All is true. But with capitalism inside -- much better. 2010-04-26

Reviewer: Mordchay Perel

Dear Steve Forbes and Elizabeth Ames:

To be honest, I did not buy your book. I peaked into the part Amazon offers to read and concluded that my views about the economy jibe with yours to the T. It may well be that people who hold opposing views will be persuaded by your real-life arguments. Amen!
I want you to pay closer attention to a few of your phrases:
1. "an economic environment that gives those people sufficient freedom to take risks and pursue their visions."
2. "few revolutionary inventions have originated in authoritarian nations."
3. "corporations are seen as mechanistic oppressors of human spirit."
The above phrases relate to countries, not to individual enterprises.
Now, let's relate them to an individual enterprise.
If 1 is true, the workers will turn the enterprise much more productive and profitable. However, inside the capitalist enterprise a command-and-control economy is practised, hence productivity of the workers is limited by peer pressure and the union.
If 2 is true, workers of all levels use their brains individually and as a team, hence the products and processes of the enterprise are improving all the time. However, inside the capitalist enterprise, due to the authoritarian relations, only the top level employees use their brains, hence revolutionary inventions come only from them. So there are only a few.
Indeed, corporations (with slight easements in a few of them) do oppress human spirit, indeed.
Should employers replace their benevolent command-and-control style of management that turns their enterprises into mechanistic oppressors of human spirit and curtails the freedom of workers to take risks and pursue their visions, thereby limiting the brain operation of the workers to the few at the top level and consequently severely depriving the corporation of productivity and profits, by another style?
What is the other style?
The other style is the next natural after-employment Mode of Labour Utilization (MLU), where a worker, instead of selling his labour for a wage (employment), is investing the value of his labour for personal profit (entrepreneurial MLU). With the new MLU, the adversarial employee-employer relationship is replaced by a symbiosis relationship: the corporation owns the means of production and makes a profit (loss) on this ownership; the worker owns his labour and makes a profit (loss) on investing this value. Where is the symbiosis? The corporation cannot make a profit without the worker utilizing its means of production. The better the worker is utilizing these means of production, the more profit the corporation makes and the more profit the workers makes on his invested labour. The corporation has the incentive to supply the worker with the most suitable means of production and the worker is interested to invest labour of the best quality. Only then both end up with most profit.
For details, get hold of my book here on Amazon, Smiling for Profit.
Smiling for Profit: Good-bye, employment. Hello, entrepreneurship on the job

Forbes is the very best 2010-04-22

Reviewer: John North

What a brilliant breakdown on all the things that concern us today.
I must read all of his books now.

How Capitalism CAN Save the USA if it's Allowed To Do It 2010-04-03

Reviewer: James R. Holland

This excellent book by Steve Forbes and Elizabeth Ames is going to be slow readIng, but not because it isn't easy to read and understand. It's because the reader is going to find half a dozen things on each paid that they want to mark for future study. This 357-page volume is a primer on just exactly what capitalism is and equally as important, what capitalism is not. Capitalism has been given a bad rap for so long that people have been brainwashed by Socialists and the economically ignorant media about how capitalism is the most efficient and effective economic system in the history of the world. "No system has been as effective as capitalism in turning scarcity into abundance."
"Along with bringing prosperity to millions, democratic capitalism has undermined political tyranny and promoted democracy and peace between nations of the world. It is, with doubt, the world's most moral system."
"Despite all the gloom and doom voiced by its critics, the free-enterprise system is--and has always been--the best way to unleash the creativity, inventiveness, and energy of people and mobilize them to meet the wants and needs of others. That's because free-market transactions, far from being driven by greed, are about achieving the greatest possible mutual benefit, not only for the parties directly involved but eventually for the rest of the society."
This book, in eight detailed chapters and an epilogue, explains why Capitalism is so superior to any other economic system that has ever existed anywhere in the world. Each chapter heading is a question that is explored in great detail. They include questions such as "Is Capitalism Moral?", "Isn't Capitalism Brutal?", Aren't the Rich Getting Richer at Other People's Expense?", "Aren't Higher Taxes the Price We Pay for a Humane Society?", "Don't Regulations Safeguard the Public Good?", "Aren't Free Trade and `Globalization' Destroying American Jobs and the Economies of Other Nations?", "Is Affordable Health Care Possible in a Free Market?", and "Isn't Government Needed to Direct the Economy?"
The co-authors do a superb examining and answering these questions and what emerges is a better understanding of what capitalism is and isn't. "...Wealth is produced in society by countless individuals seeking to meet their own needs by meeting the needs of others." It's impossible to provide even a clue to how well these questions are answered within the entire volume. The authors also provide lots of examples to back up their points. There are lots of "good" little devils helping edit the details.
"Markets are people voting with their money."
"Only government, with its immense market power, is capable of causing systemic economic upheaval on the scale of history's great economic failures. Through its ability to tax, regulate, and control the supply of money, as well as its political influence, government has more market power than many Wal-Marts and Googles put together. The creative destruction of free-market capitalism can create job losses and disruption within specific economic sectors. But only the action of government have the kind of impact on national--indeed, global--economy capable of causing a systemic meltdown on the scale of the Great Depression of the 1930s, the Great Inflation of the 1970s, and the economic crisis and recession of 2008-2009. Yet politicians and others who buy into the bad rap on capitalism almost always blame these traumas on `unfettered market'--responding with still more government `solutions' that only make matters worse."
After carefully reading this book most of the readers will probably agree that perhaps the title should be changed to read: "How Capitalism `MAY' Save Us."
Since this manuscript was completed, the government of the United States has taken several giant steps in directions that are certain to devastate the shaky and still recovering economy. Eventually the laws of supply and demand will reassert themselves and the USA will have to undergo an economic purging. When the dollar is near worthless, expenses will have to be brought into line with income. Because of his upbringing and gross inexperience in the private sector, the President has no idea how Capitalism works and is following in the footsteps of the two other Western Hemisphere countries whose leaders he admires--Castro's Cuba and Chavez's Venezuela. It `s not the President's fault, he simply has no idea what makes wealth and creates jobs. He is a self-confessed "wealth distributor" rather than a "wealth creator." His Karl Marx and Saul Alinsky inspired agenda will bankrupt the nation and turn all its citizens into serfs like in the good old days of Camelot and the Dark Ages. Americans won't like living in Obama's version of Robert Mugabe's Zimbabwe, Africa.
This is an important book for any would-be informed person to read. Our school system and media has failed utterly in teaching American economics, the free-enterprise system, and how and why capitalism works better than any other economic system that mankind has ever tried.
"Indeed, we may one day look back on the period of 1982 to 2007 as an economic golden age...we've come a long way. Not only `the rich' but people of all incomes today are doing better." Making changes to something that has worked well for so long should be made slowly and carefully examined for unintended consequences before making additional improvements.

Cover to Cover Craziness! 2010-03-03

Reviewer: Loyd E. Eskildson

"Capitalism is the world's greatest success story." So begins Steve Forbes' "How Capitalism Will Save Us," and he is right, partially. However, rather than provide a balanced presentation of capitalism and its shortcomings, the book provides a seemingly infinite supply of blatant falsities, half-truths, non-sequiturs, and omissions. Nonetheless, given the author's prominence and the lack of reviews elsewhere, the book merits review.

"How Capitalism Will Save Us" is built around a structure of first offering a well-intended misunderstanding of capitalism, followed by gentle correction from the author using selected or manufactured facts. Another constant throughout the book is a preference for private over government spending. Why - because Harvard economist Barro tells us that government spending has a lower spending 'multiplier.' Barro, however, drew his conclusions from analysis of WWII military expenditures - an outlay guaranteed to have a low multiplier. Conversely, government spending for typical infrastructure projects is highly likely to have a multiplier > 1 (especially if U.S materials are mandated), and to boost future productivity. Regardless, Forbes also contends that "Trade deficits are meaningless" - despite their pervasive, large, and growing nature, and very low multiplier. (Illegal worker remittances to Mexico would similarly have a low multiplier.)

Continuing, "Protectionism kills more jobs than it saves," writes Forbes. However, Free Trade wasn't the policy when the U.S., Japan, South Korea, China, etc. began to industrialize or started new industries, nor was it how the U.S. saved thousands of auto-making jobs in the Reagan years. Further, neither Adam Smith or David Ricardo advocated unrestrained Free Trade in an environment of competitors having a seemingly infinite supply of talented, very low-cost workers. In fact, Smith explicitly renounced Free Trade that brought the loss of capabilities vital to defense - today's heavy industry, manufacturing, and high technology. Undaunted, Forbes continues on the topic with "Relatively few jobs in the Real World are lost because of outsourcing or off-shoring." Ludicrous, given the presence of 12 million-some illegals in the U.S., and the endless procession of 1.5 mile-long trains crossing the U.S. carrying double-stacked containers with products from Asia. Goldman Sachs, for example, estimated in 2004 that about 400,000 jobs had already been lost to outsourcing and that another six million would follow over the next 10 years. Forbes then repeats the conventional wisdom that Smoot-Hawley tariffs led to a long Depression - mathematically impossible given that our exports at the time were only a fraction of one percent.

Moving to health care, Forbes tells us that "Since the early 20th century, life expectancy has increased, and infant mortality rates have fallen tenfold." However, he does not explain what capitalism had to do with either - the former was mostly due to improved public health, and the latter to improved (government-provided) access to maternal and child health care. "Major killer diseases have been drastically reduced or eradicated in most parts of the world." Why - government funded research and immunization programs.

Forbes cites Brian Riedl (Heritage Foundation) to claim that "Medicare wastes more money than any other federal program." Yet, in a 9/22/2009 paper, Riedl only claims that the $1 trillion in potential savings from Medicare and Medicaid over the next 20 years proposed by Democrats is basically mythical. Instead of admitting that Medicare has much lower administrative costs (2-3%, vs. 27-40% for private insurers), Forbes claims that both Medicare and Medicaid are "mammoth government insurance bureaucracies." Worst of all, Forbes claims "(high) health care are the result of layers of laws and regulation." The truth is that the main driver of U.S. health care spending is capitalist physicians and researchers increasing medical service utilization according to fee-for-service reimbursement incentives, profits from referring patients to physician-owned facilities, and getting illegal kickbacks from drug companies and medical device makers. Forbes seems also unaware that Mayo, Geisinger, and the Cleveland Clinics, as well as the government-run (God-forbid!) V.A. system provide very high quality care at lower cost - partly through paying physicians a flat salary. Then there's also the matter of capitalist-driven hospitals building market power through acquisitions that eliminate competition at the metropolitan area. No problem, per Forbes - the free market offers cheaper care in India - if you can get there alive.

Forbes goes on to tell readers that "Americans have higher survival rates for illnesses ranging from cancer to heart disease." Only the cancer outcomes portion is correct. The 2009 Robert Wood Johnson Foundation report contradicts Forbes with data reporting the U.S. ranking 16th out of 19 OECD nations in minimizing overall amenable mortality (including cancer), and that our asthma mortality is double the average, while U.N. and CIA data show the U.S. as 33rd in infant mortality and at about the same ranking for under-five mortality. As for expected lifespan, we're #49, per the CIA. Forbes also forgets to mention that comparisons of care quality between for-profit and not-for-profit entities consistently find inferior treatment and outcomes from the capitalistic for-profit sector.

Drug companies are most everyone's favorite whipping boy. Medicare's drug-benefit is estimated to cost taxpayers $724 billion over ten years - about $63 billion higher than necessary if price negotiations were allowed. Then there's authoritative reports that most of the expenditures for developing new drugs are funded by the government, most of new drugs are "me-too" variations with little or no benefit vs. those currently on the market (a fact concealed by comparing them vs. a placebo instead of existing drugs, or by testing a new drug vs. an inappropriate dosage of something else), companies spend more on marketing than research, considerable extra profits derive from minor tweaking of existing drugs to all extending their patent protection, and that in 2002 the top ten drug companies made greater profits than the other 490 businesses on Fortune's Top 500 list. Forbes' responses - 1)"One reason drugs are nearly unaffordable by individuals is that . . . individuals are not usually the ones paying for them", and "Is it really in the interest of drug companies to gouge consumers?" Response to #1: They often can't even afford the co-pays. Response to #2: Absolutely, when you have a patent, someone's life is on the line, they have no alternatives, and you have no qualms about gouging consumers!

Concerned about being unable to obtain health insurance due to pre-existing conditions? Forbes has an answer - 'health-status' insurance ($700-900/year). Folks already struggling to make ends meet will be delighted to hear that.

Returning to government waste, Forbes also contends that government spending is more wasteful than private spending. Yet, he ignores major Defense Department waste, propelled in large part by capitalist lobbying by Litton, Boeing, Northrup-Grumman, Lockheed-Martin, Pratt & Whitney, etc. (President Eisenhower's 'military-industrial complex). For example, our Navy maintains 11 carrier strike forces around the globe costing billions to both build and operate. Yet, they are increasingly highly vulnerable to destruction by low-cost asymmetric means - Chinese missiles and super-quiet diesel submarines, Russian missiles, Iranian speedboats armed with missiles. Don't believe it? During the Pentagon's 2002 Millennium Challenge military exercise, Marine Lt. Gen Riper launched a massive salvo of cruise missiles and 'destroyed' 16 warships carrying 20,000 sailors - including one aircraft carrier and ten cruisers comprising most of the opposing fleet. Then there's those expensive fighter planes (2,400 @ $125 million/F-35 for the newest version) - largely useless in Afghanistan and Iraq, and replaced by $4.5 million Predator drones. And what about our staffing troops in 120+ nations, along with decades of aid to Israel - Forbes forgets those expenditures as well, even though they led directly to the Arab oil embargo, 9/11, $3 trillion wasted on Iraq, an ongoing war in Afghanistan, and 7,000-some lives lost.

"People are blind to government's role in today's economic disasters," writes Forbes, and then asserts that Fannie Mae and Freddie Mac had major roles in the 2008 financial meltdown. Nobel-winning economist Joseph Stiglitz counters that both "came late into the subprime game." (Ireland had similar bubble - but no Fannie Mae or Freddie Mac.) As for Forbes' almost universal distaste for regulation, even Chuck Prince, former Citigroup CEO, implicitly admitted a major free-market role in the 2008 debacle when he pleaded with Secretary of the Treasury Henry Paulson for more regulation to alleviate the competitive pressures to follow profitable, but risky, subprime practices. "As long as the music is playing, you've got to get up and dance," Prince is quoted as saying. His message - unregulated Wall Street pressure makes financial CEOs do things that are stupid in the long run to keep from being acquired in the short-run. Finally, just in case readers might be tempted to give Forbes some slack on government regulations, he goes on to claim "loosening regulations . . . produced a flood of innovation - from personal computers and cellular phones to the Internet." Unfortunately, Forbes doesn't specify which mythical regulations were loosened to help create the Jobs/Wozniak computer in Jobs garage or the IBM PC, and neither do Jobs/Wozniak or IBM. Same with cellphones. As for the Internet - it began with DOD's Advanced Research Projects Agency in 1962, and continued to be managed by that group for 20 years. (No, Al Gore did not invent the Internet.)

Back to Riedl, Forbes' favorite waste-watcher. In 2007 Riedl pointed out that corporate capitalist farms have successfully lobbied government to receive the bulk of planned $25 billion/year in farm subsidies while driving small farmers out of business. Other experts also contend that these same subsidies create illegal immigrants out of small farmers in Mexico. Forbes, however, seems unaware of these publications. Instead, he reports that "Agricultural productivity has soared," supposedly because of capitalist innovations. Actually, the 'Green Revolution' took place largely because of government-funded work by Norman Borlaug, beginning in Mexico and then expanding to India, Pakistan, etc. In the same sentence Forbes also credits capitalism with "The environment is also cleaner in many parts of the world." In this instance, it was due to laws and EPA regulations in the U.S. and similar efforts in other nations that mandated clean-ups by automakers, power plants, and other industries - despite their strong opposition. Forbes ends this section by correctly pointing out that some mandates have unintended consequences and excess costs/life saved. His example of a good regulation - seat belts, costing $69/life-year saved. Yet, free-market auto-makers strongly opposed that mandate as well.

"The effort to save Detroit from itself . . . wiped out holdings of creditors and shareholders" complains Forbes, who also blames Washington as partially causing their demise by imposing CAFE regulations that also applied to Ford, Toyota, Nissan, BMW, etc. Instead, Forbes writes that Washington should also have forced GM and Chrysler through bankruptcy. Funny, I thought that happened.

Finally, "The rich make everyone richer" through their investing and building. Except when that investing is overseas, an LBO takeover or existing stock issue.

Bottom-Line: Forbes raises some legitimate issues - eg. our large and rapidly rising national debt, and health care expenditures. However, the mathematics of his 'cures' don't add up to much. Neither does his skimpy rationale for less government involvement in the economy, especially when compared to China's much greater degree of government involvement and recent economic track record. Finally, the innumerable deceptions, distortions, hyperbole, and contradictions in "How Capitalism Will Save Us" serve no one. Let's build on capitalism's strengths and shore up its weaknesses, not simply worship an ideal that doesn't exist.

New Adjustment to a Lingering Issue 2010-02-11

Reviewer: Alex Sova

As a graduate student of Political Science it is refreshing to read a book that sheds light and a new hope to this current economic political mess that has arisen since the political shift from Reaganomics. Most ley observers fall into the trap of blaming right vs. left, conservative vs. liberal, Republicans vs. Democrats and so forth. What remains is a genuine American conservative population that needs objective ideas to working out our own economic struggles. The book focuses on these concepts and brings us back to the basics and ethical fundamentals of economics.