Friday, May 31, 2013

Why defend Free Markets and Capitalism?

Capitalism is a system of exploitation of the poor by the rich; a means of grinding minorities, women, indigenous people, the proletariat and gays into the dirt for the benefit of the multinational corporations’ old-boy networks; a corrupt edifice that thrives on misery, disease, starvation and warfare.
The remarkable thing about this point of view is not so much that hardcore Marxist / Leninist / Stalinist / Maoist / Castroist / Pol Potist / Van Jonesist / Chavistas / take-your-pick-leftist still believe it after a century of colossal socialist crimes and failures, but how many seemingly nice, reasonable people advocate policies that implicitly acknowledge it to be ‘true’. We must tax the rich lest the poor starve. We must unionize workers in all sectors to prevent exploitation and secure social justice. The government must provide food, clothing, shelter and health care to all. Businessmen are greedy. Profit is a four-letter word. Corporations – especially insurance companies – are evil. Judeo-Christian civilization is an intolerant, barbaric relic that needs to be consigned to the ash heap of history.
Capitalism as we (almost) know it has only been around for little more than as long as the United States of America. Prior to 250 years ago (a blink of the eye in human history), the dominant social systems were feudalism and mercantilism, and the average income for 90+ percent of the world’s population was roughly equivalent to what we would call one dollar per day. The world’s population was several times less than today and it didn’t grow in spite of high birth rates, because lack of food, malnutrition, poor sanitation, inadequate clothing and shelter, barbaric medical practices, infectious disease and back-breaking labor killed a huge percentage of children before they had a chance to mature, be fruitful and multiply. Life expectancy was half or less what it is today.
What changed? The productivity of labor increased with the gradual accumulation of capital, technological innovation, division of labor and most importantly, the liberty of the not-politically-connected classes to engage in business and keep the fruits of their labor. Britain led the way in the late 18th century and the United States eventually took the lead in the 19th. France, Spain and Rwanda trailed behind.
The improvement in the standard of living of the most wretchedly poor in England in one generation was so dramatic that it required Adam Smith’s magnum opus ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ (‘The Wealth of Nations’ for short) to explain it. This book, published in Scotland in the birth year of the United States – 1776 – was the founding document of modern economic science. The phenomena it described were the first shoots of modern capitalism.
There existed rich people before capitalism; kings, noblemen, military leaders, landowners etc. The earliest effects of the creation of small mass manufactures for, by and of the poor were that ‘those who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged’ in Smith’s words. The eventual effect of the advanced development of capitalism is that people we call ‘poor’ in our society today have at their disposal a cornucopia of products and services that would make the Sun King Louis the Fourteenth of France choke on his camembert. A person of modest means today can walk into a superstore a short distance from his or her home and choose among 60,000 products from around the world, at affordable prices. People live longer and healthier than ever. This is the miracle of capitalism.
It didn’t happen because of child labor laws, because of the union movement, because of environmental legislation or any of the other interventions that ‘progressives’ insist were indispensable to protect us from the brutal greed of the capitalist pigs, or even to save us from ourselves. The nations that have the strongest pro-union legal environments, the cushiest state social safety nets, the most secure public pensions, do not have the highest standards of living; in fact as I write this in 2010 those very nations are rapidly descending into bankruptcy and social chaos.
Before wealth can be distributed, tamed and managed, it must be produced. And before it can be produced, someone has to store up some capital and take a chance on some productive project that may or may not succeed. Anything that raises the cost or risk of such projects, or threatens to take away the reward should the project succeed, reduces the likelihood of such projects being launched in the first place, thus reducing overall prosperity for all of us over time.
And that is why life, liberty and private property rights must be defended above all Santa Claus notions of what the state is supposed to provide for us.