Carolina Journal News Reports
RALEIGH — Capitalism has faced heavy criticism during the past couple of years. Some pundits have blamed free markets and other elements of the capitalist system for the nation’s economic slump. Steve Forbes, chairman, CEO, and editor-in-chief of Forbes Media, rebuts those pundits in the book How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy. Forbes discussed the book with Mitch Kokai for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Kokai: You say capitalism will save us. Why are you right?
Forbes: Well, when you look at the great crises, this one and previous ones like the Great Depression or the Great Inflation of the 1970s, we found that it was government policy that brought about the crisis, and in each case, the private sector — free markets — get the blame. In the most recent disaster, the Federal Reserve printed too much money. You wouldn’t have had a housing bubble if they hadn’t printed so much money. Fuel wouldn’t have been there for it. Two government creations, Fannie Mae and Freddie Mac, underwrote $1.5 trillion of junk mortgages. If the government hadn’t done those things, we wouldn’t have had this disaster. Yet it’s free enterprise that gets the blame, not those who made it possible — the federal government.
Kokai: The title of your book could have been How Capitalism Could Save Us, or How Capitalism Should Save Us. You wrote How Capitalism Will Save Us. Why?
Forbes: I think the American people realize that Washington’s program of binge spending, raising taxes, trying to take over health care, is not the way we’re going to get our country on a good growth path in the future. I think people are going to be recognizing again the virtues of a free people, free markets, where entrepreneurs can create new businesses, create new jobs, and the government’s task is to create an environment where risktakers can go out and try to do their thing. You need sensible rules of the road, but that’s very different from the government trying to do everything for us.
Kokai: People will have to read the book to get the details, but what’s your general outline of how capitalism will save us?
Forbes: The general outline is: you let entrepreneurs, or risktakers, go out and start new businesses, or expand existing ones. For example, 30 years ago, whoever heard of Bill Gates; he was just a middle-class kid. Steve Jobs, abandoned by his biological parents. Larry Ellison of Oracle was an orphan, and so these people do spring up, even during the terrible 1970s. You had FedEx rise up, Southwest Airlines, Oracle, Apple, Microsoft. These things are incubating. New ones are incubating now, and that’s how you surge ahead.
Kokai: I’d like to tackle some of the items mentioned on the book’s jacket. You mentioned several aspects of the rap against capitalism, and then contrast that rap with the reality. First, capitalism is blamed as an amoral system based on the survival of the fittest. What’s the reality?
Forbes: The reality of capitalism is that it is a moral system because it meets the needs in a free enterprise system, meets the needs and wants of other people. You don’t succeed unless you provide a service or a product that people want. So it’s a mutually advantageous transaction. You go to a restaurant. You want the food; the restaurant wants your money. You get the food; they get the money. You both get something out of it.
Kokai: Here’s another rap: Capitalism favors big players with too much power who are able to crush the little guy. What’s the reality?
Forbes: The reality is in a true free market it is the entrepreneur who often comes in with very little and upends existing structures. You look at the personal computer 30 years ago. Who are the major players in that? Companies like Apple, companies like Dell that didn’t exist a few years before.
Kokai: How about this one? The rap is that under capitalism the rich prosper at everyone else’s expense. What’s the reality?
Forbes: You only get rich in a free market if you’re providing those products and services that other people want, and because you’re rich today does not mean you’re going to be rich tomorrow. You see people move up and down all the time, which in a dynamic economy is the way it should be. Unless you’re doing something positive, you’re not going to stay on top.
Kokai: I have one more rap for you. This is one we hear quite a bit. Taxes are an investment in the public good, so the flipside is that tax cuts must hurt the common good. What’s your response?
Forbes: The reality in taxes is when you lower tax rates, and therefore don’t provide disincentives to people, people will do more. They will work more productively. They will take more risks. They’ll do more positive things, and, therefore, the government comes out ahead when you have a prosperous economy.
Kokai: So if all of these things you’ve mentioned are the reality, why does capitalism in general get such a bad rap?
Forbes: Capitalism has a bad rap because a lot of people, especially in the culture, don’t understand it. You see Hollywood — who’s the villain? It’s always some big corporate executive. Entrepreneurs of the past are miscast as villains of the piece; capitalism is about crushing the poor, and about greed, and all that sort of thing. We hope the book, which is written in a very conversational tone — Q&A format — enables people to get a better understanding of a system that, if allowed to work, benefits all of us. If it’s not perverted by government, and you have proper rules and regulations, we all move ahead.
Kokai: You’ve written a book to battle misperceptions about capitalism. What other things need to be done to challenge this bad rap?
Forbes: I think just doing more to understand it, and to just look around us. What makes possible the delivery of all the goods and services we take for granted? The movement of electricity, delivery of food, PCs, cell phones. I mean, 20 years ago, what was a cell phone? It was big as a shoe box, very expensive, clunky. Now it’s something that’s sleek, cheap, everyone has them — 4 billion around the world. It does things we would have put in science fiction 20 years ago. The only thing it doesn’t do for you now is dress you in the morning, but it seems to be doing everything else.
Kokai: I suspect much of our audience will agree with what you’ve said, but some people out there are going to say, “Wait a minute, here’s a rich guy, the head of Forbes, telling us to support a capitalist system that helps rich people. Why should we listen to him?”
Forbes: Well, just look at those who’ve made it in capitalism, whether it’s my grandfather, who was an immigrant to this country, one of 10 children, grade-school education, or the people who are making positive things happen today. I mentioned Michael Dell. What was Michael Dell? He was a college kid who had a love of computers, and look how he revolutionized the personal computer business. Those are the people who make things happen, and those who relax and try to enjoy their wealth, soon lose it.
Kokai: A lot of people seem pessimistic these days about the course of our country, but the title of your book, How Capitalism Will Save Us, sounds pretty optimistic. Why are you so optimistic about the future?
Forbes: Well, I think the American people instinctively understand what Washington is doing is profoundly wrong, that it’s laying a foundation for a devastating future, so I think things are going to be turning around. A key among them [is] stabilizing the American dollar, not treating it like trash, reducing the tax burden on people instead of increasing it, giving patients more control over health care instead of government bureaucrats and insurance companies. So just as in the 1970s, which was a terrible decade, economically, followed by reforms of Ronald Reagan, we had a 25-year boom.
Kokai: When you’re evaluating the people who would like to offer an alternative to the ideas the Obama administration and Congress are pursuing in Washington, what are the policies you’d like to see them pursue?
Forbes: Well, in addition to a stable and strong American dollar, in addition to cutting tax rates, getting people — advocate getting more free enterprise in health care. For example, get real competition with health insurance by allowing people to shop nationwide. Right now, if you live here in North Carolina, it’s illegal for you to buy the health insurance policy offered in Virginia. Why? You can buy a car in Virginia. You’re allowed to open a bank account in Virginia. Why can’t you buy health insurance? Shop the whole nation, then you get real competition.