Something is said to be sovereign when it is held high above all else for one reason, or another.
Any market system is composed of a buyer and seller, or consumer and producer. Yet, the mere existence of a market defined in this manner is no reason at all to suspect that capitalism also exists.
There is not a single place on this earth where money is not exchanged for a good or service that some individual or organization demands, whether the exchange occurs in New York, Iraq, or China. But that isn't to say that capitalism is sovereign in all or any of these regions, in fact.
We aren't going to argue what capitalism is today. There isn't enough space for that subject in this report. But sticking with the definition of capitalism as defined by Ludwig von Mises in Human Action and other works, or Adam Smith's Wealth of Nations, it is not at all vague that the main economic actor in a capitalist process is the consumer, not the producer.
Producers respond to signals given by the market, which is made up of consumers. Remember, the idea is to please the market. Are consumers supposed to please the producers? Of course not, that's heresy. Consumers do not respond to signals given by producers, unless you talk to a Sony Representative, or maybe Jude Wanniski. But be warned, that would only reinforce the idea that the market economy has been turned on its head.
Why drag Wanniski into this? In reviewing a speech Mises gave in 1958 to Princeton University graduates on Liberty and Property at Mises.org, Mises repeatedly stressed consumer sovereignty when defining capitalism. Of course he would, since he'd written a whole treatise on the subject entitled Human Action some 9 years earlier. But the supply siders represented by Mr. Wanniski, as you know from our deflation dispute in "The Money is No Good," claim that the main economic actor in today's economy is the producer. According to supply side doctrine, the producer is sovereign in our economic system, which seems to come much closer to the pre-capitalist era than to any description of capitalism anyway.
Yet, this is the system that has bloomed in the past two decades into a new world order, rather than capitalism.
Professor Jude Wanniski and his friends invented supply side economics in the early eighties, and Ronald Reagan's campaign was based on supply side theory. As far as the full employment doctrine goes, it worked. The only problem now is that the market is not predominantly in charge of what to produce. The government and their crony corporations are.
Today, few economists appear to comprehend that the difference between capitalism and supply side doctrine is night and day. One is beholden to the individual, and the other, to the government. Supply Side theory has use only to the government. It is of no utility to the investor, in my view.
There is also another difference, as a consequence. One process (or system of production) requires individual liberty, while the other does not. And I'm not so sure that a system of production premised on producer sovereignty requires a system of private property neither. It just requires that the consumer have money. Supply Side doctrine, at least, infers that. Let me explain... end.
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