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Ben Maryland
Erin Workman
ENC 1145
October 28, 2014
Please for the Love of Adam Smith, Dont Panic
Capitalism, the basis of the United States economy has been alive and well in spirit. From
capitalism, I am able to type on this keyboard, turn the lights on in my room, watch TV, and
drink my Chick-fil-a Sweet Tea. Capitalism is an economic system in which private property
rights are granted to individuals (or corporations), with protection on the private property.
Private property not only includes the land in which the individual or corporation is located, but
also the ideas the individual or corporation comes up with. Throughout the 2000s, hard times hit
the United States economy, and the economy fell into a rather large recession (which later
became known as the Great Recession). Though not as bad as the Great Depression, the
recession of the 2000s took a swing at everyone in the United States and made solid contact with
the working class of America. Because the working class, most of America, was affected by this
Great Recession, much of popular media revolved around bettering lives through law-making
measures that made it affordable to live in the United States. Articles upon articles began
circulating through the media when the economy recessed in the early 2000s about lower taxes,
higher wages, and more government assistance for those affected the most.
The articles published (see McIntyre (2002) and Hochschild (2005)) in the media were so
strong in rhetoric, so captivating in ideas, and so repetitive that even the over-exaggeration
became true. Every article became true to the eyes of many in the nation who had fallen in hard
times. The repetition of these articles caused a subculture in society, calling for a higher

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minimum wage and more entitlements from the government. The idea of capitalism began to
fade, and the idea of big government became even more prominent in American society.
When a capitalistic economy is in a recessionary period, moods surrounding the
principles of capitalism diminish. Authoritative figures and civilians turn to extreme measures in
order to improve conditions in the short run. Although moving towards a more government
controlled and regulated system may provide benefits in the short run, in the long run economies
do not grow under a government run command economy. Basic economic theory in both
macroeconomics and microeconomics show that capitalist economies go through troughs and
peaks. The troughs and peaks flow naturally through the business cycle in the laissez-faire
(Invisible Hand) theory. The invisible hand originated from the writings of Adam Smith, an early
18th century economist. Laissez-faire assures capitalism, although bad at times, will always turn
back to equilibrium at some point and eventually grow to new heights in the long run, such as
those found during the roaring 20s or in the late 90s when for the first time in a long time, the
United States ran a budget surplus. This is because people are selfish, self-centered, always
worrying about bettering their own place in society. But selfishness is a good thing in this case.
From The Wealth of Nations, By pursuing his own interest he frequently promotes that of the
society more effectually than when he really intends to promote it (Calhoun quoting Smith).
When the economy is allowed to navigate itself, laissez-faire, selfishness and greed will allow
the economy to grow and everyone to become wealthier. With government interference in
capitalism, laissez-faire does not exist. Laissez-faire cannot happen. Economic growth is slowed.
Conflict of interest in how the economy was to be run really picked up in 1936 with the
publishing of The General Theory of Employment, Interest, and Money by John Maynard
Keynes. His book brought about the self-titled theory of Keynesian economics. Keynesian

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economics revolves around the idea that government is the most beneficial and efficient
economic stabilizer. Keynes theorizes that the right remedy for the trade cycle is not to be found
in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps
and thus keeping us permanently in a quasi-boom (Keynes 322). Keynes came out with his
theory during the Great Depression and suggested that the government control output of certain
products in order to get the economy rolling again. He believed that the American economy
should never go into a depression because the government is powerful enough to stop the
economy from going into a depression. Many of those opposed to capitalism point back to the
Keynesian theory of economics to explain that government is the key to survival in the economy.
That is not Keynesian economics though. Keynesian economics, according to Keynes himself, is
only necessary in times where unemployment is extremely high for a long stretch of time, and
the economy is not growing and shows no signs of growing. Even Keynes believes that
government has its limits, for if the government was to grow too much, a totalitarian state would
be created.
F.A Hayek, an Austrian-born economist, responded to Keynes economic theory in a
book entitled The Road to Serfdom (1944). Hayeks ideal economic system was the polar
opposite of Keynes and aligned with much of what Adam Smith established in his Wealth of
Nations. Hayek believes that the boom is the most important aspect of the business cycle because
with the boom comes economic growth. With government interference, the booms are not as big,
and therefore will slow down the growth of the economy. Hayek offers that Keynes theory will
cause inflation to rise to a point of no return, and the economy will eventually bust because
capital (the American dollar) will be worth nothing. He believes that there are strong reasons for
believing that the worst features of the totalitarian systems are phenomena which totalitarianism

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is certain sooner or later to produce (Hayek 51). He predicts by allowing government to control
what is made, how it is made, when it is made, and what price the item will be sold at will cause
a Fascist, like Hitler or Mussolini, to rise and create a totalitarian state in both America and
England. With big government comes big consequences and risks, such as an economy that
collapses altogether and a totalitarian state such as the world saw in Germany and Italy during
World War II.
Moving into the 21st Century, the economy was growing but only because of government
interference and the creation of an inflated housing and stock market that were to burst at any
moment. The Bush Tax Cuts were presented by President Bush in 2000 to Congress in order to
avert an impending economic crisis. Although the crisis struck anyways, the tax cuts were aimed
at creating jobs and overall increasing economic growth. To be more specific the Bush proposal
dropped the bottom income-tax rate from 15 to 10 percent and the top rate from 39.6 to 33
percent (Bartlett). In other words, the tax cuts lowered tax rates for the wealthiest individuals
and corporations by 6.6% and also lowered the tax rates for the lowest tax bracket by 5%. There
is much evidence to suggest that the tax cuts were implemented at a time in which the economy
and the stock market were close to the peak of the 1990's boom. Revenues were flooding into the
treasury, and vast surpluses were anticipated far into the future. In June 1999, the federal Office
of Management and Budget projected a cumulative surplus of almost $5 trillion by 2014
(Bartlett). Opponents to the cuts such as Bartlett, a writer for the National Center for Political
Analysis, suggest with much evidence that the cuts were detrimental to the US economies
because of the success seen under President Clinton in the 1990s and the failure of the economy
in President Bushs first term. Many would argue though that the idea is that lowering the tax
rate on production, work, investment, and risk-taking will spur more of these activities and

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thereby will often lead to more tax revenue collections for
the government rather than less (Moore). Moore, a
columnist for the Wall Street Journal, believes in an idea
called the Laffer curve. Economists consider the Laffer curve
to be a popular theory of economics, and that of which Bush
and the Republican controlled Congress based their fiscal
policy off of. The Laffer curve is a tool in which the
equilibrium point between tax rate and maximum revenue in depicted. The equilibrium point will
not fall at either extreme. The idea of the Laffer curve is to adjust based on the economic
situation at hand using supply-side economics; contracting during peak economic times so that
we may lower the deficit, and expand during low economic times in order to boost the economy
again.
The initial reaction to the cuts were not positive. Both reactions from the left and right
wings of the political sphere were sceptic of Bushs motives on lowering the tax rate on the
wealthiest one percent of people in America, especially at the peak of an economic boom
throughout the 1990s. Then 9/11 happened. After 9/11, things only got worse for the United
States and specifically the Bush Presidency; the War on Terror began and, more importantly, the
economy plummeted. The media did not help the situation either. A vast majority of mainstream
media outlets were very critical of Bushs tax cuts in the early stages. Each article having a
different writer but same agenda: to label the cuts as an attack on the US economy and those who
were not of the one percent. The initial reaction from the media included accusations that the
richest Americans are slated to pocket almost half a trillion dollars from the Bush tax cuts
(McIntyre), meaning that Bush only cared about the rich getting richer because that is how he

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and the rest of the Republicans got elected. The media plea politicized the idea of economic
growth through the use of tax cuts, specifically looking at the Laffer curve. McIntyre, the
director of Citizens for Tax Justice, continues to bash the Bush cuts in his 2002 article saying to
99 percent of us the tax cuts are already mostly or fully frozen. Only the very rich have a lot
more to gain if future tax cut phase-ins are allowed to continue. The comment again reverts
back to the privileged one percent argument. Only the one percent were going to be able to
survive off of the tax cuts, because their tax cuts made everyone else poorer. According to
McIntyre, the one percent is responsible for providing the country with the entitlement programs
that make the country function. McIntyre goes on to ask, how are we going to afford to defend
our country and protect Social Security, not to mention address pressing needs like prescription
drugs for seniors, if so much of our tax money is siphoned off in giveaways to the
superwealthy? Media publicists like McIntyre produced ravaging articles against Bush and the
cuts he proposed for years to come. Three years later, the wage wars as we have come to call
them were taking over the news media. The privilege
of the one percent was still in the news: the tax cut
has already given $93,500 to every millionionaire
(Hochschild, 2005) It is estimated that 52% of the
benefits have enriched the wealthiest 1% of
Americans. Big bad Bush and the big bad rich took
all the money from the poor and pocketed it. But is
that really what happened?
In an article titled Why Capitalism has an Image Problem by Charles Murray, Murray
reacts to the problems faced throughout the 2000s with the defamation of capitalism. He says

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that Capitalist has become an accusation. The creative destruction that is at the heart of a
growing economy is now seen as evil (Murray). Moving forward, he comments Americans
increasingly appear to accept the mind-set that kept the world in poverty for millennia: If youve
gotten rich, it is because you made someone else poorer. When the media writes about wage
wars, they blame millionaires for the poors lack of wealth. Is this because the millionaires are
taxed less? Studies show that tax cuts on the wealthiest of Americans, along with the poorest of
Americans, has shown success. The Bush tax cuts, in other words, work. According to Stephen
Moore,
The Congressional Budget Office released its latest report on tax revenue collections.
The numbers are an eye-popping vindication of the Laffer Curve and the Bush tax cuts
real economic value. Federal tax revenues have surged in the first eight months of this
fiscal year [2005] by $187 billion. This represents a 15.4% rise in federal tax receipts
over 2004. Individual and corporate income tax receipts have exploded like a cap let off a
geyser, up 30% in the two years since the tax cut. Once again, tax rate cuts have created a
virtuous chain reaction of higher economic growth, more jobs, higher corporate profits,
and finally more tax receipts.
The numbers from the CBO (Congressional Budget Office) tell a different story than what the
mainstream media told the public throughout the Bush years. Moores article was written in the
same year as Hochschilds article in which Hochschild bashed Bush tax cuts for not working.
Notice when the articles were written as well, 2005. Bush was elected for a second term. The
media lost. Because they lost, and basic economic fundamentals won, their only option was to
attack Bush. Hochschild disregards the numbers the CBO put out and submits that in the
meantime, the poor are being bled. If the media tells the same stories enough, it will eventually

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come true. And sure enough it did. The American people chose to listen to writers like
Hochschild and McIntyre instead of cold-hard data, and buy the ugly-faced drawing of
capitalism the media painted.
Evidence of media affecting social dialogue has shown on college campuses around the
country. A recent survey suggests that college students, many of whom have taken an economics
class (80% of respondents) and learned about capitalism in the economics class (82% of
respondents) believe that although capitalism can be good, wage inequality needs to be addressed
in the country. President Obama and the Democrats effectively altered the idea of fair market to
be that of equal wages for all and government entitlements for those who are at a disadvantage.
Dr. Calhoun, an economics professor at the Florida State University, has taken site to this as
well, stating [Young people] are concerned about equity and justice and feel that government
can solve these problems with rules and regulations government cannot do those
things. Capitalism has a negative connotation because people mistakenly see the crony
capitalism and think it's capitalism (Calhoun). Media dialogue appealing to the emotions of
those gathering information on the economy, therefore, have painted capitalism as a whole into
a separate entity of crony capitalism. Crony capitalism are those capitalists who choose to
exchange campaign contributions for government contracts, subsidies, tax benefits, etc.
(Calhoun).
By the time Mitt Romney came into play in the 2012 election cycle, capitalism in the
minds of many Americans was not a good thing. Romneys former history in business could not
hold up to public opinion in the elections. Prior to his governorship, Romney was CEO at Bain
Capital who invested in many small businesses. Many of those businesses, like any other small
business, failed. The cause? Capitalism. Capitalism weeds out the businesses not meant to

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succeed, and rewards those who are meant to succeed. Many of the businesses Bain Capital
invested in though became successful (i.e Staples). So why did Romney lose? The media was
very influential in the election. He lost because social issues became more important than
economic issues, even though Romneys capitalistic ideals showed in his campaign. President
Obama created a social dialogue about the economy in which income inequality was a problem
and it could be fixed by a government under his lead.
Capitalism, although given a bad name, will prevail once again someday. Just as
Keynesian economics died during the Nixon-era in the early 70s, the extreme rise of socialist
ideals will fall in the 21st century and revert back to more capitalistic ideals. Hillary Clinton, who
proclaimed at a Senate campaign speech for a Democratic candidate, dont let anybody tell you
its corporations and businesses that create jobs (Clinton) and the rest of the leftist big
government idealists will soon find out that the economy cannot function on the government for
long. To compete in the global market, principles set forth by Adam Smith, F.A Hayek, and
Milton Friedman must be used in order to find success in the macroeconomic spectrum.
Although capitalism may seem unfair because of income inequality, for the [capitalist] system
to work, there must be inequalities (Calhoun). Inequality comes from progress in the markets,
which come from businesses, corporations, entrepreneurs, and inventors in the private market.
Society responds to incentives, incentives cause action, action creates growth. These are simple
macroeconomic ideas that if applied correctly will create an economic system whose growth will
balance out any recession and whose recession will not compete with the amount of growth
made. Media influence may change social outlook for a while on capitalism, but what truly lasts
is the imprint big bad government is going to put in the American and global economies as
socialist ideals continue to rise.

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Works Cited
Calhoun, Dr. Joseph. Chapter 6: Political Favoritism, Crony Capitalism, Government Failure.
ECO 2013, Section 1. Florida State University. 22 October 2014.
Calhoun, Dr. Joseph. E-mail interview. 27 October 2014.
Clinton, Hillary. Campaign Speech for Massachusetts Democratic Gubernatorial Candidate
Martha Coakley. Park Plaza Hotel, Boston, Massachusetts. 24 October 2014. Speech.
Foy, Andrew and Brenton Stransky. Lying about Bushs Tax Cuts. American Thinker. 5 March
2010.
Friedman, Milton. Free to Choose: "Volume 3: Anatomy of Crisis" PBS, 1980. Film.
Hayek, Friedrich. The Road to Serfdom. 1944.
Hochschild, Arlie. "The chauffeur's dilemma: President Bush's economic program harms the
middle class and the poor alike. Here's how he turns that assault into winning politics."
The American Prospect 16.7 (2005): 51+. Opposing Viewpoints in Context. Web. 9 Oct.
2014.
Keynes, John. The General Theory of Employment, Interest, and Money. 1936.
"The Laffer Curve." Government Spending. Ed. Nol Merino. Detroit: Greenhaven Press, 2013.
Opposing Viewpoints. Opposing Viewpoints in Context. Web. 15 Oct. 2014.
McIntyre, Robert S. "Bush's most-favored taxpayers: the top 1 percent will gain the most from
the coming tax cuts. (The Taxonomist)." The American Prospect 13.12 (2002): 17.
Opposing Viewpoints in Context. Web. 15 Oct. 2014.
Murray, Charles. Why Capitalism has an Image Problem. Wall Street Journal 30 July 2012.
Rpt. in Poverty and Homelessness. Ed. Noel Merino. Farmington Hills, MI: Greenhaven
Press, 2014. Current Controversies. Opposing Viewpoints in Context. Web. 9 Oct. 2014.

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Smith, Adam, and Edwin Cannan. An Inquiry into the Nature and Causes of the Wealth of
Nations. Canaan ed. New York: Modern Library, 1937. Print.