- Paperback: 492 pages
- Publisher: Ludwig von Mises Institute (2010)
- Language: English
- ISBN-10: 1933550627
- ISBN-13: 978-1933550626
- Package Dimensions: 9 x 5.9 x 1.2 inches
- Shipping Weight: 3.4 pounds
- Average Customer Review: 10 customer reviews
- Amazon Best Sellers Rank: #2,311,621 in Books (See Top 100 in Books)
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Case for Legalizing Capitalism Paperback – 2010
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What's the "American system" of economics? Most people would say it is capitalism, which thereby deserves all fault when anything goes wrong. Well, Kel Kelly responds to this myth in this fast-paced and darn-near comprehensive treatment of the truth about the free market and intervention.
His thesis is that the problem isn't capitalism; it is that capitalism in the sense of a free market is not even legal in the United States. Sure, we have private property and some measure of commercial freedom, and enterprise thrives wherever it is permitted. But it is also strangled, hobbled, injured, and suffocated in nearly every aspect of American economic life.
He considers every important topic: banking, education, taxation, labor, environment, trade, war and peace, safety, medicine, drugs, and far more. He presents the reader with a basic explanation of how capitalism is supposed to work and how society functions when commerce is free. He then turns to all the areas of life that are distorted and destroyed by the great "helping hand" of government.
Kel Kelly had several ambitions in writing this book. He wanted a final and decisive answer to the constant attacks on economic freedom that have emerged since the housing bust. As in the 1930s, the enemies of capitalism are having a field-day with - but with bad analytics, bad economics, and a dreadful prescription that only makes matters worse. Also, Kel wanted to bring the energy, rigor, enlightenment, and fun of the website of the Mises Institute to the printed page.
In both respects, he has succeeded many times over. It is a book that every freedom lover can rally around and give to the deeply confused. And it is true that this book is very powerful: it can convince those who are looking for answers in the ever-lasting recession.
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The author calls for a return to "real capitalism," a truly free marketplace, and states that all other schools of economic thought "endorse various forms of government control of the economy and of individuals." He makes it appear as an either/or situation. Thus, a weakness of the book is that he does not identify where government does need to regulate, police, and control both the economy and the people. Much of the political debate in recent years entails the confusing references to "de-regulation." It certainly did not pay to reduce the valid restrictions on banks that limited their speculative excesses, but it would pay to reduce the regulatory burden involved in most licensing and permitting processes. Such a proper split describing needed government action as compared to burdensome government action was spelled out 25 years ago in Joseph Johnston's "The Limits of Government." It is remarkable that the distinction between what regulation helps and what hurts has been so muddled in popular discourse, and Kelly does not directly address that issue.
The bulk of the book is aimed at: 1.) the harm done by Keynsian economic theory and, 2.) the harmful use of a central bank to print money and its related "multiplier effect" that allows banks to expand credit and create destructive bubbles. Keynsian theory is refuted, especially in it's pursuit of faulty statistics about money supply, GDP growth, and its emphasis on consumer spending. Kelly shows the warts in the stimulus program--the idea that pump priming, giving the public more dollars, will somehow jump start constructive economic activity. The author then describes just how such attempts to manage the economy fail, dangerously inflate the money supply, brings on inflation, and causes boom and bust scenarios. All of this is explained without the economic jargon used by professional economists and is reasonably accessible for most lay readers.
An excellent part of the book is the author's explanation of why almost all economists support some form of the failed Keynesian theories. First, he reveals the oft-ignored fact that Alan Greenspan was a free market champion in his youth before he was "given the chance to run a prestigious and economically powerful governmental agency." With his appointment as head of The Federal Reserve Bank he abandoned all earlier convictions and was "responsible for creating trillions of dollars in fake money, thereby helping the government steal from citizens and creating multiple financial- asset bubbles and economic collapses." And the current FRB chairman Ben Bernanke does not escape, critiqued along with his fellow "government economists" with the well aimed generalization that "These economists live in an imaginary world of mathematics and statistics that are not bound by reality." And by implication, they are bound by the need for gainful employment!
The author indirectly endorses a theory of mine--that over-educated abstract thinkers--the kinds that get all "A's" in school, have a natural liking of theory over practice, and are attracted to ideas that require them to be at the top thinking about solutions for those at the bottom. For example Kelly attributes the adherence to Keynesian theory, supporting government management of our economy, in almost all our schools, colleges, and governmental institutions, to three factors: 1.) They like socialist ideologies because they seem so moral, altruistic, and enlightened. 2.) They don't understand the market place because they have never participated in business, having spent their entire lives in academic study, and 3.) The only place they can get a job is advising on how to control or improve the economy! Under the free market system there is no place for managers or experts to manipulate the system.
Because most economists work for the government, or organizations that seek to shape governmental policies, they have to be "government economists" rather than "free market economists" if they want employment. And since governments control our schools and colleges, and provide the grants for studies, and funds research, it does not pay to be a free market specialist! Thus the people who work at the Bureau of Labor Statistics, Treasury Department, Congressional Budget Office, FDIC, etc. are primarily "government economists." And Kelly points out that also goes for "economists at the World Bank, the IMF, USAID, WTO, OECD, etc." There is a huge price in human suffering that today's failed economic theory imposes on the people in Undeveloped Nations: We have been giving them "aid," free food and medicine, for over 50 years, but no one has given them a free market place or the right to own private property as capitalism requires.
The book is also very good at explaining why the financial community favors both massive governmental regulation and the federal Reserve's fractional banking--those are the policies that give the bankers oodles of cheap money to lend out, speculate with, and live off, all the while with federal support should they get into serious financial trouble. Kelly covers the recent mortgage meltdown, as well as many historical financial panics since the Civil War, and shows how they arose primarily from the ill-advised inflationary fanning of credit by bankers.
In concluding, Kelly laments that the Government economists will occasionally "consider" free market capitalism but then argue that there is no proof that it will actually work in practice. And he asks for a regional free market experiment to demonstrate that it works, even though he states that "no true free market has ever existed in the history of the world." The obvious problem here is that he has not defined what a "truly" free market is. Even I, a fan of von Mises, do not believe in a market entirely free of some regulation. It would have helped the book if the author had looked at history and seen that most prosperous societies during the last 4,000 years have enjoyed "substantially" free markets. It's not all or nothing.
But Kelly is correct that in America today we have gone way too far in burdening small business, and relied way too much on Keynesian pump priming, stimulus plans, and bail outs of those we let get too big to fail. His book is an excellent case for reducing the influence of economists that have been basically bought and paid for by the special interests they support.
I think an interesting opportunity was missed; but it would have to have better focus and tighter writing before it could replace the 'classic' texts it tries to join together. Over all, it was twice as long and half as well written and either work.
This book will show you how the free market functions. It really is quite easy to read. I implore it's importance, if you are a truth seeker or have any interest in Economics.
The author is an admirer of George Reisman’s Capitalism, the best comprehensive defense of free markets.
I couldn't stop reading this book once I got started. I highly recommend this read to anyone who has any interest in economics or liberty. Thank you Mr. Kelly! Awesome!