Fareed Zakaria’s Capitalist Manifesto

The June 22 issue of Newsweek displayed a cover similar to what one might find on a copy of Marx’s Das Kapital or Che Geuvara’s Guerrilla Warfare. In reality, it’s just the opposite, bearing the title of “The Capitalist Manifesto”.

The central article of this issue was acclaimed journalist Fareed Zakaria’s “In Defense of Capitalism”, in which the author makes an eloquent, though logically unsound, vindication of the system.

For example, one of Zakaria’s primary arguments is that in order to avert economic crises (such as the current recession), “there’s a need for greater self-regulation…”. This is faulty by both the standards of Communism and (ironically) classic “Capitalism”. From a Communist perspective, one could argue that regulation isn’t the issue, it’s the system itself. An economic system based on self-interest will, inevitably, create more losers than winners. Even with regulation (be it self or state regulation), the “survival-of-the-fittest” process will be simply slowed, not altered. From a classical or “pure” Capitalist standpoint, Zakaria’s statement is also flawed since regulation, in any way, shape, or form, inhibits the growth of the free market. And even if one were to ignore the arguments against Zakaria’s statement (from both ends of the political-economic spectrum), one would be forced to ask whether or not “greater self-regulation” is even feasible. Humans have a hard enough time keeping themselves on their diets or giving up smoking, how can one be expected to self-regulate something as gargantuan as the economy? Again, the laissez-faire will argue that Capitalism shouldn’t be regulated and the Communists will argue that Capitalism shouldn’t exist period.

Now if it were the only flaw in Zakaria’s argument, then it might be excusable as simple idealism- a problem every system has to some degree. Sadly, this isn’t the case and there are plenty more defects plaguing the article.

At one point, Zakaria asserts that “What we are experiencing is not a crisis of Capitalism… Finance screwed up, or to be more precise, financiers did… Finance has a history of messing up”. Now before we can pass judgment on this statement, we have to dissect it first. Capitalism is, as described in previous posts, a system in which the end goal is capital, i.e. money. Finance is the current state of that capital, and financiers are those who deal in the exchange and/or circulation of money. In more simple terms, Zakaria has claimed that “The system isn’t to blame for the current situation being bad, it’s the people, and the situation is going to be bad a lot”. While this might sound reasonable, let’s take the logic behind this and apply it to a different scenario. Using Zakaria’s reasoning, one could look at a disease and claim that it’s not the fault of the treatment or the medicine the treatment requires but the patients who are to blame for not recovering. Of course, this is ridiculous. Anyone with a basic grasp of algebra can tell you that when there’s a problem with the result there must be a problem with the equation. Even if an advocate of Capitalism were to argue that the system is made up of humans and humans are naturally fallible, he or she would still arrive that the same conclusion (“therefore, Capitalism is naturally fallible”)!

And there’s more.

Zakaria claims that “over the past quarter century, more than 400 million people across Asia have been lifted out of poverty”. Now there are several issues with that statement in and of itself, not counting it’s wider implications. Firstly, there may or may not be any connection between these people’s rise out of poverty and Capitalism. Firstly, by simply redefining the word “poverty” one could technically determine the percentage of the world that is “impoverished”. Secondly, if poverty is defined by a person being paid less than one dollar a day, that said person could be “out of poverty” by being paid one dollar and one cent, rather than ninety-nine cents. Just because he or she is no longer in poverty, doesn’t mean his or her life is in any way improved. Thirdly, one must keep in mind that four-hundred million people have been [allegedly] lifted out of poverty in Asia. Zakaria fails to mention that poverty levels in Africa and much of the rest of the world continue to rise. Even if one were to look at Asia alone, at what cost has it dragged itself out of poverty? South East Asia has one of the highest levels of prostitution and sex-slavery in the world, and sweat-shop labor is rampant in the rest of the continent. All in all, Capitalism may have lifted many people out of poverty, but the number is negligible compared to the number of people still destitute, starving, and homeless.

In short while Zakaria’s article is well-written, in all honesty, the arguments made in the defense of Capitalism are unsound. Zakaria makes as good of a defense of Capitalism as Don Quixote made a good assault on the windmills, though in Don Quixote’s defense, he thought the windmills were evil giants, whereas Zakaria has no illusions of the nature of the system he’s defending.

13 Responses to “Fareed Zakaria’s Capitalist Manifesto”

  1. June 24, 2009 at 4:46 am

    “From a classical or “pure” Capitalist standpoint, Zakaria’s statement is also flawed since regulation, in any way, shape, or form, inhibits the growth of the free market.”

    I am not sure whether you would regard this as regulation or not, but Adam Smith did reserve one important role for the government in the economy– the government’s job is to ensure justice. Without justice, Laissez-faire capitalism does indeed fail. Just sayin’.

    You’re really a communist? Wow, I’m going to have to look through this blog…

    • 2 trotskyite
      June 25, 2009 at 12:37 am

      True, but Smith wasn’t exactly clear on what he meant by “justice”. Justice related to non-economically related crime, justice in the form of legislating laws, justice as the opposite of corruption (which Milton Friedman reportedly claimed was “Corruption is government intrusion into market efficiencies in the form of regulations”).

  2. June 25, 2009 at 2:15 am

    For an explanation of what justice is, we turn to Thomas Aquinas. (And for some reason, I find I’ve been explaining justice a lot lately…) Justice is the act of giving to someone that which is rightfully his. This is for any matter great or small. If you and I are in a conversation and I ask you a question, it is an act of justice for you to answer. That is a very small act of justice. When Kuwait was liberated and returned to its people, that was a large act of justice. But in both cases, something is given to the person it is due.

    Now, how do we know whether something rightfully is due someone? If by taking it or witholding it you do more harm to yourself than to the other person, then justly it belonged to the other person. In Aquinas’ system, the thief fares the worst in a robbery. Though he might gain some material possession, his character is badly injured by it. The victim (in the conventional sense) of the robbery is out only the material possession; his character is unhurt.

    This idea of harm done to the perpetrator of injustice can have material consequences. I happen to be an aid worker in Afghanistan, and I see an endless march of programs meant to alleviate poverty by giving the people the wherewithal to support themselves. For example, there are programs that give livestock and agricultural training to rural Afghans, so that they can be farmers. Nothing is demanded in return.

    As a communist, perhaps you will think that is the best possible plan; it has somethng of a command economy approach to it. In practice, it has reduced people to beggary, and it is keeping them there. In my view, the problem is that resources are not being allocated efficiently. If you offer free chickens to people, they will take them whether they need them or not. As an aid worker, I don’t have anywhere near the resources I would need to judge who could make the best economic use of chickens. What I want is for people to start poultry farms. What happens is they have chicken for dinner that very night. Also, poultry prices are depressed, devaluing the labor that the established chicken farmers had invested in their own chickens. Aid is turning the whole economy into mush.

    (As a laissez-faire capitalist, what I think we ought to do (and what I’ve suggested to the bosses in Kabul) is that we require aid recipients to do some labor– some community service, perhaps– in order to qualify for our aid. If they have to work for chickens, then they will think twice before acceping them. Those whose temperments and circumstances make them well-situated to profit from chickens will come and get them. Those who really were just picking up a free dinner won’t bother. I would want to put a maximum limit on the number of chickens a person could qualify for, so that one person doesn’t get in there and take all. If we do that, then some of those people who won’t be starting chicken farms might work for chickens anyway, which they can then sell to the established chicken farmers that have already maxed out their limit.)

    If we look at why aid is turning the economy to mush, we see something surprising; the aid is unjust. Those chickens I am giving away are worth something, and the recepients owe me. I don’t do them any favors by ignoring that debt. Rather, I render the chickens virtually worthless by ignoring that debt. Nobody tries to establish chicken farms, nobody works to improve, nobody collaborates with his neighbor on a chicken project because the chickens are all coming for free. The spirit of enterprise is crushed. Worse, they experience no pride of ownership, just the humiliation of a hand-out. And they live in dependency, scraping by from one aid program to the next. They lose their economy and their character, while I lose only some chickens. Who has fared worse?

    So, justice is the act of giving someone that which is due him. (I have a blog post about it, if anyone’s interested: http://alamanach.com/burning-down-the-gates/ )

  3. 4 trotskyite
    June 25, 2009 at 2:38 am

    And what is a chicken worth?

  4. June 25, 2009 at 3:39 am

    A chicken is worth what you can get for it. Unless people are being coerced in some way (which itself would be an injustice), they generally won’t take a bad deal. They are not being coerced by me, so I leave it to them to let me know if my prices are too high. If I demand too much community service work for my chickens, I’ll get no takers.

    For my purposes, I’m delivering this aid as part of a broader counterinsurgency strategy; I want happy, prosperous communities that have too much good stuff going on to be interested in joining the Taliban. To that end, I will take as much labor from the people as I can get; this is labor I can direct right back into the community. That prosperity is what the chickens are worth to me, and I will set my prices with that goal in mind. The chickens are worth something else to the people, and so we’ll have to find a price the two of us can agree on.

  5. 6 trotskyite
    June 25, 2009 at 6:19 am

    So you’re saying your motivation isn’t out of philanthropy but out of self-interest? Kinda harsh, don’t you think?

    And Communism isn’t about handing out resources for free. As Marx himself said, “From each according to his ability, to each according to his need…”.

  6. June 25, 2009 at 7:22 am

    “So you’re saying your motivation isn’t out of philanthropy but out of self-interest?”


    “Kinda harsh, don’t you think?”

    Nope. I have a war to win. I am part of a counterinsurgency, which is a type of warfare they didn’t really have in Smith’s or even Marx’s day. In a counterinsurgency, the shooting, bombing and killing takes a back seat to building civilization and winning people’s allegiance. This is definitely a much nicer way to go about it. But it is still war, and the need to win that war takes priority over soft-hearted concerns.

    That said, even if I didn’t have a war to win and was just doing this as a way to help rural Afghan people (a type of work which appeals to me, by the way), I’d still advocate much the same thing. I don’t think we will build their economy by giving them things, for the reasons I have described.

  7. 8 trotskyite
    June 25, 2009 at 5:00 pm

    So hypothetically, if you weren’t gaining anything through this program, you would have no motivation to spend your time, energy, and resources in this, and therefore wouldn’t do it?

  8. June 25, 2009 at 5:06 pm

    Well, it does take me away from my wife and daughter. Yes, I need to gain something. Depending on the circumstances, that something might be no more than personal satisfaction or a sort of emotional fulfillment. In this particular case, the something involves the larger war effort.

    Why do you ask?

  9. 10 trotskyite
    June 25, 2009 at 5:09 pm

    Primarily to determine whether you would hypothetically do something (on a more invested) without gaining something in return. I guess it’s more about philosophy than economics for me…

  10. June 25, 2009 at 5:13 pm

    Would you come out to Afghanistan, risking life and limb and working under conditions basically amounting to house arrest, just for the heck of it? Or would you need to have some reason for doing it?

  11. 12 trotskyite
    June 25, 2009 at 5:24 pm

    In answer to the first question, yes, though my reason would probably belong somewhere along the lines of ethical justification- “to do something because it’s right”.

  12. June 25, 2009 at 5:37 pm

    Well, we’d be of like mind, then. A lot of times I end up doing a thing only because it is right. That comes back to the emotional satisfaction and so on I was talking about. For instance: http://alamanach.com/2008/07/01/high-tea-in-kandahar/

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