Trust the “invisible hand”
By Beth Cody, Guest Opinion
Iowa City Press-Citizen
March 10, 2006

Reading Don Van Hulzen’s opinion piece “Capitalism for the 2000s” (Tuesday, February 28), I was struck by his lack of understanding of basic economics. He seems to believe that capitalism needs to be thwarted by heavy-handed government interference in order to “work.” In fact, capitalism is the most effective system for making everyone as well off as possible, and works the best when government is limited to protecting individuals, their rights and their property.

His assertion that in the early 20th century, capitalism was successfully “redirected” by government intervention to create a large middle class is simply not founded on fact. The opposite is true: capitalism created the middle class in spite of increased government interference. It is true that capitalism allows a few to become very rich at first, however, a “side-effect” is that many others also eventually become much better off as a result. It is no different than what has happened more recently with Bill Gates and Microsoft: He has become “indecently” rich, but hundreds of thousands of others have also been made better off by working directly for Microsoft, or by starting Microsoft-related businesses, or by being employed by those related businesses, or by becoming more productive (and better paid) workers because they use Microsoft software, or simply by selling something else to people who have more money to spend because of those jobs.

As a result of our relatively unfettered market (relative to Europe’s highly-taxed, stagnant economies, for instance), Americans have never been better off than we are today. One only has to watch a TV show from the 1970s to realize that people of all income groups now enjoy a standard of living much higher than before. And the persistence of a group of low-income Americans (other than recent immigrants and young workers who make up the majority of the poor, and who quickly move to the ranks of the middle class) is undoubtedly caused by the very government welfare programs instituted to help them. The way to help the poor is through private charities – people would give even more generously to charities if they weren’t compelled to support ineffective, bureaucratic-heavy government programs they don’t believe in.

Van Hulzen is full of ideas for how the government can tax us more and make our charitable decisions for us. His scheme for a national health plan would give us a system like Canada’s where people die while waiting for months to be seen by a specialist or have diagnostic tests done (unless they come to the U.S. to privately pay for such services). His plan to make all levels of education “free” would give us universities as anemic as our public high schools currently are. And the higher top income tax rates he advocates would serve only to encourage investment overseas instead of here.

To be fair, among his ideas there are a few that make sense, at least in part. Corporate subsidies are indeed unfair as well as damaging to capitalism and should be entirely eliminated, but they are a failing of a meddlesome government, not of capitalism itself. Sales, property and payroll taxes are regressive and should be discontinued (although using excise taxes to discourage “wasteful” consumption treats consumers like children who don’t know how to make the “right” economic decisions – in his opinion, not theirs).

In order to expand his understanding of real-world economics and of human nature (the same thing, actually), I recommend that Mr. Van Hulzen read about libertarianism. An excellent book is “Healing Our World” by Dr. Mary Ruwart – it clearly explains how to achieve the changes that will make the world a peaceful, better place for everyone. Utopia is not possible. The best we can do is to trust in the “invisible hand” of the market that guides individuals to make economically sound decisions for the betterment of all.

Beth Cody lives in Iowa City and owns a small business in Coralville.