Someone else has something I want. How can I get it?
Capitalism has received a great deal of criticism, from its invention to the present day. It has been blamed by one group or another for seemingly every human evil, real or imagined, including depression, imperialism, violence, hedonism, the decline of democracy, and the destruction of the environment. Especially for the poor, the disadvantaged, and the empathetic, the common refrain seems to be “blame capitalism!” Yet blindly criticizing a policy or view is not at all the same as thinking carefully about it. It’s easy to forget that governments, organizations and policies are tools just as much as hammers and plows, despite their larger scale–in fact, that very scale makes it important to pay extra attention, especially with policies as widespread and influential as capitalism. This means considering such tools’ benefits as well as their evils, while remembering that there is not likely to be a “magic bullet” solution. Poverty, depression, antagonism and the environment are all important problems–but is capitalism really responsible? Or is it possible that true capitalist practice might actually help solve some of these issues?
First of all, whether you agree with capitalist policy or not, it’s still important to remember that it is a tool, not a shadowy conspiracy or a force of nature. If a tool facilitates evil, still it is the people who wield that tool who are ultimately responsible–hence the phrase “guns don’t kill people, people kill people.” If you exchange money for goods and services (or vice versa), then you are participating in a capitalist system to some degree–you are wielding the tool–and you should frame your criticisms accordingly.1
That being said, even though the person holding the gun is ultimately responsible for any murders committed with it, still there’s no denying that the gun helps. Some tools are naturally more destructive and dangerous than others, regardless of who wields them. It would be much more difficult, for instance, to commit murder with a chair than with a gun: this is because the gun is designed to kill, whereas the chair is not. Every tool is designed to solve a problem; every invention has a purpose, and a tool will reflect the shape of its purpose to the extent that is solves it well. Some tools, such as nuclear bombs, can only cause evil, because the “problem” they were intended to solve (I need to kill as many people at once as possible) has no non-evil solutions. Other tools, such as the chair, are very difficult to use destructively, since the problem they were designed to solve (I need a place to sit) is benign. In between are tools like guns (I need to quickly kill an animal from a distance) or knives (I need to cut something apart), which can facilitate destruction but which can also be used for non-evil purposes.
Of course, humans are resourceful creatures, and any tool can be used for things other than its intended purpose–chairs can bash people’s skulls in, guns can be fired for sport at a shooting range, knives can be juggled or used as a toothpick or prybar, and so on. The question, therefore, is not “can capitalism cause harm?” Any tool can, if you get creative enough. The question is, “does capitalism cause harm by design?“
As a tool, capitalism is almost certainly less benign than the chair. Countless atrocities have been committed with its help. But then, the same could be said of chemistry, which has also produced a great deal of happiness, health, and prosperity–probably much more than it has taken away. Just as a sore thumb or two does not warrant a ban on hammers, occasional destruction and evil facilitated by more powerful tools is not a knock-down argument against them. The question is whether the good balances out the bad. What good does capitalism do? What problem is it intended to solve? Does it solve it well? And are there other tools that might solve it better or more ethically?
Let’s say you have something I want. What are some ways I could get it? Well, I could just ask you to give it to me. If you trusted me, or if it was something you didn’t particularly need, this might be a good solution. But what if we were strangers, and you refused? Well, another way I could get it would be to simply take it from you. If I were stronger or smarter than you, this could work–but what if someone stronger or smarter than me came along and took it for themselves in turn? I’d be worse off than when I started. Such a strategy would only make sense if I could be confident there was nobody smarter or stronger around–and of course, most of us simply wouldn’t be selfish enough to find such a solution palatable in the first place.
Why can’t I just ask for everything? What’s wrong with saying that if you don’t want to give something to me, then I shouldn’t get to have it? Well…nothing, really. In fact, the “policy of sharing” was the preferred solution to this problem for hundreds of thousands of years.
For most of human history we lived in small hunter-gatherer bands, in which social cohesion and group identity were of high importance. Because the rest of the band could combine their strength against any given member, no individual was strong enough to employ the “I’ll just take it” strategy, unless it was directed at an outgroup (i.e. another band) to which no allegiance was owed. “I’ll just ask,” by contrast, was so effective and simple a solution that the majority of property within a band was shared by default, and belonged to no single person. There’s even some evidence that sexual partners and children2 were shared freely, with no woman, man, or child considered as “belonging” to any other. Because trust and honesty are crucial components of this practice, discrimination, dishonesty, and meanness were rare, and were dealt with swiftly and harshly when they did appear. In short, we were a lot better off psychologically and ethically than we are now–so why did we ever stop?
The short answer is that “I’ll just ask,” while effective for small communities, doesn’t scale. With the advent of agriculture, populations grew much larger and denser, cities and towns fractured into specialized cliques, and the social cohesion that makes the policy of sharing so effective largely dissolved. In most cases, it was no longer possible to know everyone you might want something from, and since the social unity which had previously discouraged theft no longer existed, thieves proliferated. Because the success of the policy of theft depends only on strength, and because relative strength can be increased through appropriated resources, the strongest thieves were quickly able to hoard the majority of resources for themselves, doling them out to subordinates in exchange for military favors to remain in power. Those subordinates in turn amassed supporters below them, and so on all the way down to the farmers and slaves actually producing the wealth.3 Instead of a tightly-bound egalitarian net, society became a hierarchical pyramid with a few super-rich at the top, a vast base of impoverished producers laboring at the bottom, and a squabbling minority of lickspittles, middlemen, and bureaucrats fighting for position in the middle. The majority of the population was poor, the poor were depressed and miserable, and people at every layer of society played backstabbing politics with both their inferiors and superiors, struggling for the biggest possible share of resources at the expense of everyone else. Even loyalty and family, the virtues which had previously served to keep band members cooperating for the good of everyone, instead became political tools for keeping the powerful in control–the carrot to the military’s stick.4
Hang on a minute–depression, poverty, and antagonism? Aren’t those supposed to be the evils of capitalism? Not so: they’ve been around for much longer, and there’s little reason to believe that capitalism has since made them worse. Indeed, when you consider that the history of industrial capitalism only goes back a few hundred years, you may rightly wonder if it has had comparatively little impact thus far, for good or ill. When you look more closely at the many evils commonly attributed to capitalism, you’ll find that most of them are actually symptoms of the much older practice of institutionalized theft–more commonly known as dictatorship.5 Anywhere you see a pyramidal structure, with wealth flowing primarily from the many at the bottom to the few at the top, you should suspect that somebody near that top is relying on the economic policy of theft–which is not the policy of capitalism.
So what is the policy of capitalism? What’s the third alternative here? What might be more ethical than the policy of theft, while still scaling to large populations of specialists? If someone else has something I want, how can I get it without stealing it or asking for it?
Simple: give them something they want in return.
This is the heart of the capitalist ethic. The surface similarity to the policy of sharing should be obvious: implied in both is that the other person must actually say “yes” before you are entitled to take what you want. So capitalism is clearly ethically superior to the policy of theft.
However, like the policy of theft, capitalism scales well to large populations of specialists. Because you don’t need to know someone intimately to know whether they have something you want, and because the amount of trust you need for most trades is minimal, capitalism can thrive even in large societies where most people are total strangers. So capitalism is also practically superior to the policy of sharing.
Granted, capitalism didn’t scale just as well as the policy of theft, at least at first, or the policy of theft might never have found traction. This was primarily due to two problems. First, there was no way to know that the person who had what you wanted would want anything that you had–if I make violins, and the only farmer in my village doesn’t want violins, then how am I going to eat? Second, the number of things people could make for others was limited by the speed and strength of their own hands–if it takes me a week to make a violin, then I can only trade one violin per week, no matter how much food or materials I get in exchange. A thief, by contrast, grows stronger as they amass resources, making it easier for them to seize still more resources, forming a positive feedback loop that historically was limited more by constraints of geography and psychology than by any active resistance from the population.
The first problem was eventually solved by the invention of the universal trade good: money. Just as the policy of sharing is most effective when the majority of property is assumed to be public, capitalism is most effective when a certain type of property is assumed to be desirable. (Understanding this idea helps explain the much-misquoted phrase “the love of money is the root of all evil.” Since money has no value of itself, loving it for its own sake means loving something empty and hollow. This should also make clear why you shouldn’t misquote it!)
The second problem wasn’t solved until much later, with the invention of industry. This is the sense in which I mean capitalism has only been around for a few hundred years. The industrial revolution marked the turning point when having more resources could be translated directly into making more things people want. As with all abrupt, broad changes in society, the industrial revolution started out with a lot of chaos and suffering. However, as the smoke died down (literally and figuratively) and industry spread to other countries, living standards rose, populations became wealthier and more educated, and the so-called “middle class”–those who neither lived in poverty, nor relied on the poor for their own wealth, but rather created wealth through technology and trade–rose to majority status for the first time in history. Far from making us depressed, poor, and antagonistic, industrial capitalism has facilitated the most dramatic rise in overall standard of living in human memory.
How, then, to explain the undeniable fact that capitalism and its products have also facilitated theft, colonialism, oppression, and environmental destruction on unprecedented scales? The simple answer is that capitalism is a tool, and tools are amoral. A hammer does not care if you use it to pound in a nail or a skull, a gun will not fire differently if you shoot it at a deer or a police officer, and a chair will accommodate a surgeon or a rapist with equal comfort. The same is true of capitalism, but because capitalism is so much more powerful than the day-to-day tools we are familiar with, its abuses are much more obvious and severe. Unfortunately, there’s nothing to prevent someone from engaging in the policies of theft and capitalism simultaneously, trading freely to encourage innovation and growth when it suits them, and stealing the best of the profits when it doesn’t. Honest capitalism is the fairest and most effective kind, but that doesn’t mean that only honest people can be capitalists.
If this were the whole story, the future might look pretty bleak: without an advantage that only the honest could use, the thieves would continue to take what they pleased without regard for others’ welfare, and with the science and resources of capitalist practice lifting the restrictions of old, the world would eventually either be destroyed or subjugated utterly. However, there is some hope on at least two different fronts. I’ll elaborate on these next time in part two.
1. In practice, what this means is that critiques and policy debates must account for the people participating in the system, rather than treating the system as an autonomous (and possibly malevolent) entity. It is all well and good to talk of “regulating capitalism” as a rhetorical device, as long as you remember that what you should actually be regulating is people’s use of capitalism–the hand that wields the tool. Current legal policy is rife with “regulations” that only serve to make a given tool more difficult to use, without discriminating between good and evil uses; as well as policies which do not meaningfully restrict evil uses at all. For example, a law which makes it marginally more difficult to purchase a potentially dangerous weapon, but which does not actually restrict its use, is probably not going to help.
2. Search for “nuclear family.” See also: http://news.nd.edu/news/16829-research-shows-child-rearing-practices-of-distant-ancestors-foster-morality-compassion-in-kids/
3. I want to be clear that I’m talking about wealth here, not money. I’ll talk about money a bit later. See the section “Money Is not Wealth” on this page for more on the distinction.
4. This point deserves some elaboration. Of course hunter-gatherer societies exploited ingroup loyalty to encourage antagonism against outsiders, and the agricultural system was no different in that respect. The difference was that in the agricultural model, the economic incentives for this loyalty no longer ran both ways. The consequence was power structures in which a superior’s “loyalty” to their subordinates was political or nominal only and could be discarded if necessary, while an inferior’s loyalty to their master was enforced with blood and iron.
5. The technical term is autocracy, if a single person is at the top of the pyramid, or oligarchy, when the top is shared by a group of relative equals.
8 responses to “Blame Capitalism!”
lol. voluntary exchange != capitalism
capitalism is a way to structure production, not distribution. hth.
If a person were stranded alone on a desert island, what would make them “capitalist” or otherwise? Every economic system is inextricably linked with trade, and therefore distribution.
If a person were stranded alone on a desert island, then there wouldn’t be much of an economy. An economy requires the interaction of many participants.
Just what capitalism is, is difficult to say. Generally it is characterized as an economic system that features relatively unregulated markets. So, you did get that right! But crucially it also specifies that property is privately owned. In particular, the means of production are privately owned. You could have a market system that is not capitalistic if the goods being traded are not produced by privately-owned means of production. Voluntary exchange does not define capitalism. Private ownership of the means of production does. So, you can’t just conflate capitalism and exchange.
I think any reasonable interpretation of “private property” necessarily implies free exchange, and I would argue that the opposite is also true, given that only individuals can freely make decisions and act on them. (See Hans-Hermann Hoppe’s ‘A Theory of Socialism and Capitalism’ for an in-depth argument along these lines.)
I don’t mean to deny that the private ownership aspect is important–it is. But since this particular essay was about the contrast between capitalism and totalitarianism/dictatorship, where the free exchange aspect is more important, I decided not to directly address the private ownership part. If I had been contrasting capitalism with socialism instead, the property distinction would have been more relevant.
HOPPE?! Are you kidding me? Hoppe is rabidly insane. I would not trust him to tell me the time, let alone what capitalism or socialism is. Von Mises, Hoppe, Rothbard–they are all far-right nutters. Hayek is OK.
It was nice talking to you. I hope that you read some better economists in the future. I recommend Smith, Ricardo, Arrow, Stigler, and (gasp!) Keynes and Marx.
No name-calling, please.
Thank you for the recommendations–I’ve read a little Marx, and believe it or not I’m a fan, but I will definitely check out the others too. Cheers.
Good article. The second problem was also partly solved much earlier through the invention of debt, allowing exchanges to be decoupled in time. (If anything industry may have excarbated the problem since it might take years of capital investment before a factory produced anything anyone wanted, and who would feed the factory builders and the miners and so on?)
Actually, money is an example of debt, but the real innovation was to use or permit loans at interest. While cash is essentially a 0% zero-day loan from the bearer to “anybody/everybody”, in many times and places going further and loaning at interest was Just Not Done for many reasons not worth getting into. But that artificial ly restricted the use of debt because like it or not, everyone would rather have a bird in the hand than one in the bush — but they might be willing to part with a bird in the hand in exchange for 1.1 birds in the bush… Essentially, debt at interest made it possible to think further ahead than tomorrow, investing resources today for a payout that while greater, would only come later. Without debt at interest, the only way such ventures will happen is in cases where the same person/group already controls all the resources needed and can expect to keep getting the resources that will be needed later. Maybe that supported the policy of theft since only such institutions as the State could afford to build cathedrals, even if hypothetically ten thousand craftsmen and peasants and masons might have been able to pool their meager savings and loan it to a private builder — without debt at interest there is no incentive to do this. Interestingly (pun intended) medieval Church and State, at the top of that pyramid, were often the ones trying to ban interest debt. Hnnnnmm.
Going even further we see in the 1600s (in the west at least, not sure elsewhere) the introduction of equity, a peculiar kind of debt where the interest is unlimited in both directions (you could lose it all or make an insane fortune) but in exchange the lenders get more control, which was well suited to especially risky ventures. Initially used for one time ventures, it eventually came to be used for permanent ongoing ventures, and the Corporation was born. Initially the Corporation was deemed too powerful a tool to allow one to be created by any but the State, which should give you pause. And this is where the story of modern capitalism begins (or to use poster Dillon’s definition, just capitalism, and what you described he would just call free trade — but let’s argue about facts, not names). I would love to hear you follow up with an article on that story! Poster Dillon is right to point out (or maybe i just inferred this? Whatever) that until that time, no private individuals or groups outside of the few big institutions at the top of the theft pyramid could afford to control serious capital (by capital I mean something which is useless on its own in the very short term but can be used over time to get something you want later — a machine, a ship, even a computer program — you have to have faith that the effort you are putting in will pay off eventually)
Excellent points! My favorite metaphor for debt has always been “cash rental” ( http://www.qwantz.com/index.php?comic=1733), but it never occurred to me to reverse the analogy.
My planned follow-up for this particular essay is mainly about post-industrial capitalism a.k.a. “the information age,” and I don’t know how much it will focus on the relationship between corporatism and the policy of theft. There is definitely a lot to explore there, though–perhaps you should write that one yourself. 😀