Myths About Capitalism

Myths About Capitalism
by John Stossel 4-21-2010

I won 19 Emmy Awards by reporting a myth: that business constantly rips us off -- that capitalism is mostly cruel and unfair.

I know that's a myth now. So I was glad to see the publication of "The 5 Big Lies About American Business" by Michael Medved.

I invite him on tomorrow's Fox Business Network show to talk about that.

"You can only make a profit in this country by giving people a product or a service that they want," he says. "It's the golden rule in action."

Medved used to write about the movies, so he's familiar with the businessman as villain. I'll play a clip from the movie "Syriana," in which an oil tycoon makes this ridiculous speech:

"Corruption keeps us safe and warm. Corruption is why you and I are prancing around in here instead of fighting over scraps of meat out in the street."

What's interesting," Medved commented, "is that in the old days, Hollywood would have businesspeople who were very positive: George Bailey, the Jimmy Stewart character, is a banker in 'It's a Wonderful Life.'"

No longer. Today's movie capitalists are criminals or playboys. Apparently, Hollywood writers think it's plausible that CEOs have lots of time to sip cocktails and chase women.

"In school, we all studied a book called "The Theory of the Leisure Class," which ... indicted the leisure class and these people who were out there exploiting other people and really had nothing to do except sit on their yachts and go to their swimming pools and their vacations."

In real life, that's nonsense.

"The higher up on the income scale you go, the less leisure time you have. You make money in this country by working hard."

Medved's second myth is that when the rich get richer, the poor get poorer. This is the old zero-sum fallacy, which ignores that when two people engage in free exchange, both gain -- or they wouldn't have traded. It's what I call the double thank-you phenomenon. I understand why politicians and lawyers believe it: It's true in their world. But it's not true in business.

"If you believe that when the rich get richer, the poor get poorer, then you believe that creating wealth causes poverty, and you're an idiot," said Medved. "One of the things that I hate is this term 'obscene profits.' There are no obscene profits ... . (The current economic downturn shows) "that when the rich get poorer ... everybody gets poorer."

Myth No. 3: Government is more fair and reliable than business.

"Remember the last time you went into Starbucks, and then remember the last time you went into the DMV to get your license," Medved said. "Where did you get better treated? And it's not because the barista is some kind of idealist or humanitarian. She wants a tip. She wants you to come back to the Starbucks ... ."

But the left doesn't get it.

"This is the suspicion of the profit motive -- the idea that if somebody is selflessly serving me, they're going to treat me better than somebody who wants to make a buck," Medved said. But "(i)f you think about it in your own life, if somebody is benefiting from his interaction with you ... it's a far more reliable kind of interaction than someone who comes and says I'm in this only for you."

Myth No. 4: The current downturn means the death of capitalism.

"Capitalism is alive and well," Medved said.

I'm also bugged when people argue that today's problems prove that capitalism "failed." What failed? We had a correction. A bubble popped. But from 1982 to now, the Dow rose from 800 to 11,000. Had it happened without the bubble, we'd say this is one of the great boom periods.

Medved added: "This is one of the biggest lies -- the idea that because of capitalism, we're all suffering. ... Poor people in America today, people who are officially in poverty, have a higher standard of living in terms of medical standards, in terms of the chances of going to college, in terms of the way people live, than middle-class people did 30 years ago. It's an extraordinary achievement of technology and of the profit sector."