Liberty And The Overcoming of Capitalism

Duly Noted

The pledge to eliminate capitalism sells. The goal‘s equivalent is to serve a steak that has never been part of a cow.

The “traditional” civilizations of the past had generated significant achievements. About these –just think of the pyramids- it is to be noted that in them, the blend of knowledge, material and capital differed significantly from today’s usual mixture. 

Textbooks tell us that the things we create combine capital, labor, resources, and ideas that reflect knowledge. Capital and the rest of the factors are interrelated. The labor to create a better obsidian knife could not be invested into the rock unless its maker could be sustained while absented from hunting. For instance, with accumulated “capital” in the form of let us say dried meat and corn. 

The case tells a tale. It is actually only retold here but it is, especially for the benefit of the young, worth repeating. Myths planted to shape opinion thrive because an elemental truth has been forgotten or ignored. That the missionaries’ ignorance-based models of salvation forget the facts is excusable as amnesia enhances credibility. More embarrassing is when those attacked fail to evoke the point that would make them prevail. These days an illustration is the updated “the rich get richer” because of the abuse inherent in capitalism. The shibboleth gains support as, indeed, the rich are getting richer while it remains unmentioned that the relatively poor also rise. The truncated truth is of importance as the first part of the allegation is used to prove systemic exploitation and the unfairness of an uncontrolled “market”. Thereby, to prevent theft from the underpaid, radical intervention to create equality is necessary.

As we proceed either to discover the inherent evils of capitalism, or to declare faults to be non-existent –the latter attempt is a trap- we become cognizant of an ignored point. Capitalism, as in “evil” or in “boon to mankind” appears to be a recent phenomenon. In fact, while the term is “new”, what it describes is ancient. Capitalism is only new as a phrase used to name something we have noticed. Capital, which is a hoarded factor of production, has always been around -albeit not in its modern form when savings are converted into money before reinserted into productive use. 

Those that use evil capitalism to rally the virtuous the way the Nazis exploited the Jews or the Soviets their “Class Aliens”, like to suppress a salient fact. It is that capital is a basic factor of production and therefore omnipresent in all other factors. Its only variable is a development-related amount of capital in goods and the person that controls or owns it. Manipulative collectivists like to ignore this. Therefore, when they rage against “capitalism” they insinuate that, by “socializing” it, capital, as in "capitalism", will disappear. In truth, by “nationalizing” capital we only transfer its control. From numerous individual owners to a single entity which is the state. (In practice, it is likely to be a one-party-state.) The owners of unequally distributed private capital are private citizens, and as such, they are subject to the laws of the community. True, wealth is luring and, therefore, it will result in abuses. This applies to everything that is by its nature unequally distributed, from the ability to throw a ball to the talent to convince people. A democratic political order and a social value system will only be able to control capital’s publicized excesses but not to prevent them entirely. 

Once, however, the state controls all capital, the result is worse than the cluster would make one assume. When capital is concentrated, the political power that controls it will turn dictatorial. This order of things can be reversed; state capitalism can be an economic expression of political dictatorship. (A new statistic tells that the state owns 80% of the capital in China, 62% in Russia, and 38% in Brazil.) 

By its very nature, capital is unequally divided. Here a fundamental law is operating. This makes salvation schemes that promise liberation through equality into a promise to spit against the wind and to keep your face dry. Such programs have in common that, after the liquidation of those that are held responsible for inequality, they promise a new start. The equivalent is to rewind the story to where Adam, Eve, the serpent and the apple had interacted. (PC requires that the apple not be green or red.) To make the return to original equality through redistribution plausible, we need to forget the implications of the privileges of the re-allocators. After this concession, even if we assume that the leveling achieves its goal, it is a fallacy to assume that the condition will be a stable. In reality, the new recording will hardly result in a new story without the machinations of the serpent. 

Even Marx assumed that equality would exist only in that each will get according to his needs and independently of his contribution. Even centuries ago he did not insinuate that all will have the same need. Nor could he foresee that free hamburgers will cause an epidemic of obesity as availability creates its own demand. Nowadays one hears about well meaning folk that control the kid’s lunch boxes. Generalizing from that, we discover why equality and control are interrelated. 

Equalitarian projects, practiced by an entire society and not limited to a “club” of the like-minded, tend to underestimate the problems of production. Even where consumption as a corrupting force is controlled, society needs to organize matching production. Again, inequality emerges, as some will want to work more and others less. If output and the shares are related, a corresponding stratification will come about. To prevent that, controls of input and of output need to be imposed. Without a “plan”, since deferred consumption leads to the accumulation of capital, differences will re-emerge not only in what some will access but also in the realm of accumulated reserves. With that, the expelled individual capitalism will be back, as it expresses neither good nor evil but neutrally, the inequality of individuals. 

The foregoing suggests more than that inequality is natural. It also tells that utopias are a negative reaction to human nature. Combating it demands that such campaigns expurgate inherited human nature. They must also claim that alterable “conditions” cause the behavior that the superficial declare to be “human nature”. Once the order is changed, man will act in new ways that are outside the boundaries of hither experience. 

The enlightened that discover the alterability of human nature before getting the power to create new conditions will exercise guidance during the transformation. “The Forger of the New Man” as Stalin’s educational novel put it, is a project that makes dictatorship not only permanent but also unrestrained. For good reason. Those that implement the forceful transformation, in which not the “invisible hand” but the “Party” guides, will be convinced that their actions, even if otherwise contemptible, serve an ennobling end. Absolute power combined with total conviction produces a bloody mixture.  

The Big Lie

When you write about "Equalitarian projects" that "tend to underestimate the problems of production," I'd say that you are vastly understating the scope of their underestimations.

The big lie that collectivists and central planners must shill, is that free markets are stupid. Because upon that premise it becomes possible for them to aver, with the best interests of "The People" at heart, naturally, that only they have the brains to divide the fruits of economic production justly.

But the free market is not stupid. It is, in fact, via the price mechanism, the one honest means of intermediation between every mind that invests itself to gain a livelihood in an economy and every other mind doing the same.

Free markets not only determine, by the workings of those minds, the ways and means of production most efficiently. Given human beings' needs and wants on one hand and scarce resoures on the other, they are also the only means of determining what goods and services are worthwhile to produce in the first place. And that's not to mention the incentives they hold out to the discovery of what possibilities for innovation may exist.

It has been said that, before the country's collapse, the value of the industrial output of the Soviet Union was less than the value of its raw material inputs. And I believe it. Because turning over an economy, in whole or in part, to the smartest gaggle of collectivists and central planners that could possibly exist on this planet is like turning over the Manhatten Project, in whole or in part, to Little Lady Fauntleroy's Kindergarten class.


Capitalism Undervalued: Even by the Good Guys

A good and timely article.  The link between capitalism and liberty is greatly undervalued.  Perhaps Hayek said it best in his Road to Serfdom

"It is now often said that democracy will not tolerate capitalism.  If "capitalism" means here a competitive system based on free disposal over private property, it is far more important to realize that only within this system is democracy possible.  When it becomes dominated by a collectivist creed, democracy will inevitably destroy itself."

One of the reasons that seems to support the Left's hatred of capitalism is its failure (generally) to work in Third World and former soviet countries. But there are good reasons for that as Hernando DeSoto explains in The Mystery of Capital that have to do with the prior (and evolving) existence of property systems with accountability built in.  Those systems allow for the formation of capital as opposed to distributed wealth.

There is, it seems to me, a class of men to whom the liberty of others is seen as an existential threat to themselves.  I often wonder if there is a genetic component...

> Those that implement the

> Those that implement the forceful transformation, in which not the

> “invisible hand” but the “Party” guides, will be convinced that their

> actions, even if otherwise contemptible, serve an ennobling end.

> Absolute power combined with total conviction produces a bloody

> mixture.

There is a book called Power Kills ( which deals with this issue. Here is a very relevant excerpt:

In sum the communist probably have murdered something like 110,000,000, or near two-thirds of all those killed by all governments, quasi-governments, and guerrillas from 1900 to 1987. Of course, the world total itself it shocking. It is several times the 38,000,000 battle-dead that have been killed in all this century's international and domestic wars. Yet the probable number of murders by the Soviet Union alone--one communist country-- well surpasses this cost of war. And those murders of communist China almost equal it.

How can we understand all this killing by communists? It is the marriage of an absolutist ideology with the absolute power. Communists believed that they knew the truth, absolutely. They believed that they knew through Marxism what would bring about the greatest human welfare and happiness. And they believed that power, the dictatorship of the proletariat, must be used to tear down the old feudal or capitalist order and rebuild society and culture to realize this utopia. Nothing must stand in the way of its achievement. Government--the Communist Party--was thus above any law. All institutions, cultural norms, traditions, and sentiments were expendable. And the people were as though lumber and bricks, to be used in building the new world.