Does Gingrich Understand Capitalism?

Only a few hours after I posted complimentary things about candidate Gingrich, he delivered himself of a big one, like a sonorous fart at a diplomatic dinner. Makes you humble!

Basically, Gingrich accused rival Romney of being a destroyer of jobs because his business was to acquire ailing companies and to do what could be done with them. Soon, Gingrich’s allies aired an ad charging Romney with being a “vulture.” Of course, well-informed people know that vultures keep the forest healthy by disposing of carrion.

Of course, I am pretty sure that Gingrich knows of the enlightened view of capitalism embodied in the expression “destructive creativity” introduced by Vienna economist Joseph Schumpeter in Capitalism, Socialism and Democracy (1942).

Nevertheless, Gingrich’s outburst is damaging to the Republican attempt to regain the White House because it seems to confirm a vulgar naïve and negative view of capitalism. It would not matter if our ranks included only deeply convinced and sophisticated pro-market voters. That’s far from being the case however. It’s not even absurd to state that victory in the presidential election depends on garnering the votes of blue collar workers and of young voters. Both groups tend to harbor a hostile view of capitalism because that’s all they have been exposed to.

One can only hope that the Gingrich outburst will have deflowered the subject for Obama making it difficult to use it if Romney ends up being the Republican nominee.

Here is a reminder of how capitalism works; I hope you have a chance to use it:

Capitalism has made everyone prosperous beyond the wildest dreams of our forefathers. That includes the poor. In fact, the American poor tend to be richer on the average and in real terms than the most prosperous of the population of a country like India, for example, were the free market suffers many impediments.

Capitalism works its magic in several ways. One important way, not the only one but important, is that it allows sick companies to disappear. In a healthy capitalist society, business “die” (go bankrupt or disband) in vast numbers at all stages of business lives (and especially at the beginning). The elimination of bad businesses makes room for the emergence of new businesses, some of which will turn out to be better than the ones that were eliminated. The resources of the businesses that bite the dust are recycled to a large extent. When a business “dies” its employees normally don’t also die! They usually end up working for another business.

Yet, there is no denying that the employees of a business that has been eliminated often become unemployed for some time. This all looks very wasteful. However, even superficial observation tells us that the alternative is worse. In societies -such as France – where much effort is expanded to save businesses in order to avoid lay-offs, the general level of unemployment is systematically higher than in societies, such as this one, that normally let the cookie crumble. (I say “normally” because President Obama has acted differently, with his “bailouts” – like a French politician – since the beginning of his administration.) Societies protective of companies endure especially high rates of long term unemployment, the most humanly destructive form, of course.

These are not a statements based on anecdotal evidence or on light evidence. They are supported by data available over thirty years in countries that are otherwise similar.

Digression: If you wish to pursue this matter, you can look for data at the International Labor Organization and OECD. Incidentally, much of y scholarly effort spread over thirty years was devoted to the study of why organizations, including business organizations, disappear. There is list of relevant publications in my vita, linked to this blog. Some of you may also want to read my entry” Capitalism” in the 2006 edition of the Blackwell Encyclopedia of Sociology. That’s the hard copy. The entry in the paperback edition was written by a dogmatist leftist who has no idea what he is walking about.

Overtime, the clear rule of thumb is this: Protect ailing companies, promote unemployment at the national level.

Mitt Romney’s business career, including those aspects of it so imprudently denounced by Newt Gingrich, is right down the mainstream of business activity in a genuine market society.

He has nothing to apologize about. If you are concerned about the apparent hardness of this system you should deploy your energies toward promoting strong economic growth. When economic activity increases, employment rises; at some point, employers compete for labor and life is good for everyone.

The other way is some form of central planning. It’s been tried, on a massive scale. Where did it go?

About Jacques Delacroix

I am a sociologist, a short-story writer, and a blogger (Facts Matter and Notes On Liberty) in Santa Cruz, California.
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14 Responses to Does Gingrich Understand Capitalism?

  1. Pingback: Laundry Day! | Notes On Liberty

    • jacquesdelacroix says:

      “Remorse” is going too far. I would still rather have Gingrich for president than Obama, or than Ron Paul (who seems cracked to me).

      • thecrackshotcrackpot says:

        You heard it here first folks! Dr. J would rather vote for an anti-capitalist demagogue than a libertarian Republican…

        I can’t wait for elections to be over so we can get back to debating ideas.

      • jacquesdelacroix says:

        Crack: You have a tendency to overplay your hand. Are you aware of the period when Gringrich was Speaker of the House? Do you know what was done then? If Yes and Yes, do you think it was in spite of him?

  2. thecrackshotcrackpot says:

    Me? Overplay my hand? I’ve never entertained the thought!

    I’m afraid my answers to both your questions are No and No. Despite the wisdom that I espouse, I maintain that I am merely an undergraduate at a decent university.

    The only thing I know about Gingrich’s time as Speaker of the House is that he managed to earn the only reprimand of a Speaker by the House in the US republic’s short history.

    Gingrich was condemned for unethical behavior by a body largely composed of professional thieves and liars. It doesn’t get much worse than that (speaking of irresponsibility).

    • jacquesdelacroix says:

      Did Gingrich have any achievements you would approve of?

      Do you know what he was censored for? Or does it matter?

      • thecrackshotcrackpot says:

        I have no idea what Gingrich’s accomplishments in the House were, or why he was condemned for unethical behavior by a body full of professional thieves and liars.

        All I do know is that he will not be the next president of the United States, and that he did not even take his own bid seriously. I think he would do the whole country a big favor by dropping out now so that voters can choose a candidate who is seriously contemplating becoming the next president of the United States, instead of launching demagogic screeds against his political opponents.

      • jacquesdelacroix says:

        Gingrich was Regan’s right hand in the Hhuse. His current role is to force Romney to espouse publicly more conservative positions than he would under his own power. He may be bucking for Secretary of State. I would like that, of course.

        Ron Paul laid another egg yesterday: “We are still in Iraq.”

    • jacquesdelacroix says:

      Crackpot: You misunderstood my meaning. I did not accuse you of acting grandiose. I merely said that when you had a point in a particular argument the size of a micro-dot, you treated it as if it were a big inkblot.

      You will be glad to learn that “acting grandiose” is expressed n French by a sentence I translate accurately as: “farting higher than one’s ass allows.” I am not accusing you of this, again.

  3. Bruce says:

    You have three boxers. The two better fighters slug it out for eight rounds of a ten round bout. The third fighter, although weakest, comes in fresh to fight the winner of the first eight rounds. Not a good deal.
    Instead of taking the opportunity to kick Obama’s ass at every turn, they’re trying to show why their opponent in the primary is non-electable. I don’t like Romney or Gingrich that much and wish there was someone better in the race I could really get excited about. That’s not going to happen but I can live with that. What will be disasterous is if the Republicans blow it. I understand the idea of bringing all the negative stuff out early so it seems like ancient history by election time. Attack your opponents record on things he did that did not follow conservative principles. Don’t create terms like vulture capitalism to be used in sound bites for the left wind media to play over and over again. One of the problems with big government is that they don’t thin the herd.

  4. Terry Amburgey says:

    Didn’t the first big bailout of financial institutions come during the Bush administration?

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