News of Turkey’s plans to conduct comprehensive tests of the Russian-made S-400 air defense system has added to the country’s economic pains and is helping send the Turkish currency to a record low against the US dollar.

Washington Warns Turkey Against Activating the S-400s

According to Bloomberg, Turkey will test the advanced missile system next week at a site in Sinop province on the Black Sea coast. The news immediately drew fire from Washington, which warned Turkey against testing the Russian missiles.

Washington and its allies are worried that the S-400 system will enable Russia to gather intelligence about NATO’s air defense capabilities, specifically the US-made stealthy F-35 fighter jet.

The S-400s, known in Moscow as the “F-35 killer,” are considered the most modern long and medium-range surface-to-air missile system. The missiles can engage targets at a range of up to 400 kilometres, up to six times the speed of light, at heights of up to 30 kilometres. The S-400s can also launch 40N6 missiles (long-range, hypersonic, surface-to-air missiles) to engage low maneuverable aerodynamic targets.

Turkey’s Decision to Buy the S-400 Missile System from Russia

The government of Recep Tayyip Erdogan moved to buy the Russian missile system after the US hesitated to provide Turkey with the Patriot air defense system. As the first equipment of the Russian system arrived in Turkey last year, the Trump administration kicked Ankara out of its F-35 program, in which Turkey was a manufacturer and buyer.

The US also threatened to impose economic sanctions on Turkey if it deployed and activated the Russian-made S-400s, but has not yet imposed these measures.

“We continue to object strenuously to Turkey’s purchase of the S-400 air defense system, and are deeply concerned with reports that Turkey is continuing its efforts to bring the S-400 into operation,” a spokesman for the State department said. “We continue to stress at the highest levels that the S-400 transaction remains a major obstacle in the bilateral relationship and at NATO, as well as a risk for potential CAATSA sanctions.”

Ankara reportedly tested the S-400’s communications systems by scrambling the US-made F-16s last year, in a move seen by Washington and its allies as hostile to the NATO members.

The Turkish Lira Takes a Nosedive

As tension mounted over the planned test of the S-400 system, the Turkish lira plunged into a historic low on Thursday, registering 7.9 lira against US dollar. The drop was the latest in more than two years of continuing depreciation of the Turkish currency amid military tensions between Turkey and its neighbors.

In 2018, Turkey’s relations with Washington further nosedived over the detention of Pastor Andrew Brunson on terrorism charges, with the Trump administration imposing devastating economic sanctions on Ankara. These sanctions have caused the lira to plunge and forced Turkey’s economy into recession.

Turkey has been considered among the riskiest emerging markets in recent years. The Turkish economy is categorized as one of the fragile five, along with India, Brazil, South Africa and Indonesia, mainly due to the country’s large current-account deficits.

Ankara’s Growing Foreign Trade Deficit and Rising Unemployment

According to the Turkish Statistics Institute, Turkey’s foreign trade deficit leapt 168.2% year-on-year in August to $6.278 billion under the general trade system. Exports fell 5.7% and imports jumped 20.4% compared with August 2019. Turkey’s annual consumer price inflation rate registered 11.75% last month and the unemployment rate climbed to 13.4% in the three months to July.

Turkey has long survived by attracting strong capital inflows, prompting strong credit expansion which in turn encourages economic growth. But this virtuous cycle turns vicious in bad times, dragging the lira to the brink.

Erdogan’s political and military adventures have also contributed to the country’s economic woes. On the political scene, Turkey has had at least one election every year except 2016. There were local elections in 2014, two general elections in 2015, a referendum on the government system in 2017, general and parliamentary elections in 2018, and local elections in 2019. This has put continuous pressure on the authorities to spend money and keep stimulating the economy with interest rates low enough to encourage more borrowing.

Turkey’s Numerous Military Engagements

On the military side, Turkey is involved in several conflicts in its neighborhoods. The Turkish army is conducting military operations in neighboring Syria, Iraq as well as Libya, where Ankara is supporting the Tripoli-based Government of National Accord. Turkey is also engaged in a heated standoff with NATO members Greece and France over gas exploration rights in the eastern Mediterranean. Ankara also supports Azerbaijan in its military conflict with Armenia over the disputed region of Nagorno-Karabakh.

Last month, Turkey’s central bank defied pressure by Erdogan to keep the interest rate low, raising the rate from 8.25% to 10.25% in an attempt to strengthen the lira against the US currency.

But as the central bank is facing mounting pressures from Erdogan not to raise the interest rate in order to help curb inflation and amid the ongoing Turkish military disputes with neighbors, the Turkish currency is expected to bleed more in the coming weeks.

L'articolo Will the S-400 Missile System Be the ‘Death Knell’ for Turkey’s Economy? proviene da InsideOver.

Whether or not Belarussian president Aleksandr Lukashenko succeeds in stifling the protests in Belarus with violence, the writing is on the wall: his regime has lost all support.

Moreover, Lukashenko should not put his faith in Moscow, as the Kremlin may not be inclined to continue its support.

Belarus in Chaos

The footage in the news over these last days has shown the carnage currently occurring in Belarus. So far, security forces have been able to drive the demonstrators in Minsk and other cities from the streets. It may be a temporary success but it’s not a win. In fact, the current situation is testimony that the regime’s time might be over.

The recent election Day made it apparent that Lukashenko no longer has any significant support in the population – despite the rather dubious election results claiming he won with 80 percent. However, the regime is cognizant that, in reality, it does not carry 80 percent of the public’s support – arguably not even close. Moreover, by placing Minsk in a state of siege long before the polls closed on Sunday and severely obstructing the internet, it admitted that it could only stay in power by force and not via democratic processes. The latter is hardly a promising recipe for sustained success. Naturally, reliable information about the actual election result is not yet available.

How Far Will Lukashenko go to Hold on to Power?

However, autocrats enjoy few privileges more than being in power. Thus, opponents of the regime have never had any illusions: Lukashenko would also shoot demonstrators to defend his power. On the weekend, it was rubber bullets, but worse must be expected. Furthermore, even if Lukashenko should manage to crush the demonstrations by force again, the fact that he has lost the country remains.

One reason the lack of support is so notable now is that the protest movement is broader than ever before. When the regime violently crushed a massive demonstration against Lukashenko’s electoral fraud ten years ago, it was a single protest march of 50,000 people on the central street of Minsk to the government building. On the outskirts of the capital and in the rest of the country, things remained calm.

On Sunday evening, however all over Belarus people gathered in front of the polling stations and demanded an honest count; there were demonstrations in all of the larger cities, which the security forces initially found helpless in some places. Moreover, in Minsk itself, the protesters challenged the security forces in many different places until the early hours of the morning.

Opposition candidate Svetlana Tichanovskaya and her colleagues have announced that they are ready for permanent protests. However, their success or failure does not depend primarily on their political skills. The demonstrations on Sunday had no apparent organizers and no leaders. One of the crucial questions now is how far the security forces are prepared to follow Lukashenko.

Moscow’s Perspective on Lukashenko and Belarus

Just as much now depends on how Moscow behaves. For them, a weakened Lukashenko as Belarusian president would be ideal in the short term. The not precisely warmhearted telegram of congratulations from Russian President Vladimir Putin to Lukashenko shows what he expects in return for support: closer political, economic and military integration — de facto Putin wants an extensive abandonment of the country’s independence.

Nevertheless, it could be that the Kremlin will be doubtful about whether it is worth it to pay a high price for supporting Lukashenko in the long run: If Putin keeps his neighbor in power, he will gamble away the still strong ties of the majority of Belarusians with Russia. After Russia lost Ukraine because it wanted to keep a corrupt and violent regime in power, it could also lose Belarus.

It will thus be interesting to see how and if the Kremlin decided to support Lukashenko. In any case, Belarus may be on the precipice of change – one way or the other.

L'articolo Lukashenko’s Future is Uncertain as Belarus Hangs in the Balance proviene da InsideOver.

The European Council has just finished the longest meeting that it has had since the Nice, France gathering in 2000 and agreed upon a €750 billion recovery package. The package consists of grants and loans to counter the economic impact that the coronavirus has inflicted on the bloc since March.

European Council (EC) President Charles Michel described it as a “pivotal” moment for Europe and this sum represents the largest joint borrowing the EU has ever undertaken so far. The deal focuses on a €390 billion program to member states hardest hit by the virus such as Italy and Spain. An extra €360 billion in low-interest loans will alsombe available to EU states.

The ‘Frugal Four’ Opposed Grants for Spain and Italy

The agreement followed 90 hours of talks that started on Friday, during which tempers were frayed. The “frugal four” (Sweden, Denmark, Austria and the Netherlands) alongside Finland had opposed extending €500 billion in grants.

At one stage, French President Emmanuel Macron accused the frugal four of placing the European project in danger.

The €390 billion sum was recommended as a compromise, and the frugal countries were won over by the guarantee of rebates on their EU budget contributions.

Dutch Prime Minister Mark Rutte, despite being the biggest opponent of the original package, welcomed the deal.

This agreement will no doubt provide both German Chancellor Angela Merkel and Italian Prime Minister Giuseppe Conte with relief as they were the biggest proponents of the package from the beginning. Merkel argued throughout the last five days that “exceptional situations also require exceptional efforts.” Italian borrowing costs are also set to fall to March levels as the stimulus cheers markets.

The Deal Will Only Provide Short-Term Relief

Nonetheless, this stimulus will only provide the eurozone with short-term relief. Now that the EU has been provided with a recovery fund, the bloc’s greatest challenges lie ahead. The economic impact of the coronavirus has tested the single currency’s survival in a way not witnessed since the 2008 recession. If European leaders are serious about preventing a pandemic or any other external threat from threatening European unity again, they must deal with the bloc’s existential problems that the coronavirus exposed.

This was the first European Council meeting without Britain at the table. In December, a UK-EU trade deal should be completed, but if that process fails, the UK will quit the EU without a deal. This outcome would be far worse for the EU as Germany exports 800,000 cars to Britain every year, which equals 14 percent of all vehicles it makes domestically. German car imports would be levied by a 10 percent tax under World Trade Organization (WTO) rules.

Brexit Remains a Problem

The IMF suggests Ireland would suffer an output loss of four percent in the event of a no-deal Brexit. Therefore, EU diplomats should focus all their energy on preventing a no-deal scenario if they want to stimulate economic growth.

The coronavirus has also increased the prospect of other countries leaving the EU, too. The Daily Express reports on one survey which suggests that 50 percent of Italians support an “Italexit,” or Italy’s exit from the EU, whilst 27 percent of Italians prefer to remain within the bloc. Earlier this year, the President of the European Commission Ursula von der Leyen had to apologize for the way the bloc treated Italy at the start of the pandemic. It is unlikely that Italians will forget this when it comes to the polls, and COVID-19 has increased the prospect of an anti-EU coalition government being formed in Italy in the future.

Will There Be More EU Integration in the Future?

Milton Friedman and Martin Feldstein warned in 1999 that the eurozone cannot succeed without a political union. The coronavirus may make EU leaders realize that there is a greater need for political integration to prevent this situation from happening again, but it is looking doubtful all nations will agree, particularly Poland which is about to enter its own battle with Brussels over the imposition of gay marriage.

The markets may be celebrating the outcome of this European Council meeting, but technically the party is already over. How the EU evolves now will be the ultimate test of its survival.

L'articolo Why Eurozone Recovery Depends on More Than a €750 billion Stimulus proviene da InsideOver.

L'articolo Social Services Being Cut Globally for Moms and Kids Due to COVID-19 proviene da InsideOver.

America is on fire. Many urban areas have been overrun by protests that have turned violent along with looting, arson, assault and property damage to vehicles, businesses and infrastructure. Riots first broke out May 25 following the death of 46-year-old George Floyd, a black man who was pinned down to the ground by white Minneapolis policeman Derek Chauvin for 8 minutes and 46 seconds after having been accused of passing a counterfeit $20 bill in a nearby pharmacy.

The Current Situation

Rioting in Minneapolis has now ceased, but cities across the United States are ablaze and crammed with protesters, agitators and looters from Philadelphia and New York to Portland and Salt Lake City, with one man shot dead in Louisville, Kentucky and various reports and footage of attacks on police, and tense police driving through protesters and tasing a young black couple in their vehicle. Burning city halls and streets littered with burned-out husks of vehicles have dotted the evening news for the past week. The US National Guard was called in by a number of states this weekend and there were around 5,000 arrests made by police. There are charges of third-degree murder and manslaughter against Chauvin who was fired on May 26 along with attending officers Thomas Lane, Tou Thao, and Alexander Kuen. Floyd’s family’s lawyer calls the death an act of “premeditated murder.”

This is Not a Drill

In the 2004 film Man on Fire, Denzel Washington plays a former special forces operator called John Creasy who vows to get revenge on criminals who committed an atrocity against the family he was being paid to keep safe. In 2020 America on Fire — which is not a movie — a mass of people of many grievances and agendas are being driven by blind rage at the system. They are smashing the commercial structures that no longer employ 40 million Americans and opposing the police who they associate with racist violence and brutality. There are various groups involved in the ongoing unrest in the United States, despite the attempts by various media and political sides to frame the current situation simplistically. As Murtaza Hussain of the Intercept noted, “lots of people apparently want to condemn the protests and maybe even crush them but only after they’ve labelled them as having been corrupted by some ideological group they’re more comfortable posturing in opposition against.”

A Note on Narrative Building

Political talking points and narratives are constructed constantly, especially surrounding controversial and chaotic events that leave the public wanting straightforward answers. This fits well into politicians plotting how to exploit tragedy for political leverage. Almost immediately the Trump Administration and key supporters latched onto the idea of spoiled white agitators in “antifa” and well-funded hard-left agitators being behind the main acts of violence and instigating the destruction, tying into longstanding theories about George Soros and leftist oligarchs being behind attempts to destroy the United States and collapse the Trump government. Antifa, or “anti-fascist” is a loose umbrella of socialist, communist and anti-capitalist groups with roots in Stalinism.

Liberals, meanwhile, became disillusioned by the destruction and also sought a group to blame that would fit more neatly with their ideological proclivities. After all, communists and antifa have long made it clear that “liberals get the bullet too” and that kind of militancy isn’t exactly reassuring to Sally Soccer Mom in surburban St. Paul, and neither is the idea that a group they sympathize with — namely black people facing discrimination and economic abandonment that is egged on by jackal media and political operators — could also have numerous members of their community who would commit violence and property destruction.

Is Antifa Really Behind This?

The simple truth is that despite obvious instigators and hard-left groups the violence is mainly being driven by people who are angry over the death of George Floyd, poverty and police brutality and boosted along by a some determinedly menacing pencil-armed neo-Marxist white kids with too much time on their hands. The attempt to pin this all on antifa and the claim that they are going to be categorized as a terrorist organization is clearly based on political expediency rather than a pragmatic countermeasure. As Chuck Ross of the Daily Caller put it, “Antifa is terrible and all, but my guess is they’re responsible for a small fraction of the violence and looting going on.”

What About the Racists?

For their part, some suburban liberals found a new scapegoat in the white nationalist bogeyman: this upheaval was somehow a plot to make black people look bad by white racists and Russian agents. Minnesota Congressman Keith Ellison, Governor Tim Walz and others promoted the idea that most of those damaging the state were from elsewhere, which turned out not to be true. Ellison has previously promoted antifa and was formerly a member of the black nationalist Nation of Islam which has long called for black separatism and violent resistance of the white-dominated societal structure.

To be sure, there is a contingent of peaceful protesters and concerned citizens, along with a smattering of hard left communists and antifa and several riot-curious far right accelerationists and white nationalists, but this last number is miniscule as far as the evidence goes. Despite bizarre attempts by some in the mainstream media to claim the majority of damage is being done by white nationalists, racists and Russian-linked provocateurs trying to accelerate the downfall of modern, multi-racial America by striking at its fault-lines, there is no proof of more than a few white nationalists, militias and Trump supporters working their way into the upheaval. There is seemingly no end to blaming Vladimir Putin for everything that happens in the United States, which is, arguably, one of the ongoing political and media delusions and deflections that has led to this violent moment.

Fox News has been chased down and insulted by mobs, several Trump supporters were surrounded and pushed back to a building with one having his Trump hat burned as the crowd screamed “F*** Trump!” and several white nationalists who did try to infiltrate a protests were tracked and then turned into a bogeyman by antifa and left groups who claim these people are everywhere. Apart from Nick Fuentes and some “boogaloo” types popping up for photo opportunities, the violence does not appear to be orchestrated by these young internet racists. It is particularly odd to see the media blaming Trump for the vandalizing of CNN headquarters in Atlanta, for example, when this was done by a crowd who clearly despises the President and his supporters as well as CNN and mainstream media.

Where’d All the Good People Go?

There are still plenty of good people. Some protesters have restrained and delivered violent agitators to police and others have done their best to stand up to violent looters and agitators. But at the end of the day what is happening in America’s cities is a social problem more than anything else. Trust has broken down and year by year Western civilization is reverting into Thomas Hobbes’ state of nature: every man and women for themselves.

The bottom line here is simple: American society is breaking down. Look for rural communities to increasingly fortify themselves against the cities, protecting their food sources, businesses and streets from outsiders through force of arms and even vigilante patrols. There is plenty of blame to go around and deep-seated problems to reference, however now the situation truly is spiraling out of control. The United States is well on the road to becoming a failed state. Economic meltdown, the COVID-19 pandemic that is still decimating the country and an enraged uprising have come together to form the perfect storm.

Certainly, economic, racial and political aspects have all had a major role in leading to this situation, but at the end of the day the sound you hear is the social fabric tearing apart from Houston to Los Angeles. It’s the frustration boiling over, and whichever agendas and extreme groups may try to use that frustration for their own purposes it would be a mistake to think that the situation itself is entirely engineered or delusional. After all, the media and many politicians continually trying to place the motivation for unrest and problems on anything other than the actual causes of those problems is a big reason why we are in this position today.

Whatever exactly is going on, Jelani Cobb of the New Yorker put it aptly in noting that “you know we’re in uncharted territory when something happens in Minneapolis and they’re setting cars on fire in Salt Lake City.”

L'articolo America on Fire proviene da InsideOver.

Following German Chancellor Angela Merkel and French President Emmanuel Macron’s presentation of their plan for the European Union to overcome the economic impact of COVID-19, Austria, Sweden, Denmark and the Netherlands have now created their own vision of a recovery plan, which carries a simple message: loans in lieu of grants.

What Are the Specifics of the Frugal Four’s Plan?

The aforementioned states are in favour of a one-off emergency fund to strengthen the EU’s economy. Payments must be used for the reconstruction, the ecological restructuring of the EU and the future resilience of the health sector and the economy. Moreover, the funding ought to be subject to a two-year limitation.

Most importantly, the plan strictly opposes shared debts, for example, in the form of eurobonds, and a subsequent increase in the EU’s budget as a result of the latter. Austria, Sweden, Denmark and the Netherlands — all net contributors to the EU — refer in their plan to the fact that national budgets had already been heavily burdened due to the COVID-19 crisis, while more funds still needed to be invested.

The solution hence needed to be a “modernized EU budget as a starting point”. The final spending framework of COVID-19 aid ought to be determined “by a new prioritization” of spending areas in the EU budget. Aid that contributed less to economic recovery should, therefore, be saved.

The Merkel-Macron Plan

Just the previous Monday, Chancellor Merkel and President Macron presented a €500 billion concept for a recovery plan for the post-pandemic. According to the Franco-German model, the money ought to be taken up by the EU Commission in the form of loans on the capital market and distributed as non-repayable grants via the EU budget, to support particularly hard-hit countries.

However, especially Austria’s Chancellor Sebastian Kurz had been opposing the Franco-German model over the previous week, and called for a time limit on the funds, to avoid the COVID-19 aid package becoming a “debt union through the back door.”

The plan of the four states, thus, provides for the EU Commission to raise the money for the emergency fund on the financial markets and to pass it on to the member states as affordable loans in lieu of Franco-German grants.

Finding Consensus Amid the Confusion

EU Commission president Ursula von der Leyen now faces the difficult task of designing a model that is capable of reaching a consensus. She will present a new proposal for EU finances from 2021 to the end of 2027 next Wednesday, which should also include a recovery plan for the economy badly hit by the corona pandemic.

Von der Leyen is aiming for a volume of at least €1 trillion in her “reconstruction instrument,” relying on a mixture of grants and loans. In this way, the Commission seeks to prevent the member states from drifting apart economically.

In addition to a concept for a reconstruction fund, it is also expected that funds from the multi-year financial framework will be used to boost the economy. A working paper by the EU Commission, for example, proposes to invest €20 billion in a program over the next two years that will encourage consumers to buy clean new cars. Besides, there could be €40 to €60 billion for investments in emission-free drives as well as additional funds for electric charging stations and petrol stations for alternative fuels.

As far as the reconstruction fund is concerned, von der Leyen had recently shown a clear preference for the Franco-German approach. The latter goes in the direction of the proposal the Commission is working on, she said. EU Council President Charles Michel also spoke of a step in the right direction and called for a willingness to compromise from all 27 EU countries.

It will be interesting to see which elements of whose proposal will become part of Von der Leyen’s consensus idea. The issue, meanwhile, is apparent. The Austria connection has categorically ruled out any form of shared debt. However, if mainly the Merkel-Macron model prevails, it will carry significant connotation for the rest, who have long believed that it is France and especially Berlin all along that set the European Union’s policy direction for the rest of the member states.

L'articolo Frugal Four Present Counter-Proposals to Franco-German EU Rescue Plan proviene da InsideOver.

The usual suspects are at it again! Left-wing politicians, progressive activists, and even some left-leaning investors are ramping up their typical accusations and attacks on capitalism. The same people who have become rich under the system and even exploited it over the decades have also campaigned tirelessly for its destruction.

Never Let a Good Crisis Go to Waste

Using the mantra of never letting a good crisis go to waste, capitalism is being blamed for the COVID-19 pandemic and the economic crisis it has caused, among the many other evils it has allegedly brought upon this earth.

Just imagine that a Senator like Bernie Sanders has become a millionaire by attacking the very system that allowed him to increase his wealth. It is hypocritical, but not surprising, that such individuals opt to criticize capitalism and advocate its abolition from the safety of the prosperous capitalistic United States or even Europe, instead of the impoverished socialistic Venezuela, Cuba, or North Korea.

According to its many critics, the system of capitalism has enriched the few, damaging the many. Shareholders, investors and wealthy people in general have used corporations to enrich themselves at the expense of the workers, suppliers, and the overall society. Focusing on profits for themselves, they argue, shareholders do not care if the rest are harmed. Through stock buybacks, leverage, and short-term thinking, the job security of their employees was sacrificed. Now, the critics insist, the corporations are abandoning their workers as the crisis intensifies while keeping their executives’ salaries intact. The virus exposed terrible, unfair and faulty business models say the opponents of capitalism.

Seeing Through the Anti-Capitalism Argument

This is a logic that many believe. It is easy to find a target and direct all the energy and the anger towards it. What better target for someone who has lost their job than the “greedy, evil capitalists exploiting people.” So, through these modern-age millionaire-socialists, the masses are convinced that it is the system’s fault. The replacement presented is more government control, which will be benevolent and for the first-time socialism will be properly implemented — the real one this time. In every generation there is someone who believes he will implement true socialism.

In fact, true socialism and communism have been implemented time and again and have produced misery, death and destruction. However, the nice words, without reasoning or logic, are enough to convince the “social justice warriors” and the Twitter mobs who set out to free the world from capitalism from behind their keyboard.

Capitalism is Not to Blame — It’s Actually the Opposite

First of all, it is a fallacy to say that the fault of the current crisis lies in the capitalistic system. Countries, although not all of them, entered into lockdowns, closing their economies, because their governments mandated it. The damage to the economy was done due to government decisions. Even the strongest capitalist economies were not able to resist because for more than two decades there has been a mismanagement of public finances, high taxes, huge and unproductive government spending, and massive accumulation of debt by governments. They and central banks have interfered in markets, distorting them. And as a cure they present more of the same.

This is not capitalism. It is the opposite of it. Currently, most countries have strayed from the true form of capitalism and misrepresenting it, when in fact there is deep interventionism and also mercantilism in some countries that is ill-intentioned and goes against the philosophy and practice of capitalism. The left is saying we are in a bad situation economically because of bad policies — which are the opposite of what capitalism stands for — while naming them capitalistic. Their solution is more government and more empowerment for politicians.

Capitalism Works and Unlike Socialism and Communism

Secondly, the proof for the efficiency of capitalism can be found in the records of history. The lifespan of people has been greatly increased in the last century with the industrialization of countries. In the 1800s, you were lucky if you lived to be 40 or 50 years old. In the US, average real income per capita has jumped 4,000% since the 1800s. According to an article by former US Ambassador to the UN Nikki Haley, in 1820, 94% of the world lived in extreme poverty, earning less than $1.90 a day. Today, around 10% live in extreme poverty. That is still a big figure, yet it is much lower than it could have been in a socialist system, judging by the state the good people of Venezuela find themselves in today. A once prosperous, oil-producing nation, Venezuela was destroyed by the socialist policies of Hugo Chavez and its current leader Nicolas Maduro.

Scandinavian Socialism? Not So Fast

The Scandinavian countries have the highest degree of free markets and capitalism, and that is why they are among the wealthiest. Their corporate tax rates are generally lower than in America and the European average and the freedom of doing business is among the highest. Minimum wage is not imposed by law, the labor market is flexible and government intervention is nonexistent. The American and Scandinavian examples of wealth and freedom give capitalism the economic advantage.

Yet, in the United States, there are those in the private sector advocating for a stakeholder capitalism, a name that is entirely misleading. According to this philosophy, companies should not focus on their shareholders anymore, but on their customers, workers and communities. While the sound of it is undoubtedly charming, it is entirely deceiving. It leads anyone to believe that until now these companies harmed their customers in one way or another. How can a company cheat its customers and stay in business? How can it harm a community and not go bankrupt? Just a simple logical question extinguishes this whole philosophy. I am sure that these business leaders who have come out in favor of this so-called stakeholder capitalism know the absurdity of the idea. However, they are under pressure from a left who takes no prisoners and uses boycotts as a weapon, simply for the fault of not being left-wing. When you do not have the truth on your side, violence is the next option, apparently.

Every sensible finance theory proves that maximizing shareholder value maximizes the value of society. Resources in the world are limited. In a corporation, there are several stakeholders, all of which get what they require before the shareholders. So, suppliers get the money for the goods delivered, bondholders get their interest or principal payments, otherwise the company would go bankrupt. The employees get their wages, and so on. The last one to get paid are the shareholders. Thus, following this logic, shareholders have the highest incentive to expand the pie, so to speak. By expanding the pie, and using the resources at their disposal efficiently, shareholders benefit not only themselves but also their customers, suppliers, creditors and the community as a whole. Moreover, the companies are inclined to be involved in charity, in causes cherished by community and being socially responsible. Capitalism is the only economic system in which a group of people, the entrepreneurs, have no choice but to concern themselves with the needs and well-being of others, i.e. their customers.

Acknowledging the Shortcomings of Corrupt Corporations and Cronyism

It is true that there are corrupt businesses who use their government influences for power and profit. That, however, is not capitalism, and it is illegal. The cronyism in a socialist society is much worse because everyone is equal in sharing the misery except for the government and their cronies. We hear all the time from billionaires to increase taxation and lower inequality. But, the ones being hurt from the tax increases are the middle classes and the poor. If these billionaires want to pay more, they are welcome to make donations to the government or individual citizens.

In addition, stakeholder capitalism failed in Britain. Former PM Tony Blair forced corporations to take into account the interests of employees, suppliers and the environment. Yet, that did not stop the country, its banks and the private enterprises from being hit hard by the crisis of 2008.

The renowned free-market economist Milton Friedman famously said that the only social responsibility of business is “to use its resources and engage in activities designed to increase its profits so long as it stays in the rules of the game”. He knew and had proven that that was the only way that society could benefit, because profit is the incentive that has led to the major breakthroughs in science, art, technology. Anyone who is against capitalism should stop using any iPhone or Samsung, any cars or buses, tablets, planes, microwaves. Basically, anything everybody uses in everyday life should be off limits to them, because these products are the result of capitalism and the ingenuity of the private sector, not the government.

Letting the Free Market Work

Companies who are left to compete freely and without interference by the government, will be the agents that capitalism uses to provide more goods and services, and at the right price that customers and sellers decide, and also the ones that will help protect the environment and the communities. They will do so because they have an incentive. The healthier and richer the consumers are, the more profitable a business will be, the more employees it will hire and the more goods and services it will produce. If a company cheats, abuses and misbehaves, the market punishes it, because customers will simply switch to its competitor. The market is the most wonderful “entity” created, because it can correct itself and ensures the optimization of the resources available. Whereas, if we were to choose relying on the government, which is a monopoly that produces nothing, it will lead to abuse, corruption and indebtedness, and nobody will hold it accountable because all the power will have been surrendered to government.

True capitalism prohibits that, because in its fundamentals, it is a system that promotes freedom, equality and cooperation. It cannot exist without these three elements. On the other hand, socialism immorally thrives in their absence. That is why socialism is so good, that those that enforce it do so through violence and suppression, leading to poverty. Capitalism promotes choices and competition, through the free cooperation of market participants, among the various goods and it is the consumer who decides what is best, whereas in a socialist society the government tells the citizen what to buy, eat and say, how to be educated and where.

Equality of Opportunity

Capitalism ensures equality of opportunity, while promoting the most deserving, thus putting in place a meritocratic system. So, we have a competition even among people to show their best and avoid falling into complacency. Overall, it is more in line with the human nature. For this reason alone, capitalism will always be morally superior. Socialism and statism go against human nature, being a perversion of everything that make us human. Most importantly, capitalism channels self-interest into altruism. People who want to make a profit, invest into entities called companies with people who have the “know-how”, in order to produce goods and services, at prices set by themselves in cooperation with the consumers. That is why capitalism is sustainable in the long run.

Capitalism is a bearer of hope and optimism. It adapts and changes based on what the individual needs and gives the possibility to make dreams a reality. Socialism on the other hand, limits creativity, drowns people in negativity, because it crushes the human instincts and prevents individuals from having the means of realizing their dreams. Capitalism and the free markets have done more for prosperity and poverty reduction than any other statist system.

Improve the System, Don’t Scrap it

We must improve our current systems and make them truly capitalistic, more meritocratic and less reliant on government. Let us remove the negatives and cronyism from capitalism, ensuring it is truly free, and let us reject any notion of socialism. A free market is the only way forward, if we want to survive the challenges of our time. It is imperative that we move towards saving and wealth creation, instead of indebtedness and uncontrolled spending. Government must be there to provide incentives to invest, by cutting taxes and deregulating, while ensuring our national security and also that the rules are fair and apply to all. Competition in every sector will ensure better healthcare, better education and a safer environment. Lastly, we must understand that each of us has also obligations in society, not solely rights.

In our current situation, it is thanks to capitalism that we have any hope for a cure or a vaccine. We should be grateful to capitalism — the true one, not the deformed cronyism that interventionist governments create — for any future technological breakthroughs that will lead to improvements in the lives of billions of people as they have done throughout the last century. If individuals fall prey to the fairy tales of socialism and communism, we will be headed towards a lost century with poverty, misery and suppression. By improving capitalism, we have the chance for a golden era of innovations, wealth and hope.

L'articolo COVID-19: the New Pretext for Attacking Capitalism proviene da InsideOver.