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The Gospel of Wealth: Towards a New Generation of American Consumership
A Review of Economics and Finance for the American Way of Life
By Jim Chaffee
Economics and Finance for the American Way of Life is a textbook for a mandatory full year Texas public school course at the end of middle school. It was deemed necessary at this level because this is the age when students take their place among the ranks of their adult peers as consumers, with credit cards and cell phones and online shopping and as soon to be de facto owners of automobiles. Furthermore, fully thirty percent of the students in Texas will not advance beyond this level of education.
There are difficulties with such an ambitious text. Most of the students cannot read with comprehension beyond the level of comic books and it is not expected that they can comprehend newspapers in Texas until their senior year, though that is more of a goal than an expectation. This is not deemed a significant problem in Texas, in part because it is a Southern state and also because the state legislature works at the comic book level. Important documents in Texas are translated into comic book format, an innovation from Louisiana necessary to provide driver's license tests for illiterates. However, it could be problematic for other states that will likely be required to adopt this text.
In order to properly represent the true science of economics the Texas Board of Education and the State Legislator commissioned the Economics Department of the University of Chicago to compose the book. The Department of Management Science and Engineering, formerly Department of Economic Engineering (likely deemed too much an oxymoron to stand), of Stanford University was chosen to consult on matters of finance. This might explain the dedication of the textbook to Friedrich Hayek and Augusto Pinochet, "the inventor of economic freedom and the man who brought it to Chile," sure to be a controversial issue for other states where Pinochet is not the hero he is in Texas, a one-party elective constitutional monarchy under the authority of the Federal Government and within the bounds of the US Constitution.
Though aimed at a young audience, the text breaks new ground in its discussion of US capitalism. In particular, it meets head on the challenge of the conflicted vision of what might be called classical capitalism a la Adam Smith and the actual practice of US capitalism as expounded by another famous Scotsman, Andrew Carnegie, who emigrated to the US and became a far more successful practitioner of the art than the dreary academic and theoretician.
Before delving into the finer points of theory, the book (which comes packaged with a CD loaded with YouTube links) lays out the practical aspects of being an informed consumer. It begins with the contention that consuming wisely is more important than voting, making the argument that the real vote is with the pocketbook, dollars spent directing The Economy far more than ballots cast. Voting, they hint, ought be left to betters in any case, an elite they delineate later in the text.
As this implies, The Economy is the center of the text. Each nation, state, county, city and family has an Economy which must be appeased and cajoled. The duty of every citizen is to cultivate his or her Personal Economy from an early age as this will become the Family Economy, an amalgamation of husband's and wife's Economies upon marriage. They hint that there is not only a Global Economy, but in fact a Universal Economy which must be appeased by financial experts who are trained to intercede with the individual's Personal Economy through the higher Economies. (Makes you wonder what would happen if another country got an ATM on the moon first.) Some university departments such as the Stanford department which consulted on this text specialize in training analysts adroit in intercession on behalf of institutions larger than the individual, such as banks and corporations, while such intercession at the national level is mostly left to economists. In general, the role of the financial engineer (or analyst), which includes MBAs, is to intercede with different Economies on behalf of the people, including through institutions, while the duty of the economist is to interpret the will of The Economy at varying levels.
Unfortunately many economists are certified but few are chosen, which means there are plenty of false economists. Only those called by The Economy are true economists. Much mischief has been the result of false economists like Karl Marx, John Maynard Keynes, Milton Friedman, Paul Krugman, Ben Shalom Bernanke, and even Adam Smith. The calling of an economist requires intervention that cannot be supplied by a mere program of certification as a PhD. (The controversy regarding whether or not Friedman was truly a false economist is addressed and it is argued that his monetarist dogma is at odds with The Economy and its effecter, The Market. This is detailed later in the book, when it is demonstrated why Adam Smith was a false economist. Anna Schwartz is also singled out as a false economist.) It continues to be mostly left to religious professionals to intercede with and interpret the will of the Universal Economy, though economists sometimes take this role, particularly the Austrian school of which Hayek was a member. Many libertarians also take on this responsibility. However, as the text notes Hayek did not himself believe libertarianism was possible (he was a monarchist). Hayek was a true economist.
How is one to appease The Economy? Of course, by devoting one's life to pursuing money and the items it can procure. Displaying wealth is as important as having wealth. A powerful disputation shows that the most important measure of success and of validity in all social avenues from art to commerce is the amount of money the work generates. Nothing else matters in judging the value of anything, be it film, music, writing, or a life's work. It seems surprising at this late date in human history that such an argument must be made at all, but it is also surprising that so many grow up without being thoroughly inculcated into the truth. This is a failure not only of parenting, but of several religions of dubious merit. A full chapter is devoted to interpretation of scriptures that are frequently misrepresented, most especially 1 Timothy 6:10. Even the Sermon on the Mount is addressed, most especially Matthew 5:5. This is sure to add to controversy, but no one can doubt the importance of training up the coming generation to walk the right path, free from the prejudicial misinterpretations of the most important guide to economics ever written. It is amply demonstrated that the American way of life, the pursuit of wealth and material objects as the highest good, is based on solid Christian truth. The proof, of course, is in the obvious fact that God smiles upon the US as his chosen nation, a fact that causes all other people to wish to come here and participate in our holy lifestyle.
At this point students are admonished to avoid the study of useless subjects such as science and mathematics and philosophy and its ilk, disciplines better left to the needy foreigners who are trained in such frivolous pursuits. Books are to be avoided except as necessary for developing tools to get money. The example of Einstein is made, a man who gained little money for all his efforts and hence of little importance. He is paid extensive lip service for his apparent brilliance, but this is because so few understand him. Which begs the question, how do people know he was smart when he didn't take any tests to demonstrate the fact and no one understands his gibberish? At any rate, our great nation can recruit the best of his lot with ease when it is necessary to make some computations. After all, what is accounting but fifth grade arithmetic with rules for what to add and subtract?
Engineering can be of some use in business and some engineers have been successful entrepreneurs, people like Jeff Bezos, Akio Morita and Masaru Ibuka who transcended their academic restraints to become creators by starting important businesses. Of course, their reward from The Economy was immense wealth. Better, though, to follow the example of Bill Gates and Steve Jobs and eschew college certification and the potential for over-education which is expensive in time, effort and money. This advice is backed by discussion of how Bill Gates built his great company on the wasted technical efforts of Gary Kildall, a PhD in computer science. Of course, Jobs left the technical efforts to others as well; the example of his original partner Steve Wozniak is provided, and though Wozniak eventually went on to complete a college degree, it clearly did him no good. It is a myth that education leads to financial reward, since The Economy only rewards those who pursue money wholeheartedly, not through some secondary security blanket. If a degree is to be pursued, it ought to be in business. Economics is for those who would serve The Economy as secondary officials, hierophants and bean counters akin to accountants and copywriters and is anyway a calling. Those not called are false economists, as pointed out earlier.
Edison is paid the most words because he was an inventor-entrepreneur who, though sometimes getting his hands dirty, mostly hired grunts like Nikola Tesla to work the trial-and error factories where his discoveries were made. Trial and error and not science is the mother of invention. Tesla, it is pointed out, had engineering and physics training that Edison lacked, but it was Tesla who died penniless and in debt. Clearly, The Economy smiled on Edison, not Tesla for all his hyped notoriety of late.
The Gospel of Wealth versus The Wealth of Nations
The more abstract explication of capitalism opens with the simple example of Adam Smith's invisible hand presented as a control loop with feedback typically seen in robotic automobiles that parallel park themselves. In the sole usage of this expression in An Inquiry into the Nature and Causes of the Wealth of Nations, hereafter referred as Wealth, Smith presents the invisible hand as effecting positive social consequences from the profit motive and pricing mechanisms through The Market (though he did not use this name, but it is clear what he meant). For Smith it is the shopkeeper nation, not large scale industry, that brings about the invisible hand. This is a mistake and one reason he is a false economist. His model of capitalism is that of perfect competition and it is known now that in perfect competition it is impossible to make a profit (this is the reason venture capitalists do not invest in competitive enterprises, looking for opportunities in niches with difficult entry or protections such as patents or proprietary methods). Smith was not complimentary to the large corporations of his day, the likes of the East India Company or South Sea Company. He favored competition for all.
As Carnegie makes clear, competition is not for the lesser classes. The law of competition, as Carnegie calls it in The Gospel of Wealth, is only for the specially endowed elite. More about this later.
Smith also believed that the accumulation of great wealth was a danger to The Economy because it led those who accumulated it too quickly to identify with the upper classes of rich and powerful, providing a bad example. He hammers this point repeatedly in The Theory of Moral Sentiment regarding frugality; he seems to believe that conspicuous consumption is a mistake! In Wealth he writes that the employer ought to be parsimonious as an example to the worker. This is why he favored the anti-monopolistic markets where every man had an equal chance against the economic elites, because profits generated from monopolistic industry would be too easy profits and hence not lead to parsimony. Of course, he also wrote in Wealth that spending for the military should be paid for by taxes and that taxes ought to be levied more heavily on those with the most wealth, the economic elites. All of this is completely wrong, as the text points out. The US Defense Industry is monopolistic and provides a clear path to business success; witness the likes of GPS and the development of cell phones based on government monies given to corporations like Qualcomm, two examples provided alongside the historical fact that it was the government that developed the electronic digital computer with no more than moral support from a few private companies who, like IBM, profited greatly from this. The government has a clear stake in promoting monopolistic large enterprise.
As the text makes clear, Karl Marx used Smith's warning about the behavior of those who accumulate wealth to predict the demise of capitalism, a ridiculous notion in hindsight.
What Smith did get right has been tossed aside by modern society. He states in The Theory of Moral Sentiment that those in the "inferior and middling stations of life can never be great enough to be above the law, which must generally overawe them into some sort of respect for, at least, the more important rules of justice." (The Theory of Moral Sentiment, I.iii.3.5) This is where Carnegie and Smith begin to agree. Carnegie, too, is against the notion of equality before the law. The economic elites, those Carnegie terms men possessed of peculiar talent for affairs, men who make up the upper of what he calls the rigid castes of people divided into laborers and masters, are not to be subjected to the same laws as their inferiors. One of the laws not afforded lesser humans is the law of competition, which applies only the great men. They are specially chosen by The Economy and only they can compete before The Market. As Carnegie puts it, human society necessarily and rightly loses homogeneity.
Consider these words from The Gospel of Wealth: "…and while the law may be sometimes hard for the individual, it is best for the race, because it insures the survival of the fittest in every department. We accept and welcome, therefore, as conditions to which we must accommodate ourselves, great inequality of environment; the concentration of business, industrial and commercial, in the hands of a few; and the law of competition between these, as being not only beneficial, but essential to the future progress of the race. Having accepted these, it follows that there must be great scope for the exercise of special ability in the merchant and in the manufacturer who has to conduct affairs upon a great scale. That this talent for organization and management is rare among men is proved by the fact that it invariably secures enormous rewards for its possessor, no matter where or under what laws or conditions. The experienced in affairs always rate the MAN whose services can be obtained as a partner as not only the first consideration, but such as render the question of his capital scarcely worth considering: for able men soon create capital; in the hands of those without the special talent required, capital soon takes wings." (page 4; italics in the textbook, not the original).
This is the way true capitalism operates. The middling classes are not to be granted any opportunity for competition, since they are middling exactly because they are not chosen by The Economy and hence cannot create capital. Those with talent for affairs are the chosen, as seen by their accumulation of wealth. As Carnegie puts it on the following page, "It is a law, as certain as any of the others named, that men possessed of this peculiar talent for affairs, under the free play of economic forces must, of necessity, soon be in receipt of more revenue than can be judiciously expended upon themselves; and this law is as beneficial for the race as the others."
The conflict between Smith and Carnegie is on the nature of true capitalism. It is essential to not have false economies. The Economy raises mankind up to its highest good when all its manifestations are united in true capitalism, but from this conflict comes the claims of groups of the middling class, mostly misguided by socialists who want to control The Economy and by libertarians who believe that The Economy will function in a world without rules. Behind all this is a misunderstanding of the role of The Economy's hand, The Market.
The man behind the ideas of this textbook, Andrew Carnegie, author of The Gospel of Wealth, is a fit model for the modern entrepreneur (mistakenly entitled robber barons in the late 19th century). As Carnegie makes clear, society functions best when people know who are their betters. Even Smith understood that. In the text, the student is exhorted to obey his or her betters, namely those with more money. They have that money because they are the best, the chosen ones.
It is obvious that government ought not interfere with The Market, yet every law passed has this effect. Laws against murder, for example, curtail business opportunities. This is a problem only because egalitarian society requires that laws be enforced symmetrically, whereas The Economy demands that the law be applied asymmetrically. It is harmful for a poor man to kill a wealthy man, but for poor men to kill one another is not a problem. Police should be deployed only to protect the economic elites and ought be in the hire of the elites directly, so that no governmental intervention is required for the protection of society. Think how free would be every man if those like Carnegie had been able to murder with impunity the rascals who built the labor unions, if they had been able to employ military power to crush the rebellious workers who sought to upset the balance of nature as set in motion by The Economy. Here lies true path to freedom; the only true freedom is economic freedom granted by The Economy.
Social safety nets are anathema to The Economy. If a poor man dies, he is easily replaced; the wealthy can afford medical care which ought to be available only to those who can afford it. This would reduce the medical burden placed on society by reducing the requisite number of hospitals and medical personnel. When poor people can no longer work, they ought to be allowed to go off and die with dignity instead of being kept alive by the welfare programs Social Security and Medicare, which are a form of slavery to the middling class.
Laws that attempt to enforce some sort of unnatural equality and protection for the middling are evil; regulation of commerce is an abomination before The Economy. The example given is of Bernard Madoff, a man who was obviously favored by The Economy. He had great wealth. He had been a founder of the NASDAQ. That the monstrosity called the Securities and Exchange Commission destroyed him is wrong, but is the consequence of the existence of such an unnatural organization. This example could have been ripped from the work of Ayn Rand; Madoff is a hero of the sort praised in the novel Atlas Shrugged. There is no such thing as fraud in investment. People who are gullible enough to be "fleeced" were meant to be "fleeced," a mistaken term for having lost money. They are meant to be prey for men of affairs, of which Madoff was clearly one. Let the buyer beware. The Market punishes, not man. The Market is The Economy's actuator. If something is awry, is wrong, The Economy will punish the wrong doer. Madoff was not a problem and his being in prison is a great wrong to The Economy and hence to human society.
At this point, the student is once again admonished to voluntarily let the economic elite control the government. Friedrich Hayek did not trust democracy for the reason of egalitarianism, which is neither natural nor beneficial. He was a monarchist in favor of kings chosen by The Economy. It is better to let the wealthy alone vote. By instead buying goods, the middling class of consumer supplicates the chosen with the message of choice. In this way, the great men and their great corporations will provide the products that convey the most good for the most people in the middling to pathetic classes at the best prices. Those not satisfied by these choices who cannot afford to pay for their own choices are not of consequence and hence of no concern.
This may soon be a moot point in Texas. It is noted that the Texas legislature is at work on a law that will restrict voting to those with a minimum of net wealth; that is, wealth above and beyond debt. This is of course in keeping with the original will of the founding fathers, who attempted such a law but were overwhelmed by the mob. The personal property requirement would be adjusted for inflation and though the amount is not yet determined, it is considered to be at least ten million dollars by today's standards. This would insure that only the chosen of The Economy govern.
Of course, recent wise moves by the Supreme Court allowing unlimited corporate money into the election process go a long way toward implementing this anyway, since the middling and pathetic classes are heavily influenced by advertising. Fortunately their public education has the effect of keeping them from independent thought and formation of opinion, a good reason for this public expenditure. But it is more readily and cheaply implemented with commercial television designed to replace teachers and books, which are anyway passé.
All in all, this is a fair, honest and direct statement of how The US Economy should be allowed to function. That it is moving in this direction, especially with the advent of the Tea Party and their overlords, is a good sign. Adopting this text in all middle schools across the US would be worthy move in educating a new generation of consumers, likely effecting fiscal impaction and ameliorating false profits.
© Jim Chaffee 2012