Hello,
Welcome to another post from Serfdom Road.
“So to me, capitalism at its core, what we're talking about when we talk about that is the absolute pursuit of profit at all human, environmental, and social cost.”
Alexandria Ocasio-Cortez (b. 1989), speaking in 2022
“I think there is a very obvious motive: those that make Freddos know it’s popular, so they’re making a bit more money…I think we need to examine this question in some detail and see if there is excessive profit-making by those who make Freddos – then they’ve got us to answer to.”
Jeremy Corbyn (b. 1949), speaking in 2018
“What is called 'capitalism' might more accurately be called consumerism. It is the consumers who call the tune, and those capitalists who want to remain capitalists have to learn to dance to it.”
“Capitalism is not an 'ism.' It is closer to being the opposite of an 'ism,' because it is simply the freedom of ordinary people to make whatever economic transactions they can mutually agree to.”
Thomas Sowell (b. 1930)
“Capitalism was the only system in history where wealth was not acquired by looting, but by production, not by force, but by trade, the only system that stood for man's right to his own mind, to his work, to his life, to his happiness, to himself.”
Alisa Zinovyevna Rosenbaum (a.k.a Ayn Rand) (b. 1905, d. 1982)
The Land of Scarcity
“There is only one power that determines the course of history, just as it determines the course of every individual life: the power of man’s rational faculty—the power of ideas.” - Ayn Rand
Human beings have unlimited wants and needs.
Unfortunately, there is a limited supply of resources available, to satisfy those wants and needs.
This is the first lesson of economics.
However, the first lesson of politics: forget the first lesson of economics.
Human beings have to use knowledge, thinking, and rational action, to decide: how much of a resource is to be used, for what purpose, and when it is to be used.
In order to make these decisions, human beings must be free to think and act in order to satisfy their wants and needs, provided no harm is inflicted on another human being.
It is not the business of one human being to limit, or dictate, the thoughts and actions of another - one must be free to walk their own path.
Freedom is a fundamental requirement of the mind.
A rational mind does not operate under coercion, threat, or force.
For it is the rational minds of great thinkers, innovators and entrepreneurs, that we are able to live in such luxury…
…it is to these minds, that we owe our survival.
A World of Value
“In this house, we obey the laws of thermodynamics!" - Homer Simpson
The second law of thermodynamics, stated simply, is the rule that order will always decay into disorder.
A hot coffee always cools, an ice cream always melts, and sadly, a human being always dies.
Energy never disappears, it only transfers from a high quality to a low quality.
Even the universe will cease to exist, one day, after all the planets, stars and galaxies, have decayed into pure energy.
For a human being to survive and live a long and prosperous life, one must create order out of the disorder of nature.
Even though, eventually, all order will decay into disorder, at the end of time.
Now, think about a tree.
To a human being, a tree has many uses: furniture, shelter, firewood, paper…
If a human being is cold, and needs warmth, the tree could become firewood.
It can be said, the firewood has more value than the tree itself.
Based on your needs and wants, any commodity can have multiple uses - each with their own assigned value.
However, only one use can exist - a tree cannot be firewood, and paper, at the same time.
In the pursuit of reducing our suffering in this world, one must create order out of disorder, by doing work.
The reward for our hard work, is the value created.
Increasing value in our lives makes life worth living, or at the very least, sustains life.
Conversely, destroying value diminishes our existence and can even endanger our lives.
Think about a mediocre artist that can never sell a painting.
Is the artist destroying value, by consuming the limited supply of paint in the world, that could be used by another artist?
Think of Ancient Egypt, and the marvellous pyramids.
One could argue it was a waste of energy, time and materials, just to (supposedly) build a giant grave.
However, to the ancient Egyptian (or maybe just the Pharaoh), it was more than worth the effort.
What has value, and in what quantity, is always subjective - in fact, how valuable an object is, can be measured against a weight of money (not currency) e.g. gold, silver, sea shells, feathers…
A commodity, or natural resource, can also change value over time.
For example, the Inuit tribe in Alaska, after hunting a whale, opt to bury and freeze most of the carcass under the snow - ensuring there is an easily-accessible source of nutrition in the future.
The Inuit tribe have a low time preference - they prefer to save and invest now, in order to consume more in the future.
Innovation, production, and wealth, require sacrificing consumption now, for greater consumption in the future.
Unfortunately, today, humanity has a high time preference - “I want it all, and I want it now”.
Why?
Well, as central bank’s manipulate interest rates (the price to borrow currency) lower, time preferences tend to increase - why save, at ridiculously low interest rates, when you can borrow, at ridiculously low interest rates, and consume more today?
This is only possible because fiat currency is backed by nothing.
This is a problem, because, humanity only escaped the Stone Age by having a low time preference - long periods of saving and investing, before any consumption.
The Western Hemisphere seems to be reversing course at this point.
The Pursuit of Profit
Profit can be another word for value - the value created in the world.
Once a business, of any size, deducts all costs, from all sources of income, all that remains is profit (or loss).
For a business to earn a profit, their revenue must be greater than their costs.
For their revenue to be greater than their costs, the market (you and everyone else) must value the business’ output to be greater than the business’ costs.
For example, a chocolatier will source all the necessary ingredients to create a delicious chocolate bar: cocoa, sugar, milk…
If the chocolatier is to earn a profit, the market must value the finished product greater than the cost to purchase the individual ingredients.
In this case, the chocolatier has increased value in the world, because the chocolate bar is more valuable to the market, than the individual ingredients.
Profit is an important signal - “Keep doing what you’re doing!”
However, if the chocolate bar was too bitter, or bland, then the market may decide not to purchase more chocolate bars.
The chocolatier’s costs would remain the same but all sources of revenue would decrease.
Once costs are greater than revenue, the business is considered to be loss-making - the market believes the business is destroying value.
Loss is also an important signal - “Stop doing what you’re doing!”
A loss tells a business they must improve what they are doing, or stop doing what they are doing, or do something all together completely different.
A loss is not only a signal, it is an output from the market “voting-machine” that ultimately forces a business to cease trading, and stop destroying value.
Through The Looking Glass
“The more corrupt the state, the more numerous the laws.” - Tacitus (b. 56, d. 120)
Unfortunately, this profit/loss signal system is vulnerable to external distortions.
In a heavily-distorted system, it is possible to pursue profit, while also destroying value.
In this parallel universe, real interest rates are negative, the biggest IPOs are for loss-making corporations, and the gap between rich and poor increases immensely.
As always, any distortion in the free market originates in state interference.
Energy
Through years of coercing utilities to under-invest in their networks (in the name of climate change), stop-starting the economy (in the name of the NHS and everyone’s granny), the debauching of their fiat currency, and now provoking a war between Russia and Ukraine, the state has created a perfect storm for an energy crisis to erupt.
Energy prices are not increasing because utility companies are evil, they are increasing because the state has destroyed the free market.
In a free market, all utilities would be competing with each other to offer customers lower prices - thereby, increasing their market share.
In a free market, if a company is generating a profit, while increasing prices, it is because you, and everyone else, has agreed to trade your money for their product or service at that price.
However, the state always ensures it is seen providing a ceiling on the price of energy, for the “good of the people” - a solution to a problem the state created.
Now, think back to the energy crisis in Texas, in 2021, when the wind turbines froze, and Texas was at risk of losing 24% of it’s energy input.
Utilities are generating a profit, but they are also destroying value, thanks in part to state interventionism and the “green” agenda.
War
There seems to be a strong relationship between the share price of global defence contractors, and the beginning of US-backed military campaigns.
Look below at the share price movements of BAE Systems, and Raytheon.
Coincidence?
Would any of these corporations have earned massive profits, if the U.S. government had not started so many military campaigns?
Interestingly, Lockheed Martin, another major U.S. government contractor, while facing insolvency, asked the U.S. government for an emergency loan in 1971.
In 1971, the U.S. government passed the The Emergency Loan Guarantee Act, and Lockheed Martin avoided insolvency - all for the benefit of “national security”, of course.
Three decades later, former Lockheed Martin employee, and Vice President for Strategy and Planning, Bruce P. Jackson (b. 1952), between 1993 and 2002, would go on to help create the Committee For The Liberation of Iraq - the PR arm of the (illegal) Iraq War (2003-2011).
Big Pharma
The pharmaceutical industry is one of the most regulated (distorted/corrupt) markets in the world.
There is endless, and costly, “red-tape” to adhere to, with the threat of hefty fines, or even long prison sentences.
However, much of this “red-tape” was eliminated, by the state, in order for pharmaceutical corporations to “fast-track” their independent COVID-19 vaccines.
Typically, a vaccine will need 10 years, from research to delivery, and yet, the COVID-19 vaccines were allowed to be used, not even a year after COVID-19 was first “discovered”.
Read Pfizer’s analysis on their COVID-19 vaccine adverse event reports (AERs).
For the period, 1st December 2020 to 28th February 2021, there were 42,086 case reports, containing a total of 158,893 events, submitted to Pfizer.
Of the 42,086 cases, 1,223 were fatal - in the space of 3 months.
So if you were to have an adverse reaction to the Pfizer COVID-19 vaccine, you were 3% likely to die - that’s only based on the reports received by Pfizer.
There were also 1 in 20 (~5%) case reports that people contracted COVID-19 after the vaccine - is it that effective?
Pfizer were also aware that anaphylaxis (often a result of an allergic reaction) was “an important identified risk”, and yet there was “missing information” on how this risk could appear in pregnant mothers, or children younger than 12 years old.
Disturbingly, case reports were submitted for children as young as 2 months old.
These findings were known to the U.S. Food and Drug Administration (FDA) before they granted full authorisation for the use of the Pfizer vaccine in August 2021 - 6 months after Pfizer completed their post-authorisation study.
This information has only recently entered the public domain after a freedom of information request from the Public Health and Medical Professionals for Transparency group.
A pharmaceutical product that was quite clearly not “safe and effective”, that also killed 1,223 people in 3 months, was in fact, poison branded as medicine.
This COVID-19 racket is only enabled by the intervention of the state to distort the free market.
In other words, U.S. government officials could be, and should be, tried for manslaughter.
Read Steve Kirsch’s take on Pfizer’s documents.
What did Benito Mussolini (b. 1883, d. 1945) say about fascism, not capitalism?
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”
The Zero Sum Fallacy
“There is no swifter route to the corruption of thought than through the corruption of language” - George Orwell (b. 1903, d. 1950)
The word, profit, has unfortunately fallen victim to a hate campaign of late.
The pursuit of profit is often perceived as evil, greedy, and inhumane.
It is not surprising to hear “tax the rich”, or the cannibalistic, “eat the rich”.
When the pursuers of profit are demonised, they become less than human, and therefore, a target for theft (taxation), or even violence.
This demonisation can reach a tipping point - the threat of theft and violence can no longer be compensated enough by the very profit entrepreneurs generate.
To put this more simply, why invest capital, blood, sweat, and tears, into increasing value in the world, in transforming order out of disorder, if the great masses perceive you as evil?
In reality, the destroyers of value, that also make the greatest profit, are only enabled by market distortions caused by the state.
Pfizer CEO, Albert Bourla, received $24.3 million in total compensation for 2021 - a 15% increase over the prior year.
Would Bourla have earned such a great sum of money, if the state hadn’t orchestrated the mass hysteria around COVID-19?
Remember, 1,223 people died over a three month period, due to Pfizer’s vaccine.
Would Bourla have been able to earn great profits for Pfizer, if this information was more widely-available?
Would the COVID-19 hysteria have endured if the state hadn’t been one of the largest users of advertisement space since March 2020?
Big pharma has basically been given a free advertisement campaign by the state.
This would not have occurred in a free market, because the pursuit of profit means a business has to out-compete their rivals on quality and price, in order for you, the consumer, to give up your hard-earned money.
This is why socialism always fails - Why work harder than someone else, if you are going to be rewarded the same? Why drive efficiency and innovation if there is no reward, no profit motive?
However, there still remains a common economic fallacy that for one to make a profit, another must make a loss.
This is simply not true.
For example, since Microsoft released Microsoft Excel in 1987, they have likely made billions of dollars since - a great profit well-made.
Yet, how many businesses have been created and grown by leveraging Microsoft Excel?
Is Microsoft entitled to the profits of these companies? No, they’re not.
This is a win-win case: Microsoft can earn a profit, by adding value to the world, and other businesses can leverage that additional value (the software), to earn a profit for themselves.
Disclaimer: Yes, Bill Gates is evil, but the above is just to illustrate a point!
This example is similar to the lightbulb, the computer, the toothbrush, the combustible engine, the Internet, smartphones, the refrigerator, the freezer, the vacuum cleaner, the TV...
The innovators, thinkers and entrepreneurs that added all this value to the world did make a great profit.
However, it is this additional value, in the world, that many have leveraged to create even more value.
How many of the world’s poor are now able to start a business, with no capital, except a smartphone, by leveraging the value that has been created before?
The rich, and the middle-class, do not need to be taxed (or eaten!).
If anyone is to be “eaten”, it is the state.
The state only has what it has, because it stole it.
The state is the greatest consumer, and the weakest producer.
The state… is a parasite.
You are a creation of this universe, and thereby, have every right to carve out your own existence, by producing value, through the power of your own mind and body.
Bonus Feature
“I am the 1%. Let’s talk.”
U.S. hedge fund manager, Peter Schiff, bravely attended the Occupy Wall Street protests in October 2011, with little security, he spent the whole day answering questions from those angry at Wall Street, rather than 1600 Pennsylvania Avenue.
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I hope you have found this article insightful and helpful!
Please feel free to comment below.
Kind regards,
Le Libérateur
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Excellent discourse on free market economics, some great insights in there. The State's main purpose in a free market economy is to create the space and framework where real value can be created by people working in their own best interests. It rarely works out like that however.