junior at the georgia institute of technology. i'm also a member of the young america's foundation and club 100 program for i've worked with them to bring conservative speakers to campus. it's my honor to introduce our speaker, thomas dilorenzo, the professor of economics. he holds a phd in economics from university and he is the author and co-author of more than 10 books, including "underground government, the off " officialor", the diversion of federal cancer funds to politics," " the student drug from pathology to and "how capitalism saved america." he's held faculty positions at the university of tennessee and the state university of new york. he's currently an adjunct scholar. thank you. [applause] mr. "how capitalism saved america mr. dilorenzo: the topic of my book, "how capitalism saved ," i would explain why the mayflower is on the cover. in the genesis of this book was right after my previous book, we werel lincoln," talking about the enron accounting scandal. we agreed what was going to happen was that in the academic world, many books would be thaten making the argument since some business people are cricket, all business people are crooked and its inherent in a system of capitalism. this is ridiculous. it's like saying some people are left-handed, therefore all people are left-handed. there are sinners and all walks of life. sure enough, we were right. has been a lot of books like that. i work in the academic world and i know a lot of my fellow academics have been working diligently the last couple years and enthusiastically and happily making these arguments that all business is like this and they lawort such things as a which punishes every corporation in america for the sins of one or two companies. some of them have already gone to jail so they have been punished. genesis oft of the why i set out to write a book that is more or less a defense of capitalism based primarily on lessons from economic history. that is sort of my take on it. quotation by congressman rob -- ron paul. it was perfect timing. i finished the entire manuscript and i read this article by congressman paul inputted at the top of page one. he says this. "ignorance as well as for the natural restraints placed on market access is that capitalism and some markets impose cause our present leaders to reject capitalism and blamed it for all the problems we face. if this fallacy is not corrected in capitalism is further undermined, the prosperity that the free market generates will be destroyed." it should be bothering anybody who is concerned about the future of america how easily our politicians enact laws and policies and regulations that sometimes impose hundreds of millions of cost on corporations, which are ultimately paid by you and me. lawyers will drive companies out of business primarily for their own financial benefit through class-action lawsuits or how so many academics are sort of vicious attack dogs when it comes to anything with regard to business. i will give you one anecdote. i was on a committee once to pick a book that all the school, and i thought here's my chance to get all the freshmen to read a book about american business, the history of american entrepreneurship. something that 18-year-old would be interested in. meetingo the committee and i was pretty much shouted down and condemned as an immoral character for suggesting a book that was all about making money. this was in a business school. [laughter] imaginerenzo: you can the humanities of arts and sciences. we ended up adopting a book that's not that bad. for that of the genesis of it. in thist thing i do book is explain what capitalism is. most people don't understand what capitalism is. a big mistake that is made in the literature and on television and in the popular culture is to equate capitalism with something that it is not, which is mercantilism. nutshell, that is a set of government policies that essentially benefit the producers at the expense of the consumers. that is what adam smith was against. capitalism is consumer-oriented. it is oriented toward benefiting the consumer above all else. you see corporate welfare, government money going to , various laws and regulations that benefit a corporation or group of quote rations at the ask ends -- corporations at the expense of the consumer, these are .ercantilism i will give you a definition of capitalism from adam smith. it is a short, one-worded definition. "give me that which i want and you shall have this which you want." that is it. that is how a real capitalist takes money, figures out how to give people what they want in a sufficient way that they are willing to have them what he wants, money, and return. that is what capitalism is. it channels self-interest in desirable ways. .y old friend walter williams if you have dollars in your pockets, it proves one way or he worked together with somebody to produce some sort of service for your fellow man. menelse would your fellow give you those dollars? you had to provide him or her some useful service. thing that is really misunderstood or not acknowledged about capitalism is that historically, all the ofngs we take advantage other than having a refrigerator, having a car come all the consumers we have. and verily, they started out as things only for the very wealthy, the aristocracy. my firstr buying personal computer around 1982 when i was an assistant professor and didn't have that much when he did buy a $4000 pc that was a piece of junk compared to today's palm pilots. the only way to get bridges to make it cheap enough so everyone can buy one. all of these things -- refrigerators, cars, computers all started out expensive but the capitalist figure out how to mass produce them so the average working person can afford them and that is something always overlooked by the critics of capitalism. ,n consumer sovereignty capitalism is really a system where the consumer is king. there's a great quote i like to share with you. one of my favorite quotes from is about the consumer. he says neither the entrepreneurs more the farmers nor the capitalist determine what has to be produced. capitalists don't do that. the consumers do that. if a businessman strictly obeys the orders of the public, he suffers losses and goes bankrupt. make poor people rich and rich people poor. they are merciless bosses will of change and unpredictable. they are hardhearted and callous without consideration for other people. that is you and me he is referring to and it's very true. if you buy a pair of sneakers you have been buying the past couple years and nike comes out with a superior brand, everyone of you would dump the old and by the new, especially if it's cheaper. think of all the people whose jobs he might have cost by doing that. that is exactly right. it's ultimately the consumer who is in charge. that is what makes capitalism different from the alternative system, socialism, where the winds of the ruling class are in control as opposed to the consumers. capitalism relies on property rights. you can't have capitalism without a price system whereby prices are determined by buyers and sellers. and you have to have freedom of entrepreneurship. people have to be free to fail. i have a chapter on anti-capitalism that i try to explain why there's so much animosity and i don't have time to go through all of the various reasons i discussed. you will just have to buy the book. one thing i mention is utopianism. the critics of capitalism are utopians and they tend to paint an unrealistic, unachievable utopian nirvana and say this is what we want and then they compare that to the real world and say the real world stinks and we need to condemn the real world. sometimes, the utopians will look at what they think is their nirvana and then they are disappointed and lie about it. there is a fascinating book published probably 20 years ago or so called political pilgrims. i highly recommend it. at western journalists and professors and writers who like to russia, china, cuba. he came back and lied about it. as a way of condemning capitalism. theodore said "in moscow, there is poverty and there are beggars in the streets but lord how picturesque the multicolored and gs of them.ra they were very colorful. john dewey, one of the founders of the public school monopoly said soviet communism is intrinsically religious and as the moving spirit and force of a motive christianity. christianity was out load -- outlawed in russia. george bernard shaw said that could not be a food shortage in the ussr and this was right after stalin's forced collective agriculture killed six ukrainians. when i was the age of some of the students, i was in economics major and i took a course called comparative economic systems and two other writers were marxist economists. and they're probably the most influential marxist economists of the 20th century. cuba as aed coming as paradise garden where agricultural problems would melt away at a gigantic economic surplus. about cuba come you come away from cuba's communist with your faith in the human race restored because of their peer find an liberating experiences and the final quote is from norman mailer. "i announced to the city all a york and he gave us sense that there were heroes in the world. these are movers and shakers, important people. i called them the utopians. they had some vision of socialist utopia and they condemned capitalism by praising these alternatives and they are imaginary alternatives. they saw what was going on in russia, cuba, china. they got away with it for a long time. how thesef my book is enemies of capitalism have concocted a long series of myths about capitalism that pretty much holds sway in the academic world. earlier i had a picture all of the mayflower on the cover of my book. one of the early chapters is on how capitalism saved the pilgrims. i mentioned private properties was a prerequisite to what we call capitalism. on the pilgrims first came, they almost all starve to death essentially because they adopted communal agricultural communism. sharedr was produced was equally among their families. that was the arrangement made by the mayflower company. as a result, workers were so start -- stifled that -- william it was in ate about matter of having not enough energy or work ethic because there were people playing games in there, engaging in sports. it wasn't that they couldn't work but the incentive wasn't there. how the pilgrims say themselves was to adopt the primary prerequisite for a capitalist economy. plots fored private each family that they could produce and sell on the open market and that changed everything. .t's worth reading he said here's how they solve the problem. -- in that should regard, trust to themselves in all other things to go on as before. so assigned to every family a parcel of land. .his had very good success much more corn was planted than otherwise would have been by any means any other could use. that is how they saved themselves, private property. there is a story that the reason for the starvation was the corporation that was set of. they were exploiting the workers , the pilgrims. private property that saved the day in the absence of ever property that was the problem. marketuments about failure were made. alexander hamilton was one of the first to articulate the notion that roads had to be built by the government. not going tou were have adequate roads and canals. this might've seemed like a reasonable theory. he sort of failed at that argument and didn't adopt any canalment subsidized building but this was a powerful argument. my quote an economist named dan klein. he is a well-known free-market economist. historical research on early american rose and found wrong, then was communities figured out ways to overcome the free rider problem. the private road building movement built new roads reach previously unheard of in america. inr $11 million is invested terms hikes, six .5 million in new england. between 1794 and 1840, 2 hundred 70 private turnpike companies --ld and operated about 375 300 7050 miles of road. it was self interest. these people in the communities decided we will prosper if we connect our town with the telmex to us and even though it wasn't . great investment you might have had a 3% return but if you were a merchant, you would sell more goods to the connecting towns. a really interesting story about how social ostracism, how people overcome this. people pressure their neighbors to contribute and auster size them if they do not. -- ostracize them if they do not. private roads are always build better and managed better than socialist roads are. another myth you are familiar the working class was exploited. capitalism enrich the working class. that's the title of one of my chapters. were they stupid? did they say i'm going to be soed looted and paid less i'm going to take the job? the fact they moved is proof in their minds they were better off and they were.few factory job in the 19th century to my job today, it would seem abusive and exploitative. compared to six hours of backbreaking farm labor, it was pretty good. capitalism is mainly responsible for the higher wages and cheaper goods. the working class or free riders on the capitalists. the capitalists took all the the ideas,up with went to work, managed a company. the end result is higher and higher wages. benefited double from all of this. the main reason for the higher wages is capital investment. human capital investment, workers becoming educated. primarily, it's capital investment. the average american middle class america and today lives better than the kings of year ended 200 years ago. the king of europe didn't have air conditioning or cars or electric stoves. capitalism is the reason for news. reason for thehe shorter workweek. how else could you work less and get paid more than if productivity improves, which enables you to produce more per hour. that's the only way you can have more money and less work is if you produce more per hour. and if you do that, you get paid more. he will lose your best employees. ofpetition is what forces wages and a regime of capitalism where you have capital investment fueling this productivity growth. the shorter work week didn't come from labor unions or laws. the only way we could have that is productivity improvement for capitalism. was on the wing long before labor unions got into the act. their interest in child labor laws was to kick nonunion child laborers out of work. it was not concern over the children who do not pay dues to their union. it was a phony concern about sweatshop labor and indonesia. it wants to eliminate competition for its dues-paying members. besides that, i've had a lot of manual labor jobs and i've sweat in every single one. wrong with slight anyway? being in a shop is not bad. that language was confusing to me. child labor, the reason capitalism reduced child labor is as productivity grew, people were paid more and they could afford to keep their kids and send them to school. previously, they couldn't because it was a matter of life and death where the children had to work to help feed the family. if you take these young people out of their jobs, the alternatives are child .rostitution, starvation the alternative is not going back to a nice public school somewhere. how capitalism enrich the working class. i also have a chapter on the .ruth with the myth is is exactly as bolton fulsome says. some people were genuinely to print. he calls the market entrepreneurs. and made their money by withding the masses cheaper products. there were others who made their money and more dishonest way, .uch as leland stanford it essentially made competition in the railway business illegal. even i could make money in business if i had a law making competition illegal. these are what you call political entrepreneurs. so they deserved the criticism. people like john rockefeller. how did he become wealthy? well reducing the price of oil from 1869. he drove down prices for decades . americanshink of it, -- lower income americans couldn't even light their homes. rockefeller at least gave them the means by which they can have light after sunset. just that i think is more benefit to the american people than all the politicians in the history of the republic. robert fulton, the steamship operator, had a government monopoly on the hudson river. cornelius vanderbilt as a young man came around and figure out a way to compete illegally with robert fulton by charging nothing for transportation and making his money by selling food on his boat. the state police chased him up and down the hut and river until -- the hudson river until he gave up. but fulton was on the government, thought he had a protected anomaly. then of course he went on to be great railroad entrepreneur. that werepeople robbers but it was only when they formed partnerships with the government. in the free market, you can't rob anybody. the only way to make money is to persuade people it's in their interest to take your product or service in return for some of their money. he competed against all the government-subsidized railroad and build a better railroad, faster with better service. he subsidized the towns along .he way he gave them free grain, free education about farming, paid for the right-of-way across their land. he didn't call in the army to kill them. story of a market entrepreneurs succeeding, building a transcontinental railroad. he even found the passage through the rockies that lewis and clarke had found and no one had found since then. he caught -- cut 100 miles off of his route. se was a tenaciou businessman. another myth i would mention that i write about is the franklin d. roosevelt myth. it's amazing what a big myth this has become, sort of connected to the herbert hoover myth.is that herbert hoover was an advocate of policiesaire and his caused the great depression. franklin d. roosevelt came along in an activist interventionist state and saved us all from the great depression. totally the opposite of the truth. herbert hoover was not an advocate of laissez-faire when he was in politics. after he got out of politics, i've read some of his speeches and rhetorically, he was great as an advocate of laissez-faire in freedom and so forth. wasn't.itician, he what did he do in office? the first thing he did was he pressured businesses to raise wages in a recession. that's awful economics. that bad economics. demand is down, business income is down, a lot of businesses are in a position where the only way we can sustain business is temporary pay cuts. if they go to the workers and say we will show you the books, a temporaryve with pay cut. when things get better, we will pay competitive wages again. hoover pressured them to do the opposite, a higher wages. as a result, unemployment became more severe. that was basically the agenda. public worksive spending and a massive tax increase or come among the biggest tax increases in american history up to that point were opposed by him to pay for public works programs. he originated the cartel, the policy of the government to not grow food because he thought that would cause the higher prices for food, which would help farmers. these programs today. maybe some of you might remember a couple years ago, the great sam donaldsonr was in the news for having million for not raising sheep on his sheep ranch in new mexico. he has a sheep ranch and pays someone to run the sheep ranch and there's a government program based on paying sheep ranchers for not raising sheep in order to drive up the prices of sheep and wool so they can make even more money in general. , oneiend walter williams of his columns, he demanded $2 million from the irs i saying i too do not raise a sheep. [laughter] notdilorenzo: why am i getting this money? herbert hoover was the originator of this. the tariff tax- was raised about 60%. this devastated american farmers because american farmers then as now exported a great deal of their produce. what happens is if you put big tariffs like that on in order to imported goods, people get less dollars because they can't -- we can't buy their goods. we don't give them our money and we buy american sugar and wheat. but since the europeans have fewer dollars, they have less of an ability to buy our goods, the things we sent to them, which was overwhelming. going up. is and they have far fewer dollars to buy american goods. and they put high terrace on american goods coming into other countries. when the great depression broke up, the first big banking crisis was in the farming areas. the farmers were devastated by .he smoot-hawley hoover tariff that was really something that instigated the entire great depression, one of the misguided policies. that was a hoover policy. the idea he was a laissez-faire advocate is just not right. some of you may have heard this man, to dwell. he was franklin d roosevelt's chief domestic policy advisor from 1932 to 19 45. he was the tough men for a long time. here is what he said about hoover. in new the idea embodied deal legislation where he cap elation of those that come to maturity under hoover's agents. all of us owe much to hoover. that's fdr's right-hand man. he didn't in the great depression. the unemployment rate before the depression was about 3%, the normal unemployment rate. by 1938, still 19%. 1939, still 17.2%. endedeat depression never before world war ii. personal consumption, the major of how well-off consumers were was still about 10% lower than it was in 1940. the depression did not end by world war ii either. sending 10 million men or 12 million men out of the country is not the way to end the great depression. the end of the depression means greater prosperity for consumers and we didn't have that during the war. the depression didn't really end until after the war. cut ineral budget was absolute dollars from $95 1945on to $35 billion from to 1947. the economy took off. all of that money was put back in the private sector. they never pay attention to that apparently so they just went about their way. in roosevelt policy come unequivocally made the great depression worse and made it last longer. there's no doubt. the first new deal was carbtially a scheme to allies the entire u.s. economy. the basic theory was that low prices caused the depression and therefore high prices will end the depression. in the whole economy, there were price codes imposed throughout the entire economy in they were police by thousands of price police it would arrest people and put them in jail for cutting their prices. there is a famous story of a tailor in new york city who was imprisoned for having a pair of men's pants for $.35 instead of the official price of $.50. he was put in jail. in the farm sector, the same thing. the low far income is caused by low food prices. fdr originally sent government agents to destroy livestock. they thought if we go out and kill auto -- all of these cattle and animals, that will reduce their supply and drive up the price of meat and the farmers will be happy. there were long lines at soup kitchens, people starving in the mississippi delta and the government is destroying food. it was a public relation's disaster for fdr. they adopted a policy of paying the farmers to not grow the food and livestock. that was all ruled unconstitutional. so restricting production was the hope purpose of the new deal. the second new deal was even worse. probably the hallmark of the is labor legislation that greatly empowered labor unions that allowed them to increase wages by 17% in 1937 in the middle of the great depression. someone is waving at me. time? i will wrap up. forcefully raising prices in a recession or a great depression cause greater unemployment. and two economists wrote a great book called "out of work." they estimated that because of these policies that forced up wages in the recession that the unemployment rate was probably at least eight percentage points higher than it would have been because unemployment had been returning to near normal in canada, england. so that is the fdr mess. my final chapter is called the never-ending war on capitalism. i touch on issues such as political extortion. another great book is called "money for nothing" about how our politicians will propose a law that will tax certain businesses and sit back and wait for the businesses to send them campaign contributions and then they will forget about the law. they did that with pharmaceuticals when the clintons were in office. dollars into washington dc and campaign contributions and then they said let's forget about that. goose thatad for the lays the golden eggs. i mentioned lawyers, the war on by's, the nonchalant way in find a00 pound teenagers lawyer to sue mcdonald's because of their condition and if they win sunday, it will impose great economic harm on a lot of people. and some of that the authors of the more popular anti-populist books like michael moore. michael moore, the great in "stupidholar white men" lanes the fate of indian reservations on capitalism. the financial condition of washington, d.c. is he rails he does against stupid union leaders who cuts toe temporary wage save the jobs of their members. the smart ones are the ones who don't do that, a company goes and corrupt, and everyone loses their job. this is a guy who wrote a book all the "stupid white men." and barbara ehrenreich, the president or recent past president of democratic socialists of america. she has been a big celebrity on college campuses. this book of hers is used for freshman seminars everywhere. she makes the remarkable scientific discovery in the book that entry level fast food jobs don't pay very much. that's pretty much what she says. makes a page for more public housing subsidies, higher minimum wages, and all the things that have proved to be failures for many decades now. and the book with these ongoing attacks on capitalism. they will have time for some questions. [applause] >> thank you for your presentation. at the beginning of your talk, he told an anecdote about george -- george mason worth their room selecting books for the business school. with the book you've written now, had you gotten any feedback from college professors that >> your book is being taught? >>it is being used at the university of georgia, san diego state, in michigan. i'm going to use it myself and eczema are. it's coming out in paperback in about a month. and thebe much cheaper reason random house decided to do that is it's being used by more and more colleges. it will be out in paperback. i tell my students pay as much as you can for your books pay foryour parents them and you take them back at the end of the semester and get the cash. >> i go to a public college in california. nickel and dime is standard fare for freshman seminars, the loss of fee class -- philosophy classes. i noticed i often get into debates defending capitalism. standard fares of peoples arguing against me is this question of authenticity. my family isn't rich but because i don't come from the economic underclass of the united states, people will argue to me that i'm effectiveof of making economic arguments because i don't understand what it is like .irsthand i do understand the first 10 economic problems the underclass class understands. >> you say you've never had cancer either but you understand cancer is a very bad thing. you can tell them you've never personally met george washington but you know a lot about him because he read several biographies. that tactic is the one used by people who know they don't have the arguments on their side so if you don't have the logic and facts on your side, you argue emotions or bs. what their socioeconomic status is. i've heard the same argument when i was a student. i became a professor. father was a construction worker. i don't come from a rich family. a friend of mine went to the university of virginia law school, one of his professors were a very expensive three-piece suit every day with workboots. he was showing solidarity with the working class. it was phony authenticity. my friend knew about this guy and he inherited a lot of money. he was a millionaire but solidarity. ask them that. use the logic don't have cancer but you know it's a bad thing. is saying let's not use our brains, let's use our emotions. it doesn't account for the emotional and human side of the equation. >> or it dies. -- sure it does. i teach a class and i use the communist manifesto and criticisms of socialism. one of the things i did, i had whytudents agreed -- read socialism doesn't work and why --erventional is an interventional wasn't leads to. i asked him to write a paper, thinking any country in the black book of communism explaining how coercion was used theyopt socialism and learned to have socialism requires color version -- coercion. it made them miserable even if they were not killed and that is the moral high ground your fellow students are taking. they're taking the moral high ground of we are on the side of socialism because capitalism has been bad for the people. the truth is just the opposite. it's very easy to prove. that is why your friends don't rely on books like this. >> thank you for your answer. mr. dilorenzo: i want to work one day and everyone was walking around in wheelchairs. students have this project and how can you understand what people in wheelchairs feel? they had an overnight sleep out on campus in solidarity with the homeless, a big pajama party by these spoiled rich kids in solidarity with the homeless. >> earlier, you mentioned the sessions. reado economist but i've some other works and one writer i run across contends that in a peer market economy, recessions and depressions are a natural thing and almost invariably caused by government intervention and regulation. i was wondering what your philosophy on that is, whether they are a naturally occurring part of the capitalist system or a consequence of government intervention. mr. dilorenzo: the central bank is the main generator of recessions and in the business cycle. i don't think it's totally an accident that the fed came in in 1913 and then we had the great depression not too long after that. best explanation for the great depression is the one that the austrian economists put forth but also there are a lot of investors who think it's also the explanation for the nasdaq plunge a few years ago. basically what happens is monetary expansion makes credit over and results in an capitalization of a lot of businesses are created that shouldn't be out there. existing businesses expand way beyond what they should expand to and that goes on for years. he liquidation has to eventually occur because there's too much capital among consumers to buy the goods produced. invariably, there has to be liquidation of this capital and that is what causes the recession. there are a lot of highly regarded investors that think this is what happened with the crash of the nasdaq. it's also a major cause of the great depression in the 1930's. had arse, the 1930's, we combination of really bad , misbehavior by the fed, big tax increases by hoover. they did just about everything wrong. you can read my book and find out more about that. we have time now for one more. mentioned before that capitalism exploits children, people say. i read capitalism inherit a system where women work in a cottage and the husband got all of the money from the projects but when the women went to work in the factories, they were paid firsthand. an example closer to home about how capitalism has in a fitted women is the new england project in 1994. when we were -- do you talk about the positive benefits of capitalism for women in your book and if so, there is anything you would like to expand. mr. dilorenzo: i don't distinguish. i don't see how you can say a married woman benefits or doesn't benefit from capitalism apart from her husband. that doesn't make much sense to talk about how one benefits versus the other. they are in it as a team. one of the biggest developments in the past 30 or 40 years in the labor market is the increased labor force participation of married woman and that's a cause of higher wages. that's because of capitalism. they have voluntarily chosen these roots. was a college student, the statistics i've seen is that law students were about 15% of them were women. now it's over half. the same is true for engineering computer science, economics. capitalism has driven that. whether you think that's a good thing or not is not for me to say but i don't see how women could enjoy capitalism as well as anyone else can. i guess our time is about up. thank you for coming. 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