Oct. 8, 2007
BOOK REVIEW: Capitalism Explained, Defended by Classical Economist in 'The Politically Incorrect Guide to Capitalism'
By David M. Kinchen
Huntington News Network Book Critic
Shortly after I finished reading Robert P. Murphy's "The Politically Incorrect Guide to Capitalism" (Regnery, 206 pages, $19.95) on my Amtrak ride from Hinton, WV to Chicago (more about that later in this review) I came across a Sept. 21, 2007 front page story in the Wall Street Journal that jibed perfectly with Murphy's brand of David Ricardo-Adam Smith-Ludwig von Mises—Milton Friedman capitalism.
Headlined "Britain for Sale: Foreign Owners May be Key to U.K.'s Success," the article details the successful revival of the iconic Mini automobile under the ownership of Germany's BMW, along with the success stories of other foreign owners in Great Britain. Reporters Jason Singer and Alistair MacDonald say that Britain's low unemployment and rapid growth rate vis-ΰ-vis other European countries – including Germany – is partly due to its relatively hands-off policy of foreign ownership of major industries, including the London area airports.
This is the opposite of the mercantilism or neo-mercantilism that restricts foreign ownership in China, Mexico and -- yes – the U.S., where foreign companies can't buy airlines or broadcasting networks. Singer and MacDonald tell how the policy was instituted under the Conservative administration of Prime Minister Margaret Thatcher, continued under John Major and Labor prime ministers Tony Blair and now his successor Gordon Brown.
Aside from airlines and networks – and yes, the Dubai ports flap -- the U.S. doesn't interfere too much with foreign companies buying U.S. companies. My beloved Trader Joe's chain of food stores, which I visited during my stay in Chicago, has been owned for almost 30 years by Germany's closely held Aldi Einkauf GmbH and the niche market food stores haven't been screwed up by Aldi's profoundly wise "don't mess with success" philosophy.
I just wrote out a check for my monthly water bill to West Virginia American Water Co., also owned by a German company that bought it from a British one. The 7.8-mile Chicago Skyway – a major elevated link between the Indiana Toll Road and Chicago and heavily traveled by Chicagoans seeking gambling in Lake County, Indiana – was purchased for 99 years in 2005 by a private Australian-Spanish partnership for $1.83 billion. The Cintra-Mcquarie Consortium, which operates more than 30 toll roads spanning over 1,000 miles around the world, raised the toll 50 cents after purchasing it, but judging from my ride to the Resorts Casino in East Chicago, Indiana, has maintained it and improved it. Chicago's Mayor Richard M. Daley is nobody's fool; maybe he'll figure out a way to sell the financially strapped CTA to a foreign consortium.
Globalization has been a fact of life for decades, asserts Murphy, an economist who earned his doctorate at New York University, taught at Michigan's Hillsdale College and now is associated with the Ludwig von Mises Institute and Laffer Associates. Most of us don't know or don't care that our water company is owned by Germans or Martians – as long as the rates are reasonable and the service is good, both of which apply to WV American, in my opinion.
Like all "Politically Incorrect" Guides, Murphy's book takes a conservative, libertarian view of the subject. Free trade is good, government restrictions are bad is one way of looking at it. European harassment of Microsoft, which never seems to end, is bad, Murphy would argue. A monopoly by government is bad, but private monopolies – arrived at by producing a product that people want to use, such as Microsoft's computer programs and operating systems – is good.
This reminds me of a wonderful cartoon in a recent issue of The Economist, my favorite magazine, of a matronly European Union scolding Microsoft, presented as a schoolyard bully, while other software and computer companies cower behind the EU lady's ample skirts. I use both Microsoft and Apple operating system computers, but I don't fault Microsoft for their success in the marketplace. Apple's superior product was poorly marketed almost from the start, but don't blame Bill Gates of Microsoft.
Singer and MacDonald in their Sept. 21 Wall Street Journal piece on the U.K. for sale discuss some of the downsides of foreign ownership in the nation's equivalent of our "Rust Belt," such as Peugeot's decision to close an English auto plant and return production to an underused French facility, but by and large, Britain – the native land of traditional free enterprisers Ricardo and Smith – has shown the wisdom of relatively unrestricted foreign ownership. Foreigners aren't about to mess up a successful thing, as the Trader Joe's and Skyway examples demonstrate.
What about Amtrak and why does Murphy hate it so much? On pages 128-30, he says that Amtrak benefits from generous federal subsidies, while providing no service to major cities like Nashville (where he lives), Phoenix and Las Vegas. He makes the outrageous statement that few people use the intercity trains like my beloved Cardinal line and that Amtrak an example of pork that should be abolished. Yes, abolish Amtrak, however limited its service is, and we'll be worse than a Third World country, at the mercy of airlines that delivered the most miserable service in their history this past summer, according to official statistics and news reports.
Dr. Murphy, sir, I know you can't board a train in Nashville as I can in Podunk, er, Hinton (Pop. 2,800), but the nation as a whole – especially those of us living in areas far from major airports -- benefits from Amtrak service. Furthermore, the train was packed in both directions with smart consumers who don't want to do the airport strip-tease or spend all their traveling money on gasoline and parking fees once they get to the big city.
Founded in 1971, after the failure of capitalism in the form of private ownership of rail service, Amtrak is well worthy of the relatively meager federal subsidy it receives. Nobody loses his or her luggage on Amtrak, because there is no checked baggage! The train attendant on my recent trip warned us about keeping an eye on our belongings. And what about the EAS (Essential Air Service) subsidies for small airports like the ones in Beckley, Bluefield and Lewisburg, which Dr. Murphy doesn't mention. Yes, Dr. Murphy, we subsidize airports, too.
All in all, "The Politically Incorrect Guide to Capitalism" is an excellent book for everybody, especially if the last economics course we took was decades ago in college and was dismissive of Ricardo, Smith, von Mises and Friedman – if they even mentioned them at all.
You'll learn, among many other things, that "capitalism" was a term of derision coined by Karl Marx; that pollution and environmental disasters are far worse in Communist countries – the former Soviet Union and present-day China – than they are in non-communist countries; that, believe it not, there is nothing wrong with a trade deficit; that the IMF and the World Bank don't help poor countries; that when government regulates prices, it creates shortages and many other points of classical economics.
Publisher's web site: www.regnery.com

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