It was my recent misfortune to come across a column by Duncan Cameron entitled Capitalism fails again. However, this column is so full of glaring errors and economic ignorance that I feel my title sums the piece up far better.

In Cameron’s second paragraph, he makes his first glaring error. He opines that capitalism plunged the world into the great depression. Throughout Cameron’s column there is precious little actual economic analysis, and Cameron seems content to replace original and intelligent thought with buzzwords, and evidence with the tired, cliched cries of the socialist: Enron! McDonalds! Iraq! Nortel! The reason for this soon becomes plain: Cameron does not actually know about or understand economics.

The Great Depression was preceded by a government that approached but never equalled FDR’s in its interventionism. The cause of Great Depression was, in fact, Keynesianism. The Federal Reserve vastly inflated the money supply during the 1920s to create an artificial boom, in accordance with Keynesian theory which prescribes monetary inflation for economic growth. As the currency is inflated, money becomes cheaper against other commodities, since supply has increased while demand has remained relatively stable. The low price of money leads to easy credit, since collateral is worth more against money, and easy credit led to large private debts and the purchasing of shares on the margin. However, economic growth fueled by inflation is unsustainable, because it reflects not the spending of the money of consumers, but of money created from thin air by the government. Spending of inflated money is usually a malinvestment, since purchasers will spend with less regard to security than when spending commodity money, which is worth more. Thus, the malinvestments of a credit boom usually do not have the backing of consumer demand, as in the dot-com bubble, and when the supply of easy money is withdrawn they quickly collapse.

How can an economy be sustained by money from thin air, you ask? Easy: it can’t! This is why we had the Great Depression. Realising that infinite inflation ends up with a worthless currency (as in the Weimar Mark), the Fed decided to reduce the rate of inflation. They realised that this might cause a slowing of the economy. Just how slowed it would become staggered everybody, however.

This, then, is Cameron’s first error. He attributes to capitalism the errors of Keynesianism, which is a usual trick of socialist thinkers: blame capitalism for what mercantilist and socialist policies produce.

Cameron then goes on to lambast capitalists for inability to police themselves. Again, how wrong he is! Within hours of the breaking news of the Enron scandal, Enron shares were in freefall. A long time before the government had even thought of taking action, Enron had ceased to exist as an economic entity. But this mistake obscures a greater error from Cameron: the socialist tendency to see “capitalists” as a separate group from everyone else. They generally think of capitalists as investors and employers, but in the modern world, that is everybody! If you have a bank account of any kind that carries a balance or bought any kind of insurance, you are an investor. You have put dollars into a scheme in which you expect a return on those dollars without doing any work. If you have purchased any consumer goods or finished products, you are an employer. You have paid a long line of people to bring a television into your home.

Cameron ends his column with the yearning that the “apologists” be replaced by “free-thinkers”. Cameron is indeed free: he has freed himself from facts and from reality, placing himself in a “free” realm where his fantasies are a reality, and socialist dogma stand in for facts.