Capitalists Against Capitalism

by Neil H. Buchanan

I have no idea why it still surprises me, but I am always amazed when conservatives who present themselves as the brave defenders of capitalism inadvertently reveal that they have absolutely no idea what capitalism is or how it works.  A serial offender is Donald Trump's budget director, Mick Mulvaney, who is now in the midst of a fight to take over the Consumer Financial Protection Bureau (CFPB).

As part of his public relations campaign, Mulvaney announced several days ago that Trump "wants me to get [the CFPB] back to the point where it can protect people without trampling on capitalism."  This is more than a bit odd, because Mulvaney has made it clear that he never thought the CFPB was at the point where it was not trampling on capitalism, and he and Trump clearly want to destroy the agency, not bring it back to some golden age of capitalism-friendly consumer protection.

The big point that Trump and Mulvaney are making, after all, is that the agency that has aggressively enforced anti-fraud laws to the benefit of American citizens must be stopped because its efforts to force Wall Street banks to obey the law are an affront to capitalism itself.  Notice that this is not even a statement that the underlying laws that the CFPB enforces are anti-capitalist (although I am sure that conservatives oppose those laws as well).  Mulvaney and Trump apparently believe that forcing banks not to break the law is itself a problem.

This is what we might call the Dumb Guy's Version of Capitalism.  A not-very-bright man hears that rich guys with lots of power say that they like capitalism and that they hate anything that limits their power, especially governments and labor unions.  Therefore, anything that rich, powerful guys like must be what capitalism is, and everything they hate must be an assault on baseball, hot dogs, apple pie, and (especially) Chevrolet.

It just so happens that that is completely wrong.  It was never true that what's good for General Motors is automatically good for America, and it is now even more important to understand the difference between being in favor of capitalism and being slavishly in favor of everything that business leaders say they want.

Importantly, this applies not just to the relatively small debate over the future of the CFPB but to every aspect of the Republicans' agenda.  Trickle-down tax cuts, gutted environmental regulations, weakened consumer and worker protections might lead to record-setting stock prices, but they are bad for capitalism and bad for America.

In the Dumb Guy's Version of Capitalism, any rule that prevents businesses from doing whatever they want is bad, because the pursuit of profit is always good and rules necessarily prevent some businesses from increasing their profits.  The presumption is that Adam Smith's (horribly misunderstood) invisible hand is all that is needed to make the world a better place.

Yet a famous Supreme Court case, Brown Shoe Co. v. U.S., made it clear that the point of free markets is not to guarantee the success of particular businesses, because what is important is "the protection of competition, not competitors."  That somewhat Delphic statement means that there is nothing at all wrong with a world in which companies fail, so long as the process that led to such failures was open and fair.

And what used to be known as "enlightened self-interest" still leads some businesspeople to conclude that Wild West rules are bad for competition.  People who want to run honest used car dealerships, for example, understand that they will either be driven out of business or forced to become dishonest unless they are operating under laws that give potential customers confidence that they are not going to be ripped off.

As always, the fundamental point that people like Mulvaney and Trump fail to grasp is that the choice is not "rules or no rules," because there will always be rules.  The only question is how the rules will allocate power between different players in capitalism's game: companies, investors, workers, customers, communities, and so on.

We could, for example, change the laws of contract in this country such that every clause of every contract is enforced to the letter, no matter how extreme or how it came about.  In the midst of boilerplate language about, say, where disputes under a contract will be adjudicated, a party could insert a sentence that allows them to double the price if the other party fails to wear a green suit one week after signing the contract.

Would that be good?  Would that be unfair competition or merely aggressive behavior?  After all, we could take the attitude that people are required to protect themselves, and if they sign something without reading every word, they are out of luck -- even if the offending language was added without notice by one party to the last draft of a contract that both parties had already gone over multiple times.

When, over the course of the twentieth century, we adopted laws that prevented parties from engaging in various types of behavior, we were not trampling capitalism.  We were saying that capitalism's rules needed to be changed in ways that not only prevent opportunistic behavior but that allow business activity to thrive.

Even so, there are always people with political clout who say, "I just hate that those damn government bureaucrats are stopping me from making money on this deal."  They have always had the ear of politicians, but now it has reached the point where they are saying, "Hey, we paid good money for this Congress (and White House and Supreme Court), and now we want the rules changed to allow us to do everything we've always wanted."

Frequent readers of my columns will recognize that this is hardly the first time that I have accused self-styled capitalists of not believing in capitalism.  A year ago, I wrote that "Trump hates capitalism."  My point there was that Trump not only is willing to violate the simplest conservative economic principles by, for example, subsidizing the Carrier Corporation to keep jobs in Indiana, but he simply does not understand the notion of "win-win," which is the essence of capitalism.

The true genius of capitalism, after all, is that people try to improve their lot in life by buying and selling things (most importantly their own time and talents), and the combination of everyone's efforts results in everyone getting ahead.  The person who is better than I am at entertaining people with musical performances did not make me a loser, because she was driven to be a better singer and I was encouraged to find something at which I could earn a living.

Back in 2011, when Donald Trump was still nothing but a punchline, I wrote a column explaining why the creation of the CFPB was good for capitalism.  At that point, Elizabeth Warren was running for the Senate, and Wall Street was furiously opposing her because she had all but singlehandedly created the agency that they hated.  Critiquing her critics, I wrote that Warren "believes in capitalism more than they do," and added:
"Warren’s preferred policies make it more difficult for Wall Street firms to do as they please, and they do not like that a bit.  In both actions and words, the political players on Wall Street are making it clear that it really is that simple.  With Warren in office, they are more likely to have to follow rules that they would rather not follow."
Again, capitalism is not supposed to be about allowing the people with power and money to get everything they want.  If, say, the coal industry cannot survive under a certain set of rules, social attitudes, and changes in technology, it will die not because of a mythical "war on coal" but because it cannot survive.

That is not to say that the rules could not be changed to allow coal to survive -- which is exactly what Trump has promised to try to do -- but that is exactly the point.  Different rules lead to different outcomes, but no set of rules is presumptively "right."  We make choices all the time to change rules, and everyone competes under those new rules.  Some people who previously won become losers, and they call on Republicans to change the rules back.  That is not capitalism but the abuse of the political process for the benefit of certain groups.

Changing the rules to allow health insurance companies to sell junk policies, giving tax cuts to people and companies who have already made loads of money, allowing banks to cheat their customers, and everything else on the Republican agenda is not a reassertion of capitalism against anti-capitalists.  It is a tiny group of people asserting a nonexistent presumptive right to continue to have everything go their way.

The more tilted the playing field becomes in favor of entrenched interests, and the more difficult it becomes for people to improve their positions in life, the less well the capitalist system works.  Republicans are helping Trump destroy constitutional democracy, and they are even more eagerly killing capitalism.