The Guardian has published an edited extract from an impromptu speech made by the creator of the TV series The Wire, David Simon, at the Festival of Dangerous Ideas in Sydney, Australia. Broadly in his speech he argued that, although capitalism is the best wealth creation tool we have, it has created a “horror show” of a society and therefore more socialism must be and is somehow the solution to what ails America. In this post I pick out the main flaws in his arguments and conclusions.

He begins with observations about his local area and how he perceives there to be “two Americas”.

America is a country that is now utterly divided when it comes to its society, its economy, its politics. There are definitely two Americas. I live in one, on one block in Baltimore that is part of the viable America, the America that is connected to its own economy, where there is a plausible future for the people born into it. About 20 blocks away is another America entirely. It’s astonishing how little we have to do with each other, and yet we are living in such proximity. There’s no barbed wire around West Baltimore or around East Baltimore, around Pimlico, the areas in my city that have been utterly divorced from the American experience that I know. But there might as well be. We’ve somehow managed to march on to two separate futures and I think you’re seeing this more and more in the west. I don’t think it’s unique to America.

I can see no reason to doubt the accuracy of his observations of the current state of American society, clearly it’s a talent of his, and broadly I agree with his notion of American society being “utterly divided”.  He continues:

I think we’ve perfected a lot of the tragedy and we’re getting there faster than a lot of other places that may be a little more reasoned, but my dangerous idea kind of involves this fellow who got left by the wayside in the 20th century and seemed to be almost the butt end of the joke of the 20th century; a fellow named Karl Marx.

I’m not a Marxist in the sense that I don’t think Marxism has a very specific clinical answer to what ails us economically. I think Marx was a much better diagnostician than he was a clinician. He was good at figuring out what was wrong or what could be wrong with capitalism if it wasn’t attended to and much less credible when it comes to how you might solve that.

You know if you’ve read Capital or if you’ve got the Cliff Notes, you know that his imaginings of how classical Marxism – of how his logic would work when applied – kind of devolve into such nonsense as the withering away of the state and platitudes like that. But he was really sharp about what goes wrong when capital wins unequivocally, when it gets everything it asks for.

Giving Karl Marx’s ideas any plausibility whatsoever as economic, political or moral theories is not only mistaken but also an incredibly morally perverse thing to do. Various implementations of different forms of communism in the past have led to the deaths of an estimated 94 million people as a result of executions, famine, deportations, physical confinement, or forced labour. According to the Black Book of Communism, communist regimes are responsible for more deaths than any other political ideal or movement including Nazism (which led to the deaths of approximately 24 million people). Think about that, nearly 100 million souls snuffed out as a result of following to some degree or other Marx’s blueprints for a better society. Marx believed that communism was inevitable and would supersede capitalism (and socialism), and was the only way to achieve “the greatest good for the greatest number”. In practice, however, all it has ever achieved (and all it can ever possibly achieve) is the greatest suffering for the masses and the greatest good for those who rule over them.

Simon continues:

That may be the ultimate tragedy of capitalism in our time, that it has achieved its dominance without regard to a social compact, without being connected to any other metric for human progress.

He seems not to comprehend the difference between theories like communism and systems like capitalism. Communism is a plan designed by a few men that requires enacting and imposing upon a population by a central coercive authority. Whereas capitalism is an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. Capitalism isn’t someone’s bright idea and doesn’t require any action to be implemented, it’s a system that has spontaneously emerged from the complex interactions of large numbers of human beings in the absence of forced labour, i.e. serfdom and its various forms, since the masses of the world were emancipated from about the Middle Ages onwards.

Most people, including the world’s mainstream economists and politicians, refer to the developed economies of the world as capitalist, but by definition no purely capitalist economy exists or has ever existed, and so the label is misleading. Today’s economies are what’s known as ‘mixed economies’, which are economies involving a degree of private economic freedom mixed with government regulation of markets. Referring to our economies simply as capitalist is inaccurate because it ignores the proportion of them that isn’t capitalist, i.e. free from government influence, which is a much larger proportion than most people realise. In fact it’s simpler to say what areas of the economy are free from government influence rather than which aren’t. Some argue with good reason that no economic activity at all is truly free from government influence given that governments control the money supply and interest rates, and given the existence of taxation.

It certainly appears that Simon, like most, is under a misconception about the nature of today’s economies. What he identifies as ‘capitalism’ is more accurately described as part state-controlled capitalism, part state-socialism with fascistic elements. So what he argues is a tragedy of capitalism can only be a tragedy of the American mixed economy system, which over the last several decades, as the size and scope of government has increased significantly, has become increasingly more socialistic and fascistic and consequently increasingly less capitalistic. The substantial increase in the size and scope of the American government and therefore its direct and indirect influence over the economic activities of Americans since the second world war is a fact that is easily verified with a little research. If David Simon had taken the time to correctly identify the problem he would not have made the mistake of incorrectly condemning capitalism and then proposing a solution based on a mixed economy with even more socialistic elements, such as ‘free’ healthcare, which has already shown its strong potential to be the biggest economic and social disaster in the history of socialistic government action.

He goes on:

Ultimately we … believed in the idea of trickle-down and the idea of the market economy and the market knows best, to the point where now libertarianism in my country is actually being taken seriously as an intelligent mode of political thought. It’s astonishing to me. But it is. People are saying I don’t need anything but my own ability to earn a profit. I’m not connected to society. I don’t care how the road got built, I don’t care where the firefighter comes from, I don’t care who educates the kids other than my kids. I am me. It’s the triumph of the self. I am me, hear me roar.

Here he demonstrates his complete miscomprehension of libertarianism and misrepresents the convictions of libertarians. Now is not the time to go into a full exposition of libertarianism, but if you would like to learn exactly what libertarians stand for, then please read my previous post entitled ‘Miscomprehending Libertarianism‘. It suffices to say that, contrary to Simon’s assertion, libertarianism is an intelligent mode of political thought. This is only astonishing to him because he simply doesn’t understand the theory which he so passionately decries.

He criticises the make-believe libertarian who argues “I don’t care how the road got built”, as if to suggest they do not understand the nature of society, but his argument is nonsensical; for why should one need to know how roads get built? Does he know how his television, car or refrigerator got built? Does he care? Of course not. He’s got far more important things to be concerned with, like his career and his life. All that matters is that they do get made and that they can be acquired in exchange for money, which is a beautiful thing.

Of course what Simon is implying here is that roads wouldn’t get built if the government didn’t forcibly take money from people and hire contractors to build them. This argument is total nonsense because it relies on the premise that road-builders would not be able to build a network of roads unless people paid up front for their construction. We need only consider the construction of mobile phone networks, as just one example, to realise that this is an absurd argument.

Telecommunications companies planned, funded and built their infrastructures without having to ask everyone in society for an upfront payment in order to raise the hundreds of millions required to build them. Investors, businesses and banks were prepared to provide the funding for the construction of mobile telecoms networks because they believed it to be a sound and profitable investment. Once the network was in place, mobile telecoms companies then recouped their outlay via small payments from millions of people who value being able to use mobile phones; and eventually provide a return for their investors and creditors, and a profit for themselves. This is just one example of many. It’s basic economics, it’s the beauty and bravery of capitalism. It’s all a result of supply and demand. The same goes for firefighters and schools. Everyone wants firefighters and schools and therefore the supply will be so abundant, diverse and competitive that the poorest to the richest will be provided for. There’s no need to take money from people by force to pay for these things.

If you’re not convinced that the ‘essentials’ of a society would be provided sufficiently and cheaply enough without the middle-man of government, then just think about ‘small things’ for which there is almost universal demand in the same way as there is for schools; deodorants are a good example. My shop sells about fifty to sixty different deodorants, from about 30 different suppliers. Such diversity and abundance in the supply of something as relatively trivial as a thing we spray under our arms! Something people are only willing to pay a few quid for. Just imagine, then, the incredible diversity and abundance of supply that would emerge for something like education, which everyone would be willing to pay much more for. It’s tragic, but all we can do for the foreseeable future is imagine, because governments currently monopolise the provision of education. The supply of education is a trickle when it should be a waterfall, but thankfully the Internet is already starting to greatly increase the abundance and diversity of supply – whilst driving down the cost in many cases to zero. It’s no coincidence that the Internet is a way of doing business that is the least influenced by government.

It might interest David Simon to know that libertarians, whom he believes to be selfish, advocate non-monopolistic/governmental supply of things like education and fire fighters because they understand the enormous benefits it would certainly bring to everyone – especially the poor – in the form of lower costs and better quality; the very effects that free-markets always produce.

Simon goes on to claim that he believes in capitalism:

I’m utterly committed to the idea that capitalism has to be the way we generate mass wealth in the coming century. That argument’s over. But the idea that it’s not going to be married to a social compact, that how you distribute the benefits of capitalism isn’t going to include everyone in the society to a reasonable extent, that’s astonishing to me.

Here he is under the delusion that capitalism and socialism can permanently co-exist in some kind of democratic do-si-do, but this is truly an impractical utopian belief because socialism gets to use coercion and threats of violence (i.e. the powers of the The State) whilst capitalism doesn’t. If history has taught us anything it’s that people with weapons always win against unarmed people, and the American government has all the guns in the world. Also he seems to be referring to the current extreme inequality that exists in American society, but as we’ve already established this isn’t the result of ‘capitalism’, it’s the consequences of a mixed economy with an increasingly socialistic government – the very thing he is arguing for more of.

He continues and his arguments become even more confused and perverse:

And so capitalism is about to seize defeat from the jaws of victory all by its own hand. That’s the astonishing end of this story, unless we reverse course. Unless we take into consideration, if not the remedies of Marx then the diagnosis, because he saw what would happen if capital triumphed unequivocally, if it got everything it wanted.

Again he returns to what he believes is the wisdom of Marx. You can’t “take into consideration” the arguments of Marx in relation to capitalism. That would be like asking the Jews to take into consideration the views of the Nazis. It wasn’t that Marx just wasn’t terribly keen on capitalism, he believed it should not exist, just the like Nazis believed Jews should not exist. Marx didn’t see “what would happen if capital triumphed…” he saw what he thought would happen if his conception of capitalism was to triumph, but his understanding of capitalism and economics was erroneous. We know this because he subscribed to the flawed labour theory of value, and failed to grasp that economic calculation is impossible in a communist/socialist system where there is no markets and therefore no prices for the means of production; thus rendering the goals of communism/socialism unrealizable in reality.

He moves on to talk about health care:

If you watched the debacle that was, and is, the fight over something as basic as public health policy in my country over the last couple of years, imagine the ineffectiveness that Americans are going to offer the world when it comes to something really complicated like global warming. We can’t even get healthcare for our citizens on a basic level. And the argument comes down to: “Goddamn this socialist president. Does he think I’m going to pay to keep other people healthy? It’s socialism, motherfucker.”

What do you think group health insurance is? You know you ask these guys, “Do you have group health insurance where you …?” “Oh yeah, I get …” you know, “my law firm …” So when you get sick you’re able to afford the treatment.

The treatment comes because you have enough people in your law firm so you’re able to get health insurance enough for them to stay healthy. So the actuarial tables work and all of you, when you do get sick, are able to have the resources there to get better because you’re relying on the idea of the group. Yeah. And they nod their heads, and you go “Brother, that’s socialism. You know it is.”

The health and medical care market is the most extensively regulated sector in America, at both state and federal level, with entry to the market highly restricted and competition within it reduced due to the government owning 20% of hospitals. In short, it’s the least free and most government controlled/influenced market in America. The crucial thing to understand about government regulation, as it does in any other market, is that it has the effect of raising the costs of providing health and medical care because it takes x amount of time and resources to comply with regulations; time and resources that would otherwise be directed towards satisfying customers. In 2004 the Cato Institute conducted a study which determined that health services regulation costs Americans $340bn but only provides benefits amounting to $170bn.  In other words regulation increases the cost of health care services by $170bn, and this is why about 16% of Americans do not have health insurance or can afford health and medical care when they need it. The very involvement and influence of government in the health and medical care sector has put it beyond reach of the poorest Americans, as well as lowering the quality to customers; and conditions are set to worsen under Obama. The inevitable unintended but deleterious effects of ObamaCare have already been exposed by numerous Libertarian economists, and its worth taking time to understand them – something it seems Simon hasn’t done.

If David Simon thinks socialized health care can provide to society the best quality health/medical services at the lowest cost, then I can only assume he isn’t aware of the manifest problems, high cost and reduced quality of the oldest and most revered example of socialized healthcare in the world today. The National Health Service here in the UK is 65 years old, costs each tax payer around £166 a month and is facing a £30 billion funding gap by 2020.

The fundamental flaw with the NHS (and socialised health care in general) is that it cannot achieve the best results (from the perspective of customers) because its resources are directed according to the plan of government bureaucrats – who can only guess what millions of individuals want from health and medical services – and not according to society’s current demands, which are expressed elsewhere to businesses through profit and loss in the market economy every day. The NHS can’t help but misdirect resources and when management eventually realises it isn’t best meeting people’s needs the necessary corrections take much longer to make than they do in the market economy. This means the NHS is constantly in “urgent need of reform” and invariably in crisis. It’s lasted for 65 years simply by virtue of the fact that no one has had the choice to stop paying for it. It’s long life as a publicly funded institution may come to an end in the coming decades as tax revenues decline due to an aging population and a moribund economy. But if there isn’t any corresponding freedom from government influence in the health care market, then even a rapidly ‘privatised’ version of the NHS is unlikely to offer a better end product to society.

The tragedy of a socialized health care system is that society doesn’t get anything like the full benefit of all the wonderfully caring nurses and doctors, and highly skilled surgeons that are out there; because they spend half their time filling in paperwork to show how they are meeting the targets of government planners and acting in according with their plans instead of helping sick people and saving lives by acting in according with their own judgement based on their own expertise.

Simon goes on to draw a false analogy between socialized health care and a private health care scheme at a law firm. Of the latter he claims “…that’s socialism” and in doing so demonstrates that he not only fails to understand that which he argues against – capitalism – but also that which he advocates as the solution to America’s woes – socialism. False premises lead to false conclusions. A private health care scheme of the type he cites is most certainly not socialism because it does not require the forceful prevention of non-participation in the same way socialistic schemes do; no one is fined or locked in the basement should they refuse to join the scheme. The only way to determine the value to society of any given voluntary private health care scheme is how profitable it is. If everyone at the law firm has joined the health care scheme then we know that all those people judged it to be valuable, i.e. it meets their needs and preferences in terms of what they want from such a scheme. Thus we can say that this scheme is worthy of its existence.

There is no way, however, to determine how valued a socialistic scheme is to society, how effective it is at achieving its ends, when no one is free to act upon their disapproval or dislike of said scheme by refraining from buying into it. We cannot know how many of the individuals that make up society deem the NHS in its current configuration as worthy of its existence because none of them can refrain from paying for it – it the same way they can with any other product or service; and even if they could they most likely wouldn’t with regards to health care because there’s no alternative providers in a market highly regulated and fenced off by government.

Freedom is the essential factor here. How can a husband know that his wife loves him if she isn’t free to leave the relationship? It’s only because my partner is free to leave me that I know that she chooses to stay with me. How would Apple know if its customers didn’t like its latest gadget if they weren’t free to abstain from buying it? It’s only through Apple’s customers’ freedom to buy and not to buy its products that Apple knows what its customers like and what the don’t like; and it’s that information, expressed through profit and loss, that enables them to stay in business. If no one valued any of Apple’s products, then Apple wouldn’t exist. But Apple does exist and is highly profitable, and that’s how we know Apple’s products are highly valued by society.

If David Simon thinks that a socialised health care system is going to result in the best or better quality health care being available to everyone at the lowest or lower cost than is currently the case, then he is very much mistaken.

The last passage I’ll pick out from Simon’s speech is this one:

Right now capital has effectively purchased the government, and you witnessed it again with the healthcare debacle in terms of the $450m that was heaved into Congress, the most broken part of my government, in order that the popular will never actually emerged in any of that legislative process.

Government power is a very highly valued commodity to any organisation. Why? Because if a corporation can leverage the government’s powers in its favour, then it can gain privileges at the direct expense of its competitors or society as a whole. And that’s why politicians are bought and sold long before they reach the podium to pour persuasive rhetoric into your ears in order to coax a vote out of you. That politicians and heads of banks/corporations enter into mutually beneficial arrangements is not surprising, after all they’re only human – and all human action stems from a desire to replace an unsatisfactory state of affairs with a more satisfactory state of affairs, from the acting individual’s perspective. Even if you replaced all politicians and all those who head banks and corporations with the most intelligent or benevolent and virtuous people in society it would not stop it from happening; because leverageable and exploitable government economic powers would still exist. Power is the root of the problem, not imperfect creatures acting imperfectly, which is what human beings are. The State’s institutionalised right to monopolise the money supply and control interest rates is the root of the problem; it’s right to control, restrict and influence the economic activity of individuals is the problem; it’s remit to overcome the alleged ‘flaws and excesses’ of capitalism is the root of the problem.

David Simon’s vision of a better world where capitalism and the ideas of Karl Marx can somehow and to some degree be permanently fused together is entirely unrealizable; because capitalism requires liberty and property rights whereas communism/socialism requires the absence of them; and therefore must eventually erode them out of existence by the use of government powers.

Simon is an intelligent person who is apparently great at what he does for a living, but I’m afraid he’s fallen into the trap of believing his smarts can be used like a magic wand to produce answers to complex problems, like how to arrest the degradation of American society, without having to have knowledge of economics or having to take the time to correctly diagnose the problems. What’s most unfortunate is that, as a well-known intellectual, his views on how to solve America’s problems will be accepted as true by many people, assimilated and repeated. He should think about how he will feel decades from now when he realises that what he carelessly and vociferously advocated in his younger days as the cure for America’s ills only made it more sick.