make no mistake we have our capitalist engine and our durable social fabric to thank for our incredible success.
I’d like to share a story about something I saw on a recent Friday afternoon. A friend of mine, an avid guitar player, was driving us to the beach for the weekend and asked if I minded if we were to make a pit stop to drop off a couple of his amplifiers at a little outfit in Burgaw, NC, a town of about 4,000 near the coastal city of Wilmington. I have driven past Burgaw dozens of times on my way to nearby Wrightsville Beach, but I think I had only driven through Burgaw once long ago. All I knew of Burgaw was that it was hot, flat, and it meant you were almost at the beach. So, we snaked our way off the interstate and down a state highway that bisected cornfields for a few miles until Waze told us our destination was just ahead.
As we pulled off the highway, I thought to myself that it would be great when they finally get all the bugs out of Waze because now we were lost and late, and just at that moment, we rounded the corner and there, in front of us, was a brand new three-story building with a FedEx truck in one of the many loading bays. The beautiful glass and concrete building looked like it had been dropped there by the cornfields by aliens. Inside, after handing off the two amps for inspection and repair to a Gen Y millennial who said she lived in Burgaw, we were treated to a tour of what turned out to be a factory for a company that sold custom amps, speakers, and guitar pickups to everybody from Rush to The Who. The amp cabinet-makers had already left for the day; they arrived at about 5 am to beat the heat and so by 3 pm they were gone. But the employees in the wiring department were there, and I couldn’t help but notice most of them were Hispanic. Upstairs were the salespeople, the finance team, and the owner’s office. The head honcho had already left to attend a soccer game for a certain 9 year old. I counted about 35 people working there. Making custom guitar amplifiers. With Chinese vacuum tubes. In Burgaw, North Carolina. In the air conditioning. Word on the street there is that a brewery is about to open down the road.
But again, what have the Romans ever done for us?
Any opinions are those of Burke Koonce and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Burke Koonce is a financial advisor at Raymond James & Associates, Inc., member New York Stock Exchange, member SIPC.