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Is capitalism broken? Terence Corcoran interviews Arthur C. Brooks ahead of Munk Debate appearance

The former head of the American Enterprise Institute speaks about his debate strategy, the nature of capitalism and U.S. presidential politics

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On Wednesday night in Toronto, four ideological foes will take the stage at Roy Thomson Hall for the latest in the Munk Debate series. The motion before the debaters: “The capitalist system is broken. It’s time to try something different.”

Taking the affirmative side — that capitalism is an engine of inequality and environmental destruction — are Yanis Varoufakis, former Greek finance minister and star of Europe’s socialist movement, and Katrina vanden Heuvel, editor of The Nation magazine.

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Arguing that capitalism is the engine of economic and social progress are Arthur C. Brooks, former head of the American Enterprise Institute, and David Brooks, a columnist with The New York Times.

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In advance of the debate, Terence Corcoran talks to Arthur C. Brooks about his debate strategy, the nature of capitalism, U.S. presidential politics and the Green New Deal. The interview has been edited and condensed.

Terence Corcoran: I must say I think you’ve got your work cut out for you at the Munk Debate. You are up against a raging European Marxist who thinks capitalism is a morally bankrupt failure of a system that needs to be blown up, and a leftist U.S. magazine editor who thinks Bernie Sanders is a moderate realist. Do you have a clear battle plan to take on these two radical anti-capitalists?

Arthur C. Brooks: I want to talk about the free enterprise system and how capitalism has helped people — and how it has failed to do so. The important thing about a debate is not winning, the important thing is letting people get a menu of ideas articulated in a respectful way.

Corcoran: Although at the Munk Debate, the audience is polled before and after the debate, as if to see who won.

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Brooks: To see who was more persuasive in making their case, and whether the audience was moved one way or another. The point is to see who made the case most persuasively on a hot topic.

Corcoran: Now the debate is clearly about something called capitalism, although the motion is very odd: “The capitalist system is broken. It’s time to try something different.” What is your definition of capitalism?

Brooks: Capitalism is a theoretical concept that was derisively described by Karl Marx as one where the system rewards capital over labour. The problem is there isn’t actually a capitalist system in existence. It’s better to talk about free enterprise, and a free enterprise system is one where markets allocate capital and resources when they’re best equipped to do so. It doesn’t rule out the possibility of a social welfare system or government or anything like that. So I prefer to talk about the free enterprise system.

Visitors take photos in front of a sculpture of German philosopher and revolutionary Karl Marx on May 5, 2018, the 200th anniversary of Marx’s birth, in Trier, Germany.
Visitors take photos in front of a sculpture of German philosopher and revolutionary Karl Marx on May 5, 2018, the 200th anniversary of Marx’s birth, in Trier, Germany. Photo by Thomas Lohnes/Getty Images

Corcoran: But capitalism was developed into a more favourable non-Marxian definition by any number of economists, such as Milton Friedman.

Brooks: Yeah, kind of. What they agree on is that markets either do or should allocate resources, that’s the whole idea. So a pure capitalist system is one in which markets allocate all resources according to those who can and would pay the most for them. And Milton Friedman would say, yeah, when it’s possible it’s best, and Marx would say that’s what always happens in societies where we don’t have institutional socialism and that’s bad. But they kind of agree on what happens under capitalism.

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Corcoran: You’ve written about what you’ve described as the five forces of capitalism. Many people would look at these five forces and say, whoa, he’s identifying the five problems of capitalism. What are the five forces?

Brooks: Globalization, free trade, property rights, rule of law and a culture of entrepreneurship. These aren’t five forces of capitalism. They are the five forces of prosperity, of progress, that have revolutionized the world and pulled two billion people out of poverty. The only reason I care about these things is because I want a world with more opportunity and less poverty. I don’t really care which people pay taxes. I care about the business climate only in so far that it creates jobs and pulls people out of the margins of society. Globalization, free trade and the other forces are under attack from left and right, but this is not a left-right issue under any circumstances. These are values that the big majority of people in the U.S. and Canada believe in, and that small fringes on either side don’t believe in. So this is a question of open versus closed societies and not about capitalism per se.

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Milton Friedman left, the recipient of the 1976 Nobel Memorial Prize for Economic Science, is joined by his wife Dr. Rose Friedman and president George W. Bush during a tribute on the occasion of his 90th birthday on May 9, in Washington, D.C.
Milton Friedman left, the recipient of the 1976 Nobel Memorial Prize for Economic Science, is joined by his wife Dr. Rose Friedman and president George W. Bush during a tribute on the occasion of his 90th birthday on May 9, in Washington, D.C.

Corcoran: The fact is that one of your opponents in the debate, Yanis Varoufakis, is going to say that capitalism is a disaster that can only be rescued by an international democratic socialist political revolution of some kind. He claims capitalism is immoral.

Brooks: Well, it’s hard to say what we’ll be debating, but Varoufakis is right, capitalism is not moral. My car isn’t moral either. Only people are moral.

The problem with any “ism,” including socialism, is when people don’t have clear morals and values. When we have our values in order, when we have a good society in which we care for each other, then the enterprise system is best for lifting people up to opportunity and equal dignity. But when we don’t have our morals in order, you can get everything from a dystopia based on predatory markets all the way through to the Soviet Union.

The problem with socialism is that it scales very poorly. My family is a socialist enterprise. But as you get into larger and larger groups of people, the incentives for individuals is such that no matter what the rules are, you wind up not just with inefficiencies but bitterness and having to have such a strong hand that human dignity is almost always violated.

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On the other hand, when you have no sense of social solidarity, capitalism will wind up being eviscerated by greed and materialism. Part of the problem is also that detractors think capitalism is something that it isn’t. The enterprise system requires competition. Cronyism, people fixing deals with the government, that’s not free enterprise. Cronyism is not winning a competition; it shuts down competition, the Red Sox blowing up the Yankees’ bus on the way to the game, that’s not competition.

Capitalism is not moral. My car isn’t moral either. Only people are moral

Corcoran: If the forces of free enterprise are demonstrably desirable, in terms of historical achievement, why are people in the United States and around the world seemingly turning against the them?

Brooks: There are a bunch of different reasons for that. Free trade and globalization lift billions of people out of poverty, but in local areas you can actually see people who suffer from it.

When you allocate capital according to the most efficient use, you might not make shoes in Oklahoma, you might make shoes in Guatemala, which is really good for people in Guatemala but not so good for people who just lost their shoe-making jobs in Oklahoma. “Hey, what about us? I lost my job.”

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Corcoran: What’s the answer?

Brooks: You need public policy to allow people and markets and countries and communities to adjust to new economic realities and sometimes that can be incredibly expensive. We have education systems that don’t retrain anybody, education systems that were appropriate to the pre-trade economy of the 1950s and ’60s. We will train you to do one thing and we’re never going to train you to do anything else ever again, and that’s crazy. We don’t have a match between workers and jobs.

We need a system that makes it possible for people to move to where the jobs are. We actually don’t have a lack of jobs because of globalization and free trade; we simply don’t have a match between workers and jobs. If you’re living in rural Kentucky, there are no jobs in the coal mines. But that doesn’t mean that there are no jobs for you anyplace.

Corcoran: But can’t people figure that out on their own and do what individuals have done for centuries, which is to cross the country or move to another town?

Brooks: Not everybody actually has the ability or willingness to do that and unless we’re willing to say “laissez-faire” — let people be hungry if they’re not going to pick up and move — then we need a social welfare system that actually takes that on in a more meaningful way. I believe that’s exactly what the largesse from capitalism allows us to do. The greatest achievement of capitalism, from my point of view, is creating a largesse where we can have a social welfare state that provides for people and their needs. And one of the most important needs is the dislocation that happens to people.

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Corcoran: I’m going to change gears here to note that all sides in the current U.S. election debate seem to be dominated by anti-capitalists. Could the arrival of Michael Bloomberg, who is a capitalist by most definitions, as a Democratic candidate change the ideological environment?

Democratic U.S. presidential candidate Michael Bloomberg addresses a news conference after launching his presidential bid in Norfolk, Va., on Nov. 25, 2019.
Democratic U.S. presidential candidate Michael Bloomberg addresses a news conference after launching his presidential bid in Norfolk, Va., on Nov. 25, 2019. Photo by Joshua Roberts/Reuters

Brooks: It’s impossible these days to predict what’s going to happen in politics. Bloomberg could get zero traction and do nothing, kind of like Tom Steyer, or he’ll hit the moment in just the right way with a plurality. Donald Trump was never the majority flavour of the Republican Party. Bloomberg might be able to do that on the moderate side with the Democrats, for all I know. I wouldn’t do any Vegas betting on politics in the U.S. anymore.

Corcoran: Are you at all dismayed by the fact that we have three or four fairly radical leftish socialists in competition for the Democratic leadership?

Brooks: It’s pretty predictable. Every 10 years after a financial crisis, when economic growth is very uneven, populists parties and politicians get about a 30 per cent bump in voter support. The reason is that in the wake of a crisis something like 20 per cent of the population gets 80 per cent of the gain from new economic growth. There’s not a macroeconomist on the planet — whether a Milton Friedman or a Yanis Varoufakis — who knows how to sort that out effectively. Governments don’t know how to deal with this asymmetric growth problem, but what ordinarily happens in the U.S., and most other places, is that as the economy becomes more symmetric, people lose their taste for these types of politicians.

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These are all fundamentally fear-based politicians. They’re saying “Somebody got your stuff and I’m going to get it back.” That’s what Bernie Sanders and Donald Trump have in common.

Corcoran: Your Munk Debate opponent, Yanis Varoufakis, is a high-profile leader of Europe’s burbling leftists who want to install a new anti-capitalist democratic government in Europe, including a Green New Deal aimed at eliminating fossil fuels from the EU economy. It sounds very similar to what people are talking about both in the U.S. and Canada.

Brooks: The Green New Deal is a proposal in the United States that’s not going to go anyplace — and it’s used as a political football by the political right who act as if this were a mortal threat to the capitalist system. Before you freak out about the Green New Deal, you need to ask to what extent does this have any likelihood of becoming law? I’ve looked at it and it’s not something that people want. There’s no evidence that any government is remotely capable of governing on the scale that they’re talking about. The result would be unimaginable levels of unnecessary secondary consequences.

This interview has been edited and condensed. For more on the Dec. 4 Munk Debate on Capitalism, visit munkdebates.com.

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