“Arguments against the free market are simply arguments that people should be prevented by threat of violence from running their own lives by their own plans”
A Liberty Primer, 86
Computers are a wonderful example of Capitalism’s benefits. When I was young, no one had computers except, I suppose, universities and the militaries. Here it is 2011, and computers are not only prevalent, they have become vastly more powerful [my desktop, so I understand, is vastly more powerful than the NASA computers which put a man on the moon], yet their price has dropped to the point that most of us can afford one, their size has diminished to increase our convenience, they work everywhere so they are always at our fingertips if we wish, and so on. What gives?
As another example, what happened with computers also happened with cars, although it took longer. The first Model T Ford’s were, I expect, fairly expensive, only came in black, and had, by our standards today, only the most rudimentary of abilities and features. It drove, and didn’t require a horse, but that was about it. But what a marvel that was. A century later, aside from bailouts and brake recalls, the fact is everyone can have a car, they go further, faster, more comfortably than at ever Henry Ford could have imagined.
“The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates….the same process of industrial mutation – if I may use the biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating the new one. This process of Creative Destruction is the essential fact about capitalism.”
Capitalism, Socialism and Democracy, by Joseph Schumpeter, cited in“The Ascent of Money; a Financial History of the World”, Niall Ferguson, 351
“Everything is worth what its purchaser will pay for it.”
Publius Syrus, c. 50 BC
As any new product enters the market, it will have a cost disproportionate to what the cost might become. If it proves to be a popular product, like cars and computers and hundreds and thousands of other examples from mouse traps to lightbulbs to hip replacements, the rich people will buy them first, which will permit further developments and improvements, and cost-savings, such that in time the less rich will be able to buy them, (and better versions even), and so on and on down to the “poorest” folk. Everyone who wants jeans – aside from designer ones – has them, for instance. Cars are now pretty much everywhere on this planet, not just on the streets of Detroit; and more or less anyone who wanted a car today could have one that is vastly, vastly, better than a Model T, at a fraction of its relative original price. So too with clothing, electricity, food, and beer.
“60 percent of poor families now have clothes dryers (compared to 45% in 1971); 37 percent have dishwashers (18% in 1971); and 78% have air conditioning (32% in 1971). More remarkable than mere possessions, however, is the drop in hours worked that are needed to acquire things. In 1971, it took 551 work hours (at the average U.S. hourly rate) to buy the 11 appliances included in the comparison. In 2009, it took only 171 hours… Whatever the explanation, the poor are getting richer all the time.”
Toronto Globe & Mail, December 18, 2009
Capitalists understand that the earned success of one man, is the greatest benefit to everyone else.
The invention itself is the thing which improves the general standard of living for everyone. Indoor toilets were once a luxury unknown even to Kings; is there any doubt that they improve your standard of living, yet you are no King? Are they not readily available throughout society? Now that’s the trickle down theory in action!
“There would not be any profits but for the eagerness of the public to acquire the merchandise offered for sale by the successful entrepreneur. But the same people who scramble for these articles vilify the businessman and call his profit ill-got. One of the main functions of profit is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public.”
Ludwig von Mises, 1952
Few of us remember a time when we had to slaughter our food, grow our own grain, churn our own butter, start our own fires, or spin our own clothes, or carry in our water from the lake; we live in a marvelous time which invention has made possible. Thousands and thousands and thousands of inventions, building on those discoveries that went before, evolving them into different forms, some of which survive and prosper, others which prove unsuccessful and disappear, depending on the wishes of users. Do you like to have choice when you go to the store? Then with each decision you are making, you are adding to or subtracting from the Darwinian dance of market invention, innovation and creation.
Now, there are those who clamour that it is not fair, that it is contrary to some “human right” that the rich get a thing before others do, but that perspective is transparently selfish and illogical. There is no right to a thing, outside of a contract for delivery, and then it is a legal right, not a so-called “human right”. There is no way that a peasant 500 years ago had a “human right” to a car, so how could it be a “human right” today to get one? Is there a right to a Mercedes, or to just a Volkswagen? A thing will, if the demand exists, become available to more and more people over time, so the socialists can relax if they can just remain patient long enough. (Ironically, and as an aside, the “rich” will have paid more money for the less grand early versions, but no one thanks them for their early investment which benefits us all – but leave aside that detail, they likely didn’t buy it for our sake anyhow.)
“Underlying most arguments against the free market is a lack of belief in freedom itself.”
“No human development is possible without risk.”
Jarret B. Wollstein
A free market of Capitalists striving to obtain the public’s best price for a product, is what drives the engine by which everyone’s standard of living benefits. Those who don’t understand this principle will deride Capitalists as “greedy”, but frankly, if it bothers them, those people are welcome to go back to churning their own butter, and visiting the outhouse with a candle at night. They won’t though, because being human, they too are greedy for betterment. We all are. Get over it – everyone is greedy for betterment. It is our nature to be greedy, to want to improve things for ourselves. Embrace that reality as a good thing.
A janitor in an industrial country may enjoy a higher standard of living than a janitor, or even a physician, in an undeveloped country… Their incomes are determined by the productivity of other workers in the same economy. The higher the average productivity, the higher the average standard of living, as more goods and services are consumed by the same number of people. The cheaper goods made by the more productive people lower the cost of living to everyone, including the less productive people. … The effect is very obvious when a high-paying factory moves into, or out of, a small town. The sharp increase or decrease in incomes is not limited to those actually employed in the highly productive factory jobs.
A Liberty Primer, 94
Now, along comes the government. A Capitalist government would stay away from the economy and let people invent and buy or invest to their heart’s content - but every government we see today will want to, and does, interfere or intervene, whether out of a sense of wanting to spread the wealth to more voters, more quickly for a political tradeoff, or out of a sense of bettering “society” outside of these economic laws (which always have bettered society all by themselves and without government’s interference), or out of a sense that the benefits will put some group of important friends out of business, or into business, or out of a sense that votes can be bought. And so on.
“Nothing is older than the idea that human wisdom is concentrated in a select few, who must impose it on the ignorant many.”
Thomas Sowell, 1981
When the current government bailed out General Motors, by no stretch of the imagination is that Capitalist, free-market behaviour. That is socialism. Sorry Prime Minister. [See my paper on Government]. Essentially, Canadian consumers were not prepared to buy GM’s products voluntarily, so the company ought to fail or find some free-market method to survive. It could have been bought out by Honda, for instance. It could have perhaps issued very high rate interest corporate bonds and attract new, risk tolerant lenders. I don’t know. But instead of letting the free market solve the dilemma, the government chose to quickly yank away several years’ worth of taxation income to keep the company going. We Canadians weren’t willing enough to buy GM cars; but not only did we end up paying for them anyhow – we didn’t even get the car! Only government could do that you – force you to buy what you didn’t want. It spent our money, (or our children’s), more than likely to keep union votes in Windsor. Note that the same government has not intervened in Nortel’s bankruptcy. Too big to fail? Only politically. Of course society can cope without GM. It’s done so for millions of years before this century. But the government claims to know what is best for us.
“It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people. They are always, and without exception the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs”
Adam Smith, 1776
“The ultimate result of shielding men from the effects of folly is to fill the world with fools.”
Herbert Spencer, 1844
The government has massive spending power to corrupt the forces of a free market. As a result of just this example, money has and will be taken out of our pockets which would have been available to us to spend on other things in the economy that matter to us. All that has happened is our freedom of choice has been eliminated, and our quality of life will not improve in direct proportion. It is like the proverbial story of the invention of the lightbulb: due to the lobbying of the candle manufacturers, the government prevented its marketability. Try to find a great short story called “Anthem”, by Ayn Rand, and give it a read.
To get a picture of the evil power of intrusive market forces, catch an old movie starring Alec Guinness, called “The Man in the White Suit”, from 1951. He invents a fantastic new fabric for clothing, but that invention threatens the garment union who have been earning a living by selling a hitherto fine, but now inferior product which would be dinosaured by this new innovation.
“The free market is a decentralized regulator of our economic system. The free market is not only a more efficient decision maker than even the wisest planning body, but even more important, the free market keeps economic power widely dispersed.”
President John F. Kennedy, 1962
Just exactly who benefits by suppressing new and better stuff? Only politicians and their cronies, as far as I can tell. Thank goodness for Apple Computers, the Beatles, and all the other magnificent innovators of our world.