“But Unbridled Capitalism is Bad Too!”

So I was making a post on the Book of Faces about the evils of Socialism. (Bluntly, to the extent you have socialism, you have slavery since you are using force–not persuasion and not trade, but force–to require some to work for others.) Naturally one of the left-leaning folk on my friends list had to come in and say “The evils of unbridled capitalism are as bad or worse as the evils of unbridled communism!”

What utter and complete crap.  Even if we credit the argument, it’s intellectually dishonest in that the existence of evil in the extreme does not mean that we’re anywhere close to that point and especially does not mean that we need “more socialism” now.  But they don’t stop at their being evil at some extreme.  No, they claim that the “evil” is all around us do to already being far too close to that “unbridled capitalism”.

First, let’s clarify terms.  Capitalism is a system where individuals have control of their own property and the uses to which they can put it and can engage in voluntary transactions involving that property without forcible coercion.  Basically, it’s what happens when you leave people alone to manage their own affairs.

The merging of business with the state is not capitalism.  That merging gets called by different names depending on the route toward that merging.  If it’s “seizure by the people” which ends up with the government owning everything it’s called socialism or communism.  If it’s government dictate what the businesses will produce and how much, what prices they can charge, and so forth while leaving (on paper) private ownership (with said owners having little actual say in how the businesses will run), it’s fascism.  If it’s through “regulatory capture” where a handful of big businesses through lobbying efforts get regulations passed that restrict competition, it’s merchantilism.

All of them rely on the coercive power of government.  And all of them are, quite frankly, built on the common foundation and structure of central control and planning.  The differences are simply arguments over what color curtains to hang int he window of that structure, or maybe what color siding to use for people outside to look at.

Capitalism, true capitalism, is where individuals and self-organized groups of individuals make their own decisions over property they own and manage that through voluntary transactions with others.

Once you understand that, it becomes brutally clear that the “unbridled capitalism” that is so often condemned is all too frequently anything but.

Consider the “company towns” that were the spur behind unionization in the late 19th century.  Consider the following:  employment monopsony (i.e. no other employers to compete for workers, meaning potential workers had no other choice), essentially issuing their own currency (“company scrip” usable only in the “company store”), generally physical isolation in a time where travel was much more difficult than today restricting the ability of people to “vote with their feet” and leave. Because of these, the company was acting more as a government than a business.  It was more a socialist/fascist model than capitalism.

Another one people point to is “sweat shops,” including the factory conditions often cited in the early Industrial Revolution.  However, this has proven, time and again, to be a temporary condition that fades with time.  Indeed, I’ve discussed that issue before. But, to summarize, going from a muscle-based agricultural economy to an industrial economy requires considerable learning.  As just one example, coordinating effort between people performing different steps of a process so that one group isn’t standing idle while waiting for the other to catch up can be a challenge.  And until they learn all the myriad skills and gain the requisite habits, the only thing they have to compete on is price.  As Thomas Sowell noted in his book Basic Economics, at one point factory workers in India were only 15% as productive as workers in the same types of jobs in the West.  One could pay Western workers five times as much and come out ahead.  If folk were going to build factories in India and develop an industrial base in the country to pull it out of poverty, those workers had to be competitive with workers elsewhere.  And that would only happen if they were paid, at most, 15% (less, actually because of uncertainty and risk factors) of what Western workers would be paid for ostensibly the same jobs.  And while soy-latte drinking pseudo-socialist college students might raise outraged voices at the “exploitation” the fact remains that even those low wages are better than other alternatives available to the people in those “sweatshops” and as the workers become more productive, it becomes more attractive for other businesses to locate there and hire away some of those low-cost yet productive workers.  Competition then bids up the price of the workers leading to their earning more.  As Thomas Sowell notes about a different example:  Japan after Perry forced its opening to the West:

As of 1886, the per capita purchasing power in Japan was one-fortieth of that in the United Kingdom, though by 1898 this had risen to one-sixth.

Later Japan would become one of the most technologically and economically prosperous nations in the world with a per-capita GDP (Purchasing Power Parity) per the IMF that places it #28 in the world. (The US, for comparison, is #10).

Indeed, this is a very common pattern in countries attempting to pull themselves out of Third World economies into modern, industrial and technological, prosperous economies.  It is the very pattern the First world went through in the beginning of the industrial age.  It may well be that there is simply no way to avoid it.

These are just a couple of examples of the mistakes (I’ll credit them as mistakes rather than deliberate dishonesty) involved when people make the claim about how bad “unbridled capitalism” is.  They either conflate government action with “unbridled capitalism”, or they confuse something other than capitalism (the crypto-fascism of the “company town”) with capitalism, or they look at a necessary stepping stone to better things which isn’t as good as they would like (while being better than was before) as though it were “evil exploitation”.  They conflate many things that are not capitalism into “unbridled capitalism” to give the impression of everpresent “evil” in order to justify the socialist programs they want to implement now.  It’s intellectually dishonest.

I’ve acknowledged before that there is a role for government.  That issues with external costs and benefits, goods that are indivisible so that people who don’t pay get the benefit so long as someone pays for them (therefore giving everyone the incentive to let someone else pay), and so forth.  But we are not anywhere near that point.  We are so far past that point that we can’t even see it behind us.

So, no, warnings about the evils of “unbridled capitalism” are not a valid excuse for “more socialism”.  We don’t have unbridled capitalism.  We aren’t even close to unbridled capitalism.  The problems we have are not because of too much capitalism.  They are because of too much socialism.  It’s not more socialism we need.  It’s more capitalism.