Capitalism — The Good, The Bad and The Ugly ~ Teaching Students How to Think vs. Teaching Them What to Think

Sadly, when it gets to the point in Texas that teachers must teach the truth in “public” schools only as social conservatives in this state are privileged to know the truth, it will be time for me to retire or find something else to do until I do.

opaSeptember 7, 2009  —  From day-one in my high school economics classes, I assure my college-bound students that my goal is not to teach them what to think, but rather how to think. I tell them that, if we are to have the freedom and ability to make up our own minds about controversial subjects, we must be exposed to facts, theory and opinion from all sides — without prejudice. They, for the most part, seem to accept and respect this as a given.

Introducing the subject of an economics lesson to my high school seniors last week, Capitalism and Free Enterprise, I quoted an Anglican Priest, W. R. Inge, who said or wrote, “The enemies of freedom do not argue, they just shout and shoot.”

I gather what Reverend Inge was saying is that, for freedom to thrive, people must be willing to engage in “reasoned” argument – that when we refuse to consider others’ arguments or stop listening to facts and start making things up to distract others from real issues, we are obstructing the democratic process and are, therefore, enemies of freedom. Now, this I did not say to my classes, but we’ve seen a good deal of shouting taking place in town hall meetings all across the country this past month. Have we not? We’ve also seen individuals showing-up at these meetings with loaded weapons, weapons they insisted were not brought to intimidate people with whom they disagree. Awhhh… give a break!

Inge was a professor at Cambridge University and a prolific author who wrote scores of articles, lectures and sermons. He also wrote over 35 books but was best known for his works on Plotinus and neoplatonic philosophy, and on Christian mysticism. He was a believer in spiritual religion — faith based not upon coercive authority but on experience and individual inspiration. Obviously, he was a pragmatic person. I can’t find any reference to his political leanings though. If he had any, he probably kept them to himself because, as in the U. S., I assume religious leaders and educators in the U. K. are pretty much expected to be apolitical. But I’ll just bet that, if he ever did vote, he voted for candidates representing either the Social Democratic Party or the “old” Liberal Democratic Party of the U.K.

I shared none of my speculation about Inge’s politics with my students, if he had any politics. Teachers in Texas are expected to be apolitical too, especially if they lean at all to the left, don’t you know? But as I write this now, I’m struck by how I was teaching this lesson last week while some parents in Texas were calling school boards and principals to threaten keeping their students out of school if they were allowed to watch President Obama’s return-to-school address to students. Sadly, when it gets to the point in Texas that teachers must teach the truth in “public” schools only as social conservatives in this state are privileged to know the truth, it will be time for me to retire or to find something else to do until I do. With the Texas Education Agency (TEA) review committee, stacked as it is with like-thinking social conservatives to rewrite the Texas Essential Knowledge and Skills (TEKS) for social studies subjects according to right-wing, radical political philosophies and beliefs, that time may be upon me sooner than later.

No, my point in using Inge’s quote was not to indoctrinate my students with “liberal” ideas. It was to get my students to think beyond the limits of our textbook lesson on capitalism – to think on a higher level – to get them to understand why some living outside the developed world are reluctant to embrace western-style capitalism, why they view our system as just another form of imperialism, an economic form. Scholars of the Islamic faith and Southwest Asian history say that this is behind much of the hatred directed toward the U.S. and European countries — why some in the Islamic World have become so militant, choosing to shout and shoot rather than accept the possibility that they could be wrong.

After discussing current economic events, including the story that broke last week about the average annual compensation for CEOs of the twenty largest banks and financial institutions in the U.S. exceeding $13,700,000 each, we covered the characteristics and merits of capitalism. These CEOs, by the way, head-up the very businesses that received most of the tax-payer funded Troubled Asset Relief Program (TARP) money last year and this. The compensation of these CEOs is more than thirty-five times as much as our president makes and more than 400 times as much as the average tax-payer.

Although not included in our text book, it is true that the roots of capitalism can be traced back to the Golden Age of Islam and the Muslim Agricultural Revolution that took place between the 8th and 12th Centuries. Europe was still in transition from Feudalism to Mercantilism and would not begin to adopt “free market” concepts until after Adam Smith’s landmark book, The Wealth of Nations published in 1776. It is also true that capitalism, the American version of it, is based on the concept of economic freedom, the idea that we are free to pursue any business we choose anywhere in the country, or outside the country for that matter, that we choose to make whatever products and provide whatever services we wish – so long as our choices don’t harm others or at least aren’t illegal. It is also true that, in America, the concept of economic freedom implies that there should be a minimum of government restrictions on businesses, that we trust the market place to punish irresponsible behavior. But this tenet differs from other western market economies wherein governments have become more involved – more shared (socialized) since the end of WWII.

Some in America believe that economic freedom is a synonym for Free Enterprise, and that Free Enterprise is simply the English translation of Laissez-Faire (meaning no government involvement whatsoever). But, as we have learned from recent experience following the deregulation of financials in this country, Adam Smith’s Invisible Hand does need a measure of guidance and oversight by regulatory agencies, whether part of the government or not as is the case with the Federal Deposit Insurance Corporation. This is because business under capitalism is driven by self-interest, another characteristic of capitalism, and sometimes this motivating force can lead to greed, excesses, and violation of the public trust.

At this point, I had my students watch a brief video interview of Bill Gates, the most successful capitalist of our time, by the editor of Time Magazine. Mr. Gates spoke of how capitalism has worked well, better than anyone could have imagined, simulating innovation and advances in all manner of products and services. But he also made quite clear that capitalism has worked best for the well-off, increasing dramatically in recent years the gulf between the wealthy and the poor – rich nations and poor nations. Without offering ideas for how to incentivize businesses to do more to alleviate poverty and suffering in the world, using their great potential for profit in altruistic ways, he postulated that they should and that, magically, somehow they will. In support of this great hope, he suggested that the young today have an innate desire to work for socially-responsible businesses and that this will temper corporate greed.

After viewing this video, one of my students suggested that Mr. Gate’s vision for the future of capitalism without government encouragement is overly optimistic. This led to a brief discussion on whether the federal government has the authority under the Constitution to limit excessive compensation. I settled the argument so that we could move on by pointing out that Congress enacted minimum wage, thereby establishing a floor for wages, under the Fair Labor Standards Act of 1938. While people still argue for and against it for its positive and negative impacts on the economy, the law has been upheld by the Supreme Court. Therefore, there is no reason to disbelieve that Congress could not enact a law establishing a ceiling on salaries and other forms of corporate compensation.

Another characteristic of capitalism is that it includes the concept of voluntary exchange – the idea that buyers and sellers can freely and willingly engage in market transactions – that we don’t have to buy products and services offered by a particular business or made here in the U.S. Likewise, businesses are not prohibited from doing business in other countries, even exporting Americans’ jobs for foreign workers. We participate in transactions believing that both buyers and sellers are made better-off there from.

Capitalism, as envisioned by Adam Smith, cannot thrive where there is inadequate competition. When a particular industry becomes excessively concentrated as, for example, health insurance in the U.S. these days, the seller has an excessive advantage in the marketplace. Prices will outpace average inflation for all other goods and services.  That’s when, as our textbook points out, government as a regulator must step-in to somehow restore competition.

Finally, American-style capitalism depends on the concept of private property, to include “intellectual” property, as in copy rights and patents on new technologies. Unfortunately, other countries’ versions of capitalism, such as that which is practiced in China’s “mixed” economy, don’t recognize this as being so important, especially since most of the creative innovation still comes from the U.S. and other market-based economies.

The lesson concluded with the various roles played in capitalistic economies such as ours, the entrepreneur, the government and the consumer. As our textbook points out, when competition is adequate, the consumer is “sovereign,” or king in the economy. This is because the dollars we spend on goods and services act as if they were votes. The choices we make, expressed by the dollars we spend for what we buy and from whom we buy determine what gets produced. Were it not such a contentious political issue and if I could be free to express my personal opinion, I’d have pointed out that this is exactly why President Obama advocates a “public” option for health insurance in the legislative debate over health care reform. Americans these days, unless they are members of Congress or are well-off enough to shop for insurance independent of an employer, have no choice. Therefore, consumers are not sovereign in this particular market; corporations are.

With minimal government regulation and state and local governments’ support for business development, American-style capitalism has clearly made some in this country very rich. This economic formula has also led to miraculous advances in technologies that have improved our material lives and longevity. But there have been down-sides too. The gulf between the rich and the poor has grown and grown to the point that average citizens are worse-off today in terms of purchasing power. Americans’ take-home pay today buys thirty percent less than the average manufacturing wage after taxes did back in the 1970s. Also, with the elimination of most trade restrictions in American-style capitalism, many well-paying jobs have been off-shored to the developing world. So foreigners are benefiting from American-style capitalism right along with the wealthy in this country. So, capitalism is good. It’s also bad and it can be ugly, especially if you’re out of work, can’t afford health insurance, and you get sick. It all depends on your point of view or your political persuasion.

Please feel free to post a comment whether you agree or not.

Published in: on September 7, 2009 at 8:15 pm  Comments (9)  

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9 CommentsLeave a comment

  1. SBOE members are elected, not appointed.
    The Governor only appoints the chair.

  2. Thanks for pointing this out, Kimmy. I think I’ve made the appropriate correction to the text.

  3. This was a great and informative read. I am a student in East Tennessee, and just as in Texas, left-leaning individuals are frowned upon. This has helped strengthen several arguments I use during class discussion when we talk about socialization of certain industries or lack thereof.

  4. It was regulation that created the market collapse. Please read about the Cummunity Reinvestment Act supported by both parties.
    Please teach your students about the Political views of Ghandi. May I suggest the book, “Mahatma Gandhi: Selected Political Writings” (Paperback)
    ~ Mahatma Gandhi (Author), Dennis Dalton (Editor)

    “External freedom will always be the means of measuring the freedom of the self within. Hence we often find that laws made to grant us freedom often turn out to be shackles binding us.” ~ Mahatma Gandhi

  5. I do not teach my students what to think. I do try, however, to teach them how to think.

    You are welcome to your opinion, but please know that it is shared by only a small minority of today’s academics. Politicians may love the idea of expanding the CRA for the votes that it may gain them, but economists are more dubious. I, however, will let my students know of the reading you suggest. Thank you for your comment.

  6. I know my opinions are not shared by “today’s academics” and I agree that you should not teach your students what to think– I never suggested that.

    However, I do think that the biggest problem is that the view I suggest above is “shared by only a small minority of today’s academics.” There should be no majority or minority in academic teaching. I believe that students should be exposed to all views.

    Basically, I believe the facts are not taught in public eduaciton and I am discovering this by talking with my younger friends (I am a 32 year old registered libertarian who would never sell my soul to either the Republican or Democrat ‘side’).

    Those in their early twenties that I have spoke with simply do not know the facts about the different parties and their history and do not know the facts about freedom and the founding father’s intentions.
    Please skim these articles at the URLs:

    I won’t bother you again. I am just concerned about the direction America is going and I perceive this as a problem with public education being far too one-sided.

    Thank you for your open mind. You are an asset to “today’s academics.”

  7. Your comments have not bothered me. You are entitled to your opinions even though they are consistent with those of only a small minority of academics, and you are free to express them on my blog. It is for that purpose, the free exchange of ideas, for which The World According to Opa is dedicated.

    Libertarians come in many different hues. Those with whom I have traded “reasoned” arguments in the past have all turned out to be ultra conservative, however, which is where I perceive the Republican Party is headed these days. I, on the other hand, attempt to maintain a more moderate stance, but it’s difficult to do in light of recent events. The pragmatist would say, “If what you’ve been doing hasn’t worked, try something else.” But we are in agreement on one thing, that teaching a subject like economics, whether from the far right or the far left so as to indoctrinate young people, is wrong.

  8. Hi Opa,
    Like Lauren, I too am a Libertarian and I am appalled that many ultra right conservatives (Beck, Palin et al) have managed to “hijack” the tea party movement.

    I for one am NOT against gay marriage (what two people agree to do, provided it has no direct impact on me is their business); smoking pot and other “victimless” crimes; abortion and so many of the other issues that we have allowed government over the years to encroach on the liberties guaranteed under our constitution and bill of rights.

    But despite your apparent “left” leaning views, I am in full and total agreement that as educators, we have a moral obligation to present a “fair and balanced” perspective on all issues, in the hope that by teaching people to think critically, that we can avoid the “extremists” we see becoming more influential, whether religiously, politically and socially…….

    Dr. PDG, Jakarta, Indonesia

  9. This is quite possibly the most gracious comment posted yet by a person of your political persuasion. Thank you, Dr. Giammalvo.

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