Christmas and Capitalism

Christmas and Capitalism

Christmas is supposed to be a time of both giving and of celebration, so I’ll do the obvious thing and celebrate giving.

We live in a society of two factors, freedom (and the forces necessary to maintain it) and forceful restriction. Neither of them are perfect, but only one can lead to real prosperity and general happiness. An argument goes that men cannot be free because they are greedy, that most evil of crimes which they have been accused of throughout time, but it is ironic that only through free interaction can the forces of greed be harnessed to productive use. Throughout the political spectrum greed is disparaged, the Occupy Wall Street protesters blame greed for the vast majority of suffering today, and they are not alone by any means. The problem is greed, the problem is property, the problem is the fact that there is no master plan driven by “the people”, and this provides riches only for the greediest. The problem is freedom, and the only way to solve it is with more government, with more force. What is the problem with this line of argumentation? There are many reasons why, but they can be summed up with the statement “Almost everything about this point of view is incorrect and ill-considered”.

No one in the political arena, even the most ardent of Republican “capitalists”, seem to understand the magnitude of what their dealing with. Capitalism is the most productive force that humanity has ever seen. The size of the economy under capitalism is so large that it would have been little short of unthinkable before it was actually seen. Indeed it’s hard to believe that the classical economists, who extolled the virtues of the market economy, could have ever imagined exactly what capitalism was capable of and would eventually bring about. The number of people alive today in the industrialized nations, all of which are the most capitalistic and free nations, who enjoy a very high standard of living, is absolutely remarkable. The array of goods available to the average American is remarkable. They are exceedingly versatile, easy to use, international both in design and origin, and relatively cheap.

The awe inspiring nature of the market economy is that it does the impossible. Out what seems to be chaos, that is out of no set order, comes an amazing unity, which a central power could only ever dream of. Think of the size of the modern economy which, if considered in its real international perspective, consists of a labor force hundreds of millions strong. There are literally millions of products and massive amounts of machinery, buildings, and land, all of which have to be arranged in such a way that productivity is optimized, or even arranged in a way that any rational production results. The system is so massive, so complicated, that only a decentralized system could ever handle it. How could a centralized system ever truly hope to organize and facilitate such an infinitely complicated system? Only through the division of labor and specialization, applied to administration so that the infinite number of production stages can be overseen on a small level, can an efficient system of this size ever arise.

We can see two things, that the fact that capitalism works better than a centralized system is not surprising, but rather to be expected, and the second is that the arrangement, and prosperity of the modern economy is not something that is perfectly natural and predictable, it is not something that will happen under any system, and some conditions will be more friendly to growth than others.

Capitalism, freedom, has spoiled us. The protesters who now fill Wall Street decry capitalism, and in their eyes the world could hardly to better than to rid itself of this anarchistic system of greed. They do not see that they enjoy the standard of living that they do because of capitalism, because of the profit seeking businessman, because of the investments of the rich, because of the diabolical creditor and his sin of usury. Their proposed policies of heavy taxation of the rich would, under ideal capitalistic conditions, destroy investment and long term growth, if student loan debts were wiped out then interest rates for college would rise dramatically, and if the entire economy were taken over by the government then a war to seize control of government power would result, even though the complexity and blindness of the system would all but obliterate modern living standards. Capitalism has spoiled us. If only “we” controlled the system, if only “we” could seize it from the rich who so maliciously hold onto their wealth and power, then surely prosperity unlimited would result. It could not be the fact that greed and chaos are what make the system work... Could it?

What does drive this system, really? The problem is, and has been since some of capitalism’s first attackers came in the form of the early socialists, that people don’t understand how the system works. They say that capitalism works in favor of the businessman, and against the worker and the common man. The businessman pursues profit, and ignores all other considerations, ending only in destruction of society in general. But this is simply not the case. Simply put: Capitalism is actually the greatest tool for giving that has ever existed.

Capitalism arises out of a condition of freedom. Men begin to cooperate because they find that it is mutually beneficial. Individuals believe that through trade they can both be made better off. If this were not the case the two would not engage in trade. In this way businessmen find themselves able to hire people, once again an act of mutually beneficial behavior, in order to produce a product and then sell this product to others and engage in trade. This means that if he wishes to actually sell the product then he must produce something that others are willing to buy. This is the magic element in the capitalistic economy. The businessman, by pursuing his own self interest, becomes a servant to the consumer. I use this term in a very true sense. The businessman must produce what the consumer wants, if he wishes to maximize his profit then he will act in the best way he can to attract as large a customer base as he can, and do all that he can to make the customer as pleased with him as is possible. This goes beyond simply a good product, but also a good presentation, a good service, and an appealing ethos.

The system, however, goes even further. In an attempt to maximize products businessmen bid up those resources which are necessary to the price which they are actually worth. The alternative is to under-employ resources and lose market share and profits as resources are bid away by entrepreneurs who are willing to pay the real value of these inputs. This applies not only to things like iron and concrete, but also to labor and machinery. The producer must conserve resources so that they can be used in areas and not waisted where they could be spared. If he does not do this then he will find himself at a loss compared to what he could have been in. The resources saved will either be employed in another area where they are more efficient, or saved for a later date when they are desired. Each input is also employed in its most productive use. The alternative is that the sales of the producer will bring him an all around lower income than they otherwise could. The same goes for branching off into new markets, and the creation of new goods which people will consume. Most importantly businesses have an incentive to take out loans and invest in new machinery, which actually increases how much can be produced in the economy, allowing for widespread gain for all, whilst revenue for the specific business increases as more is produced at the same cost. Finally, only those who are the best at planning the structure of production, and of predicting what consumers want, will long endure in such an economy, because if they are prone to loses, or if their business plans are unsound, then they will not be able to find an investor who is willing to lend to them and their own reserves will soon dry up.

This sounds Utopian, a world in which only what is desired is produced, and which the entire economy acts in an efficient manner which increases overtime, but it is actually quite possible, more than possible, it is reality, albeit one which is continually restricted an hampered by forceful interference. This is literally the outcome that must arise out of the presupposition of greed and rabid profit seeking that is described by those who despise capitalism so.This is the capitalism which is considered infamous and evil and has been despised for centuries now.

Capitalism is an unrivaled system of production in terms of output and efficiency, and as we can see it is also the greatest form of giving and cooperation. It gives people that which they actually produce, and it gives them an incentive to actually take care of and work for the benefit of others.

Many oft-quoted passages from “The Wealth of Nations” by the grandfather of economics, Adam Smith, states that due to the actions of individuals in pursuit of profit that a general benefit results which none of the individuals were working towards. It is hard to know whether or not Smith even fully understood the extent to which this is true, for it is not simply competition to drive down prices which is performed by capitalists, but also a pursuit to open up new markets, introduce new production techniques, serve the customers in every way possible, to make use of resources to the fullest extent, and to expand production through the introduction of new machinery and other investments which increase productivity. The most important thing to emphasize however, is that capitalism is a system of mass production for the masses. It is the consumers who eventually make the decision in capitalism. The producer is not a law unto himself. If the producer makes things which are not wanted by the public then that producer will go out of business. It is about what the common individual desires that matters, not what the producer wants.

This is the single factor that cannot be emphasized enough. Capitalism is the system which has brought men to work for the betterment of their fellow men on a greater scale than any other system that humanity has ever seen. The system works because it is mutually beneficial and helps all who participate. If it were not mutually beneficial then the system would have never come about due to its voluntary nature. To stay in existence businesses must cater to the consumer and do whatever they can to please him. Capitalism is indeed a system of mass servitude, but it is not one of the capitalist over the worker, but rather of the consumers over the entire production process. Capitalism is the system which the Occupy Protestors have been seeking this whole time, capitalism is the system which socialists should have been fighting for all these years, it is a system in which the wants and needs of the common man and the normal consumer are made the prime concern of the entire system. Capitalism is the most benevolent form of collectivism imaginable, and it comes out of individual action and and greed.

In this way anti-consumerist groups, like adbusters, a group which helped to instigate the Occupy Movement, and who advocate democracy, are entirely contradictory. People spend money each year to consume a 2.0 version of the gadget that they bought the previous year because of their own foolish (depending upon your point of view) desires, not because of the wickedness of the capitalist system. People in America are fat whilst many in other countries starve because they ate the foods which companies produced and did not buy healthier foods made by other companies while at the same time showing no sympathy to those who were in need. Consumerism is only the fault of capitalism insofar as people demand it. Capitalism is a type of democracy, although it acts upon many levels. Capitalism is the consumer’s democracy, and it will only be as wise, and as compassionate, as the consumers are.

Do not blame “the corporations” for the incredible consumerism of the holidays, blame the people. Then take a good look in the mirror, and you’ll probably find that a fraction of the blame even belongs with you.

So merry Christmas everyone. I hope that everyone had a good celebration of the things which they loved most in life, and I hope that while you were at it you did a bit of celebrating to the system that has given more than anything else in human history, the system of capitalism.