Category Archives: Family

In defense of the masses ( how I learned to love capitalism and help the poor )

Students of history will recognize that the terms capitalism, capital, and capitalists were employed by Marx as part of his campaign to convince the world of the inevitability of Socialism. They are today increasingly employed by most people with an opprobrious connotation. Yet these words pertinently point toward the main factor whose operation produced all the marvelous achievements of the last two hundred and fifty years.

The unprecedented improvement of the average standard of living for a continually increasing population. What distinguishes modern industrial conditions in the capitalistic nation-states from those in many Third World countries is the amount of the supply of capital. (You can blame weak property rights in most cases – See: The Other Path by Peruvian Economist Hernando DeSoto ) The fact of the matter is that no technological improvement can be put to work if the capital required has not previously been accumulated by saving or available through fungible assets like property.

Even without property, capital accumulation, know as savings, is the mechanism that has driven humanity step by step the awkward search for food on the part of savage cave dwellers into the modern global economy. The pacemakers of this evolution were the ideas that created the institutional framework of property laws. Within these frameworks, capital accumulation was rendered safe by the principle of private ownership of the means of production. Every lurch forward on the path to prosperity is the effect of saving. The most fantastic technological innovations would be practically useless if the capital goods required for their utilization had not been accumulated by saving.

Entrepreneurs employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not-yet-satisfied wants of the consumers. Together with the technologists, intent upon perfecting the methods of processing, they play, next to the savers themselves, an active part in the course of events that is called economic progress. The rest of mankind profit from the activities of these three classes of pioneers. But whatever their own doings may be, they are only beneficiaries of changes to the emergence of which they contributed nothing.

The characteristic feature of a market economy is the fact that it allots the greater part of the improvements brought about by the endeavors of the three progressive classes: (1)those saving; (2)those investing the capital goods; and (3)those elaborating new methods for the employment of capital goods (ironically to the non-progressive majority of people). Capital accumulation exceeding the increase in population raises, on the one hand, the marginal productivity of labor. On the other hand, it cheapens the products. ( Moore’s Law and Walmart all rolled into one ) The market process provides the common person with the opportunity to enjoy the fruits of other peoples’ achievements. How many of you have an iPhone that you call others on to gather people to stop that Google or Apple bus?

In short, the market forces the three progressive classes to serve the non-progressive majority in the best possible way.

Best of all, everybody is free to join the ranks of the three progressive classes of a capitalist society. These classes are not closed to new members. Membership in them is not a privilege conferred on the individual by a higher authority or inherited from one’s ancestors. These classes are not clubs, and the “ins” have no power to keep out any newcomer. What is needed to become a capitalist, an entrepreneur, or a deviser of new technological methods is brains and will power.

This is why education is so important. It is the lifeblood of the system. Every brain on the planet with a good education can play a role in the capitalist system and gain rewards commiserate with their contributions.

The heir of a wealthy family enjoys a certain advantage as she starts under more favorable conditions than others. But his task in the rivalry of the market is not easier, but sometimes even more wearisome and less remunerative than that of a newcomer. She has to reorganize her inheritance in order to adjust it to the changes in market conditions.

The popular philosophy of the common man misrepresents all these facts in the most lamentable way. As today’s hipster sees it, all those new industries that are supplying him with amenities unknown to his father came into being by some mythical agency called progress. Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity.

If any person has to be credited with what the hipster considers as the rise in the productivity of labor, then it is the person on the assembly line. Unfortunately, in this sinful world there is exploitation of one person by another. Business skims the cream and leaves, as the Communist Manifesto points out, to the creator of all good things, to the manual worker, not more than “he requires for his maintenance and for the propagation of his race.” Consequently, “the modern worker, instead of rising with the progress of industry, sinks deeper and deeper…. He becomes a pauper, and pauperism develops more rapidly than population and wealth.”

The authors of this description of capitalistic industry are praised at many universities as the greatest philosophers and benefactors of mankind and their teachings are accepted with reverential awe by the millions whose homes, besides other gadgets, are equipped with microwaves, iPads and 1080 HD TVs.

The worst exploitation, say professors, “labor” leaders, Occupy Wall Street and some politicians is done by big business. They all fail to realize that the characteristic mark of big business is mass production for the satisfaction of the needs of the masses. Under capitalism the workers themselves, directly or indirectly, are the main consumers of all those things that the factories are turning out.

In the early days of capitalism there was still a considerable time lag between the emergence of an innovation and its becoming accessible to the masses. Over 100 years ago Gabriel Tarde was right in pointing out that an industrial innovation is the fancy of a minority before it becomes the need of everybody. What was considered first as an extravagance turns later into a customary requisite of all and sundry. This statement was still correct with regard to the popularization of the automobile. But big-scale production by big business has shortened and almost eliminated this time lag.

Modern innovations can only be produced profitably according to the methods of mass production and hence become accessible to the many at the very moment of their practical inauguration. There was, for example, in the United States no extended period in which the enjoyment of such innovations as microwaves, personal computers, nor cell phones was reserved to a minority of the well-to-do. Big business tends, in fact, toward a standardization of the peoples’ ways of consumption and enjoyment. Nobody is needy in the market economy because of the fact that some people are rich. The riches of the rich are not the cause of the poverty of anybody. The process that makes some people riches, on the contrary, the corollary of the process that improves many peoples’ want satisfaction.

In the end, the truth is that the entrepreneurs, the capitalists and the technologies prosper as far as they succeed in best supplying the consumers.