03/18/09 Pylesville, MD As I read the headlines, I can’t help but see the tendrils of socialism grasping more and more very day. And it always brings to mind my uncle, Wm. R. Duvall.
When I was a boy, my uncle was the richest man I knew. He was fond of saying, “”There are three things you need to get rich: time, leverage and other people’s money.” I didn’t know what it meant at the time, but when I got older, I wanted to hear how he made it big
“I always knew I would be rich,” he said. “Even when I didn’t have two nickels to rub together.”
He started out as a barber, renting a chair in another man’s shop for $20 a week. “10 heads,” he said, “that’s all I needed. After that, every dollar was mine.”
“At that point,” he remarked, “all I had was time. I was making money, but I wasn’t getting rich.” It finally occurred to him that a real way to get ahead in barbering was to have his own shop and rent out his own chairs to other guys who were getting started in the barbering business.
So he looked high and low until he found a dumpy old place where he could afford the rent, then spent his nights and weekends fixing it up. In a couple months, he had it ready and went to work. He rented out the five chairs in the shop while he still worked at the same chair he had rented for several years. “It seemed like a risky idea to leave the spot where my customers were used to coming,” he told me.
Unfortunately, after a year, his landlord realized how good the business was and forced my uncle out. “What a setback,” he said. “All these customers and nowhere to go.”
His first thought was to look for a new place to rent. But then he was hit with a stroke of genius: “Own my own place, and I can’t get kicked out again!” It only took him a handful of days to locate what would become his goldmine: 3 acres of land with a corner shop and two houses.
He set out his shingle in the shop, bought a trailer for $150 and moved it onto the back of the property, then rented the two little houses. He had talked the owners into selling him the whole ball of wax with 100% financing over 10 years. After he got his extra chairs rented out and moved another trailer onto the property, he was flush with cash. In the end, the property was paid off in eight years. But in the meantime he dabbled in other real estate, left the country and bought a house in Cancun where he lived as a tour guide. Years later he came back and bought a beachfront house on a local river, where he lived until just recently.
“Everybody gets the same amount of time, Billy,” he would often say. “But that’s not enough to get you to the top of the heap.” His experience with collecting the rent from four other barbers showed him the power of leverage. His no-money-down real estate deal taught him about other people’s money. And I imagine he probably watched a boatload of late-night infomercials that helped formulate his “Wealth Outline.”
I have come to find that what he said (even though it was completely borrowed and not original) held a great deal of truth.
But up to this point, you’re probably wondering what in the world this has to do with socialism. Seems like a pretty entrepreneurial story. Right? You are correct.
Seeing the proper working of a man and his wealth, well, that makes a counterfeit all the more easily spotted. But we could add to that story our own little adventure in currency options. The same three principles are at work. Time, leverage and other peoples’ money.
But the path to wealth through socialism is not so clearly seen. As a matter of fact, it is more like a path to nowhere. Because socialism denies the capitalistic importance of these four pillars: wealth, time, leverage and other people’s money. Instead, they corrupt them to their own destructive ends.
Any socialist will tell you wealth is important. As a matter of fact, that is the big carrot held out to entice people to follow such a muddleheaded plan. They will also tell you that time is important. Not because you need it to build wealth, but because you need it to spend wealth. In other words, the here-and-now is what is of the utmost importance. And you must be rich now, in order to enjoy what time you have here!
Leverage is also important to the socialist. As poor men manage their wealth very poorly (but seem to know instinctively how to manage their ballot), it is imperative to leverage out the efforts of the poor man into large voting blocks. One poor man cannot get a candidate into office. But 100,000 of them, that’s a horse of a different color.
Finally, we have the socialist’s take on other people’s money. They love it. They covet it. And they’ll do anything to get it. Obviously it is impossible to enrich the poor men who voted for them with the candidate’s own money. This is why other people’s money is so critically important. Unfortunately for them, they have forgotten the words of U.K. Prime Minister Margaret Thatcher, who said, “The problem with socialism is that you eventually run out of other people’s money.”
Whether she actually believed that or not is a question for another day. But it still has the ring of an eternal truth.
My uncle’s understanding of other people’s money was that it could be used to make money for himself. And he was right. But here is a key difference. The “other people” in my uncle’s life lent him that money VOLUNTARILY, not because they were coerced. And they expected a real cash return on their funds, not just the “warm feeling” that comes from being forced to help an indolent person by way of government-run charity!
Because socialists reward those who treat money poorly and penalize those who treat money well, the system will never work. True, advocates of wealth redistribution can point to circumstances where it did “work,” and where it does “work” from time to time (if only for a limited time). But I can also point to circumstances where the laws of gravity are temporarily suspended, such as when I get on a plane.
But even God will not help me if I just assume because I can fly for a few hours from here to there that I can fly forever. At some point my plane has to come back to the ground. At some point the laws of gravity will resume their authority, and I will realize that my flight and my violation of gravity’s laws are coming to an end.
Capitalism is a law established by God, just like gravity. Its foundation is in the 9th Commandment, “Thou shalt not covet.” I am never free to desire to take what is my neighbor’s. Not his wife. Not his house. Not his lands. Not his possessions. I can trade him for them if I have something he wants more than what he has. (Except his wife, of course…) I can buy them from him if my offer is right. But I cannot steal (or vote) away his property into my account. That is not wealth creation; it is merely re-distribution. God condemns it, and He will not be mocked by those who think that they can make socialism “fly” forever.
Eventually, they will run out of other people’s money. And when they do, their plane will come crashing to the ground.
One more thing. All around us, we see the widespread push toward more socialism, even when it hasn’t yet worked. How could that be? To explain what we are seeing currently, we must acknowledge that if the socialists manage to escape complete annihilation in the plane that they wreck, they will begin a campaign of propaganda, reminding the people that if only the free market force of gravity hadn’t gotten involved, they would have been successful. And that all they need is more fuel (other people’s money) to get the thing going again.
And, of course, the people will see the wisdom of their case, and will vote for more fuel or parts or anything, just so long as we don’t let those stupid Gravitarians have control of the cockpit.
More groundbreaking efforts will be tried, such as debasing the fuel, so that we have more of it. Sure, if you add five gallons of water to five gallons of gasoline you get 10 gallons… Certainly we can go further on twice as much fuel, right? Yeah, Right. Whatever you say, Comrade. Meanwhile, anybody who knows better had better be preparing a parachute.
As the major nations of the world move deeper and deeper into the “Pit of Despair” (to borrow a good term from “The Princess Bride”), their solutions will work less and less. Each effort will become more and more futile. Perhaps then we will learn our lessons. If not we will be doomed to repeat them.
All that being said, we did have a big news item from last week. Chinese Premier Wen Jiabao fired a shot across the bow of the Good Ship USS Treasury.
It was not just a request, and it was not couched in the tactfulness of political diplomats.
China warned the United States to “Keep its word.” Seems that the Moral Empire of America has a hard time with the bad habits of lying and stealing.
And now the rest of the world knows it.
And now we know that the Chinese know it.
And we know that we need their lending to keep up our little charade.
And they know we need their lending.
Now they are telling us, do not fool with our investments. China has options of where to put their money. What options do we have? How many nations can lend us the amounts we are consuming? China has options. We don’t. “The borrower is servant to the lender.”
The world is changing… and we will keep looking for opportunities to profit from it.
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Well this is quite an interesting piece, and well reasoned. I would agree with some of it, but on the other hand, capitalism is not a law from god. And like socialism, capitalism has its day, but doesn’t necessarily last forever. When Mr. Jenkins states that socialism isn’t wealth creation, it is wealth redistribution, there is the problem. You can “create” wealth. Resources and cash aren’t an unlimited supply, thus, rather than create wealth, you can accumulate it. You can convert resources (the means of production) into fiat money and save it. The problem with capitalism is that people wanted to create ever more wealth out of nothing–most workers in the US today don’t provide a service or a product. The smoke and mirrors of the finance industry are the last gasps of the dying capitalist system trying to create wealth when that is an impossible task. Like socialism, it worked for a while, but now the plane has crashed. Simply put, socialism is an economic system that puts people before profits. Capitalism puts profits ahead of people. Both are imperfect, but both can work from time to time. Both systems will eventually produce those individuals who wish to take advantage of the system.
^^^^”Capitalism is not a law from God”
Interesting argument, but Capitalism is a law derived from civilization. If you don’t believe in ownership rights (capital) then the world is ruled by power and anarchy.
For instance, I might like your car so i would beat you until you give me your keys…until you get a gun and shoot me in the face so you can take those keys back. Clearly, for civilization’s sake, we need rules to maintain peace and prosperity.
The only rule that works in the long run is capitalism. If i’m not allowed to keep what i earn, then i will no longer work or earn next time…i’ll let some other rube do that.
Fine. But be an honest, single person capitalist business. Leave others unexploited by your cunning. We see that unbridled, non-unionized capitalism has the opportunity to exploit the time of another human for profit. Some say it is illegal for corporations not to do this. Socialism claims to prevent this exploitation by giving a right to vote in the workplace. Two thousand and nine year old wisdom shows any system works only when each member treats every other member as he really would like to be treated. There is plenty of hypocrisy to go around these days.
this short article is the most important defense of free enterprise since george gilder’s wealth and poverty and surpasses gilder by recognizing that free enterprise, or more specifically property, is a gift protected by god. it’s dismaying to read objections to the almighty Providence.
i used the term free enterprise rather than capitalism for a reason. ALL forms of economic organization require capital. those which accumulate the least of it are destined to eternal poverty. businesses in socialistic countries require capital. businesses in communist countries require capital. etc etc. every economic effort requires capital and labor.
the problem with socialism is that it dissipates and hinders the capital stock because it is encumbered with burdens unrelated to the function of producing goods and services. it’s like designing a computer into a coffee maker so that people can surf the internet while waiting for coffee to cook.
socialism is all about coveting thy neighbor’s wife, chattle, and property. that is why it is evil and why the current president is the evil one.
thank you mr jenkins for a well spoken and a fundamentally correct defense of free enterprise but more importantly a defense of property rights. our society is sick that we need that defense.
most other defenders of property rights such as arthur laffer fall back on utilitarian arguments such as increased tax revenues for lower tax rates. this is an immoral view of property. socialism is pathological and brings diseases wherever it spreads. after decades of communist indoctrination by the press and universities this nation has now succumbed aided and abetted by the powerful oligarchy which uses the religion of socialism to mask its raw lust for power.
The problem with capitalism is that people wanted to create ever more wealth out of nothing–most workers in the US today don’t provide a service or a product.
*****
If they’re not involved in providing a service or a product – why is someone paying them? Government employees are the only true overhead I can think of. Whom are you referring to?
“Fine. But be an honest, single person capitalist business. Leave others unexploited by your cunning. We see that unbridled, non-unionized capitalism has the opportunity to exploit the time of another human for profit.”
So you’re saying capitalism isn’t a perfect Utopia? So Socialism is?
There’s no exploitation in socialism?
What about every earner and achiever who works extra hard, utilizing extra talent, skill, dilligence – his hard-won fruits of his labor are confiscated and given to the the lazy and the careless. Has he not then been exploited? He would have done better to do half as well or half his best. And this is, in fact, what individuals will do in such a circumstance. As a result, all of society suffers.
There is a petty autocrat in every socialist.
Our friends in China have had a really good run over the last twenty years or so manipulating their currency by pegging it to the US dollar at a fixed rate and not allowing it to float freely on the world market. If their currency had been allowed to appreciate they would not be sitting on so much US debt. Put another way they worked the system to gain their ‘investment’ in the US. Now it’s time for gravity to catch up with them.
Poor Minister of Church. He doesn’t know that there are more than one Gods for God’s sake and there are many many more commandments. Who cares what your God wrote in 9th Commandment, with the end of cheap fossil fuels, it is end of socialism and capitalism both and possibly birth of Communne system also known as Communism.
Here’s the problem. Capitalism fails when someone wins it all… and the banks and politically connected money printers somehow always seem to win. So I could write another article called “the pros of socialism” which could be that sometimes, when the sheep get sheared too much, they demand payback.
Since average people can not possibly look ahead far enough to see that a system is going to collapse, it will, and then they reverse course a la FDR’s 90% marginal tax rates, which after 20 years did turn the tide, but not for long, and now it is going to change yet again.
One more thought.. is the ancient Jewish “Jubilee” – which is itself based off of other nations’ practices – “Socialism”?
Bill Jenkins is a moron. The laws of gravity are not “temporarily suspended” or “violated” when an aeroplane flies. What a fool! Rather, using the principles of thrust and lift, an aeroplane flies – well within the eternal and unchanging law of Gravity.
Gravity is a law from God. Capitalism is not.
Jason, the first poster, had it right on the definitions of capitalism and socialism.
All people in all systems in all civilisations will cheat and steal and lie and exploit others. This is human nature. A socialist system in which every one is a Christlike nice guy will work better than a capitalist one in which everyone is a ruthless SOB.
Capitalists claim that since not everyone can be Christlike, however, their system accounts for human nature and therefore works better. This is inane, of course, because a capitalist system in which a few oligarchs exploit the cheap labour of peasants is also a disaster (if one cares about human rights and justice, which most capitalists do not).
So who wins? It all depends on the time, the circumstances, etc. Democracy, for example, is a good idea, but I’ll take an enlightened philosopher-king over an uninformed, moronic majority-rule public (like today’s United States) any day.
Even in the 1930s socialism wasn’t a significant threat, and today the only socialism we have actually seen is when the Republican administration got involved with the big banks. I enjoyed this article, but socialism in America will never happen. Doing something as a unified country in the national interest is not socialism. I call it flexible capitalism, but it is not socialism. Why don’t we give this nonsense a rest?
“Savoy said
There is a petty autocrat in every socialist.” There is a petty crook in every capitalist.
an interesting post was made asking if the jewish year of jubilee was socialist….i for years thought that it was and could not reconcile how god could command wealth redistribution…..then one day it made sense….the year of jubilee and other manumitive acts are prophylactics….they are intended to discourage irresponsible indebtedness and lending….
thus a potential creditor needs to think twice before extending credit….it also protects the people from the perpetual servitude, slavery, and oppression by the powerful….the practice turns out to be quite healthy….
our current crisis arises in part from abuse of credit….not only was credit itself mandated for poor risks by the government, but the greedy banksters invented derivatives to protect themselves from that artificial risk….the ballooning of derivatives is the cancer which will kill the stroke victim….contrary to many faux experts, the swaps are not inert and will wreak massive destruction as they come due….that process has already started in earnest….
otherwise it is dreary to read the emotional rants from anti-intellectual minds deploring private property and free enterprise….your jobs require capital…..insisting that it be impaired with lusts on your neighbor’s property is self-defeating….and the blather about socialism being virtuous has been destoyed both academically and practically as we have seen the carnage which stalin, mao, pol pot, castro, and other virtuous saints of the left leave in their wakes. the western european socialocracies have a differnt set of problems which fetters the human potential and discourages work through its procrustean limitations and destruction of people’s persons….
yes it looks like salon has sent some folks over here to spread the arrogance of socialism….no economic system can prevent the corruption of people…but that government which protects property will do best in its restraint of carnal instincts.
the fact that there is such hostility toward free enterprise and fondness for socialism spells continuued collapse of america without any countervailing benefits from the socialism to follow….mediocrity will fill all and bring us to 3d world status just as it nearly did to britain before thatcher intervened to reverse the tide.
socialism is a religion with a false god whose goal is to deify the one who can grab power for ordering a world in his own image. free enterprise is about relesing the spirits of the many so that they can achieve the good for which god created them. the former is about fear the latter about love.
Many interesting comments on this essay.
–jlaix: I refer to the finance industry and the top heavy management structures. I think that you would agree that the US produces only a fraction of the goods that it once did–from clothing, to furniture, cars, appliances and so on…
–David Green, thanks for agreeing with me, however, I wouldn’t call Bill Jenkins a moron–I think that he used the plane analogy to make a point…but correct, the laws of gravity aren’t suspended by the plane, they are overcome by Bernoulli’s principle.
Many of the posts equate socialism with totalitarianism, but that view is incorrect. Marx and Engels never intended for the state to be empowered.
Some who posted are in error to think that I favor stupid, unregulated socialism over stupid, unregulated capitalism. Let me define terms when most people say capitalism they mean a market open for profit only among other coporations. Just try doing business with a corporation without being incorporated yourself. Socialism, as I define it, is a group of partners (no employees), each member of the partnership is responsible for the liabilities, and viability of the whole enterprise in the marketplace. Got a better Idea? Go for it!
“ALL CONSTRUCTIVE HUMAN WANTS ARE BEST FULFILLED THROUGH VOLUNTARY EXCHANGES”
The above statement separates the civilized from the tyrant. Where do you stand?