Monday, 10 August 2020

The Case for Capitalism

     I was born with a tarnished silver spoon in my mouth. My paternal grandfather came to Australia as a fatherless teenager, and became a wealthy jeweller. By 1901 he was prosperous enough to pay for three portraits of his daughters by the state's leading portrait artist, and he lived in a two story home with four servants. None of this money came down to the next generation, I might add. My parents were small businessmen who lost their business and ended up as unskilled labourers, leaving me to climb my own way up into the middle class. I wouldn't want all you socialists and assorted Marxists to think I am speaking from some sort of privileged background. But I would like to ask you this: would you prefer to live as the owner of a big jewellery store in 1901, or as a shop assistant in such a store today?
     That my grandfather's life held certain advantages cannot be denied. However, before you make your choice, there are a few things you ought to know. Two of his eight children died in infancy, and another in early adulthood. Antibiotics did not really become available until the middle of last century. His eldest daughter was envied by some of her schoolmates because she was driven to school in a carriage by the family groom. But the fact was she was partly lame because of polio. This was decades before the Salk vaccine made polio virtually obsolete in most of the developed world. I myself was born during the last great polio epidemic. Furthermore, in my own lifetime I have seen smallpox wiped off the face of the earth, and right now the World Health Organization is closing in on polio.
    It is likely that the modern jeweller's shop assistant has a car. My grandfather didn't have one - at least, not in 1901. Nor did he have a flushing toilet. Sewage did not arrive in Brisbane until the 1960s. Here's a few other things the modern shop assistant has which were rare or non-existent in Grandpa's 1901 mansion: a telephone (certainly not a smart phone!),  washing machine, refrigerator, possibly even a dishwasher, television, CD and DVD players, a computer, and the internet.
    One of our friends was always complaining about lack of money, and for good reason: she was a renter solely reliant on the old age pension. Just the same, she lived in low rent public housing with a telephone, television, and air conditioner - unheard-of luxuries a century ago.
    For more than a century we have taken constant inflation for granted. For this reason, we need the Measuring Worth website in order to compare prices and income over any length of time. However, several indices are required. The "real price" is a measure of inflation, of the cost of living, or the CPI, while the "labour value" tracks the standard of living ie how much labour was necessary to buy a particular item. As I pointed out in an earlier article, in the 50 years from 1966 to 2006, labour value increased at twice the rate of the real price ie we had all got twice as rich in that time. If we take the period 1900 to 2000, the figure is 5.8. A shop assistant in 2000 was almost six times as rich as one in 1900 - and possesses technology never imagined then. For more than a century we have just taken it for granted that our standard of living will constantly improve without any real effort on our own part!
    The same was true of the previous century. Despite the existence of terrible slums, the fact is that real wages quadrupled in Britain during the nineteenth century (even though only 10 per cent of the workforce was unionised by 1900!). In the middle of the century the wages of farm labourers in the north of England were twice as high as in the south. Why? Because the north was industrialised. And despite the terrible conditions in the factories, as chronicled by Dickens and Engels, the workers were still paid better than on the land, so the only way to "keep them down on the farm" was to raise their wages.
     How did all this come about? H. G. Wells might have been a socialist, but he was right about one thing: for science and the arts to flourish, it is necessary to have a class of people who do not have to work for their bread and butter. This aptly describes Great Britain at the time Adam Smith's Wealth of Nations came out in 1776. Britain could hardly have been called a democracy at that period; only a small percentage of the population had the vote. But freedom does not mean just the freedom to choose the government, but also freedom from government - something our over-regulated state has forgotten. So, living under a free constitution, the upper crust, following their own stars, and seeking to improve the productivity of their own land, commenced the agricultural revolution: making three grains of wheat grow where once only two grew. With a greater surplus in food, this led to the second wave: the industrial revolution - again, commenced by people following their own interests. The rest is history.
     There are still people who will try to tell you that the West rose to prominence by exploiting other nations - conveniently never asking how they managed to get into that position in the first place. Come off it! Australia has been the recipient of massive amounts of foreign investment, first from Britain, and then from the US. How come we haven't got poorer, rather than richer? Since independence, Singapore has risen from a third world nation to a flourishing member of the first world. How did they do it? If you examine the third world, you will see that the most prosperous nations are those which cultivated the strongest ties with the advanced capitalist countries. The green revolution of the 1970s has raised the living standards of billions while still permitting a huge population increase. Even the vast hordes of would be illegal immigrants battening on the borders of the West are the result of increasing prosperity. Previously, they would not have had the money to pay the people smugglers.
    We live in the most comfortable society in history. In the third world, capitalism has raised hundreds of millions out of abject poverty. So why do so many people claim that it is "broken", and seek to overthrow and change a winning system?
    I can see two motives, one good and one bad: compassion and resentment.
    The former is the cause of the old adage that someone who is not a socialist when he is young has no heart, and whoever is still a socialist when he is old has no brains. Since no system is perfect, they see big businessmen behaving badly, and disadvantaged people falling through the cracks. The logical solution is to fix the imperfections. The function of government is to do for the citizens what they cannot individually do for themselves. Of course, this means it must ensure that people do not cheat, lie, and steal as they follow their dreams. And it has to act as the insurer of last resort, providing a safety net (but not a hammock) against disaster. Indeed, it is only the advanced capitalist societies which have the wherewithal to finance an effective welfare state.
     The trouble is, these idealists are too easily seduced by an old, tired fallacy of the nineteenth century: that society is perfectible, and that utopia can be achieved by having the government take over everything, centrally planning the economy, and handing out largess to all and sundry.
     In an ant-nest this works very well, but two clear problems arise when it is applied to human society. Firstly, by separating the individual from the fruit of his labour, it encourages freeloading and discourages incentive. After all, if you are going to be paid no matter how hard you work, there is no incentive to be productive. Likewise, if your extra income is going to be stolen by confiscatory taxes, what is the point of introducing innovations, or expanding your enterprise? Is there thus any wonder socialism has been a failure wherever it has been tried?
    "Inequality" is the word constantly bandied around by the anti-capitalists, so let me be a heretic and ask: What have they got against inequality - at least as far as material possessions are concerned? Money does not buy happiness. Like fat in the diet, it is essential, but too much is a hindrance to the good life. I don't resent the fact that some people have more than I, and there is no reason I should be bothered if others have less - provided they have enough. That last phrase, of course, is important. I needed the social safety net when I was younger, and I don't begrudge it to those who use it today. But this has nothing to do with a quest for "equality".
     Furthermore, despite the evidence that the standard of living has been increasing for generations - that the slice each of us takes from the economic pie is bigger because the pie is growing - too many people assume that wealth is a zero sum process: that a person cannot get richer without making another person poorer. Of course it is ridiculous. An individual capitalist might be a bad or a good person, but all of them made their money the same way: by providing something which people wanted to buy. Bill Gates did not become a billionaire by dipping his hand into everyone's pockets; he did it by putting a computer into every home. The process is easiest to see in the entertainment industry. Nobody was forced to buy J. K. Rowling's books, or watch Steven Spielberg's movies. We willingly gave them money for the service.
    There is another factor which people tend to forget: the rich redistribute wealth by means of purchases. To understand this, think of what you might do if you won the lottery. Perhaps you would go on a holiday, or buy a new car, and so forth. You will note that all of involves transferring money to other people. It you paid off your mortgage, that would just leave you with more discretionary spending. Similarly, although a millionaire may live in a mansion, he has to pay someone to build it, and someone else to maintain it. The money doesn't necessarily filter down to the most needy, but that's what we have a government safety net for. You don't need socialism to help the needy.
     Unfortunately, it's not difficult to also detect other, worse motives: attitudes which are traditionally regarded as two of the meanest of vices: envy and resentment. They resent the fact that some people have more money than the rest of us, and so convince themselves that the rich are actually responsible for the others having less. They want to redress the balance by stealing from the haves and giving to the haves-less. Many of them would be happy to drag everybody down as long as it would result in "equality".
     At the back of it lies a darker and more sinister ideology. I have spent enough of my long life studying it to recognize its features. Karl Marx proclaimed there to be no such thing as objective morality, that the ends justify the means, and that "violence is the midwife of history". Nechayev, whose writings Lenin recommended, taught in The Revolutionary Catechism the need to hate the whole of society, and proclaimed: "Our task is terrible, total, universal and merciless destruction." Looked at objectively, isn't this what we are seeing in the current political violence in the U.S., which has already lasted ten weeks in Portland?
     The average socialist is a well-meaning, but misguided, ideologist who sees himself as a modern Robin Hood. But the die-hard Marxists are real nasty pieces of work, who hate the whole of society, and have sold their souls to an evil ideology which allows them to rationalise the anger in their hearts. Don't let them seduce you into abandoning a system which works and benefits everyone for one with an unbroken track record of failure.