Sunday, October 2, 2011

Is Capitalism Evil? Part 2

Several common fallacies are constantly broadcast around the world. The goals of these fallacies are to denigrate, defeat and destroy capitalism. I mentioned four of these fallacies in the last post. In this post, I will be discussing the first fallacy:

Fallacy 1. Capitalism is individualistic rather than collectivist

This fallacy is in the form of a charge against capitalism. It happens to be true. However, the fallacy is made up of the argument that individualism (and therefore capitalism) is evil and collectivism is good.

One of the key points made by religious and Marxist critics is that capitalism lets loose a “dog-eat-dog” predation in men through which the most aggressive and vicious “animals” survive. This criticism, thought by some to derive from “Social Darwinism”, is a misapplication of Darwin’s principle of the “survival of the fittest”. It assumes that the “law of the jungle” is the basic premise of capitalism and that bad things happen when capitalism is not controlled. Anti-capitalists prefer to interpret individualism as vicious predation. In fact, whenever you state that you are an advocate of individualism you are immediately equated with Nietzche as an advocate of dictatorship.

The basic premise of capitalism’s detractors is collectivism. Most people are raised on collectivism which is one of the most common ideas in history. Many are taught to feel guilty if they advocate anything other than collectivism. Collectivists are so hateful of individualism that few people want to admit they are individualists. Many are treated as pariahs for doing so. Yet, collectivism is based upon certain false notions about man’s nature and some misconceptions about the requirements of survival.

For instance, collectivists hold that sacrifice for the collective is a positive act that creates good in society. I have written extensively about the fact that sacrifice to the collective is harmful to every individual because it removes his mind (and the effort necessary for survival) from the decision-making process and demands that the individual actually “lose” something of value in order to avoid the ire of others. The atrocities of history are actually caused, not by individualism, as is commonly charged, but by the demands of collectivism for sacrifice. The dead bodies in the mass graves are those of people deemed unwilling to sacrifice for the collective; the individualists.

Sacrifice is justified by the philosophy of altruism and it insists that the only good act is the act of living for others. Even today, this primitive idea is considered to be correct in spite of the centuries of hate and theft it has imposed on innocent people. It assumes that transactions between men are “zero-sum”, some men win and others lose, and that the only way to address this disparity is for the government to intervene and make sure that the “loser” “wins”. What this view ignores is that the exploitation of the productive individual will discourage him (or her) from participating in such a society.

The view that mutual trade is "zero-sum" is so unrealistic that regulators who make trade and policy decisions on its basis do tremendous damage. Capitalism and freedom release men to make correct economic decisions for the sake of living better lives. Each individual has a right to pursue his happiness and wellbeing and to produce the abundance necessary for survival. This includes the right to property and other individual rights. Capitalism is about peace and cooperation among rational men, not about predators and prey in the hunt. When regulators attempt to regulate economic activity they wind up regulating rational action and criminalizing profit.

According to the “zero-sum” view of Marxists, there is always an exploited and an exploiter, a predator and a prey. If you adhere to this view, you develop a negative and false view of capitalism’s nature as well as a false view of the nature of free society. You interpret free societies to be full of conflict and exploitation by the strong when this is not the case. In fact, in a fully capitalist system that is allowed to flourish, the “weak” benefit from new products as well as the “strong”.

The premise that capitalism is “dog-eat-dog” creates a cognitive split between the Marxist view of business and reality. The Marxists develop the view that government needs to regulate and restrict freedom in order to keep the capitalist from exploiting the workers. I recently watched a movie(1) that tried to explain the 2008 stock market collapse from this perspective. Its conclusion was that there were not enough regulations on the financial services industry - which is the most regulated sector of the economy. It virtually ignored the government's coercive role as the sole cause of the fiasco and indicted capitalism when the real culprits were government regulations of the housing industry, government backing of FDIC, FANNIE MAE and FREDDIE MAC, the Community Re-investment Act (CRA), Barnie Frank and Chris Dodd.

Marxists of the communist variety would wrongly disenfranchise the capitalists and put the government in charge of production in order to eliminate the non-existent predation. Old-style progressives and socialists whoe advocate mixed economies, foster a combination of freedom and coercion in which government must restrain and control the capitalist (presumably) in order to keep him from taking advantage of his customers. All varieties of Marxists advocate coercion and this is their basic flaw that invalidates all of their prescriptions for society; Coercion is never a solution to any problem because it is a violation of free will; it forces people to do things they would not otherwise do. That progressives and Marxists have no problem with forcing people is an issue each of them should address in the privacy of their own mind.

Capitalism, it is thought, keeps the weak person down, making him constantly struggle for survival with no ability to build his own capital base. The predator presumably uses his position as a controller of capital to keep the little guy down and exploit his work. The “system” supposedly offers the weak no chance of enjoying the luxuries that have been created for the rich.

Capitalism does no such thing to the weak and history has shown that capitalism enables any man or woman to develop the capital necessary to become rich. For instance, capitalism requires that the “worker” be trained and educated so he can be more productive and this makes him more valuable as an employee, enables him to earn more money, develop a surplus and even learn how to start and run a business of his own.

Marxists ignore the fact that the “little guy” is actually in a strong position in a capitalist system. If he finds cheaters and elitists who use government to get rich, he can merely withdraw his support for them by refusing to do business with them. Once the “cheaters” are put out of business, the field is left to those who have rightly earned the trust of the “little guy” and who have provided benefits that improve his life.

The deceptive tactic of the Marxists consists of taking specific transactions that don’t go right as indications of a flaw in capitalism that must be addressed coercively. They ignore the full context of capitalism and human nature because they want to find flaws in capitalism in order to justify interference. Had they left the economy free of their manipulations, the consumer would have fixed the problem by seeking out honest businessmen offering more value for better prices. There is no flaw in capitalism that can’t be fixed by free choice.

Another supposed flaw in capitalism is that workers are exploited by the capitalist. This view holds that collectivism, solidarity and collective bargaining are the only way that workers can keep from being exploited. Not only does this argument assume that the capitalist exploits his employees, but it ignores the fact that an astute capitalist will want to have the best relationship possible with his workers. He will also want to train his best employees and educate them about how to perform their jobs better. In order to be successful, he will ensure that his most productive employees are given better treatment with bonuses, promotions, higher wages and other benefits.

Collective bargaining destroys the relationship between an employer and his employees. Unionism is a form of collectivism that is destructive of a system based upon individual achievement. It requires a form of solidarity that creates a bad relationship between workers and business owners. Union leaders will do all they can to poison that relationship in order to use it as a wedge to justify the existence of the union.

Let’s understand this more fully by examining what a good employee would do when he is hired to work for a business. First, this employee would seek to ensure that he can secure his job by demonstrating the ability to do quality work. This brings in more income for the employer than the employee is paid. This is as it should be because the goal of the employer is to utilize capital resources and combine them with labor in order to make a profit for himself and his shareholders. The employee's competence along with the employer's planning and management skills create a viable business that makes a profit. The employee recognizes that he would be of no value to the business, to himself or to his family if he demonstrates that he does not deserve the position to which he has been hired.

Companies that are saddled with unions offer a different motivation to the prospective employee. At first, he or she will do everything he can to convince management that he will be a hard-working contributor to the success of the company. He will work very hard until he qualifies to join the union, whereupon he no longer has to worry about working as hard, he can learn the union contract and file grievances whenever he feels he can and if he gets fired, he may get his job back through a union/management procedure. For this worker, the union adds significantly to the cost of employee management for the company.

When the good employee in the non-union shop is asked to change a work process or use a new piece of equipment, his first thought is how he can help the business be more successful, what can he do to make himself more valuable to the employer. The employer appreciates the good attitude because it means being able to get on to other issues without having to deal with disagreements or arguments.

On the other hand, in the union shop, the employee argues with his boss, pretends to know more about running the business and otherwise accuses his boss of wanting him to work “too hard”; he will eventually convince the employer that having him employed is more trouble than it is worth.

A union would not tell the employee that the success of the business is paramount. It would tell him, right or wrong, that he is the reason for the success of the business and that he should resist whenever he thinks he is being exploited. He tells the employee that he should join a collective bargaining effort to force the employer to do what he thinks is right. All of these suggestions from the labor leader are intended to involve the union in the running of the business and are costly for the company.

A labor union would tell this troublesome employee that he is right in his hatred of the company and that the company is seeking to make money off of his work without giving him a fair wage. The union would ask him to join in solidarity to negotiate a fair wage and keep the company from firing him unfairly (which is most often a fair firing). It would tell him that his length of service in the company entitles him to a job over people who have not been there as long. It would ridicule and ostracize the employee who is "too productive" and accuse him of stealing jobs from other workers.

If the company attempts to defend its legitimate property rights and keep the union from entering the premises, unions typically take the position that the company has no legitimate property rights and sends goons to trespass on the company premises. Later, it asks government to force the company to deal with the union. These regulations presumably are justified by collectivist and anti-capitalist lies that capitalist organizations are cheating employees and customers. The government and unions use these lies to convince people that the corporations are doing something to the workers instead of defending their own legitimate property rights.

The basic flaw of unionism is the Marxist premise called the "labor theory of value". This premise holds that the labor expended on the manufacture of a product is the only significant factor influencing the value of that product. This theory justifies unions in accusing capitalists of exploitation because it nuetralizes the influence on value from such factors as intelligence, labor saving devices, production lines, capital expenditures and production line improvements, etc.

Yet, the capitalist, in his pursuit of profit, is trying to increase the value of products so they are acceptable to willing customers. He does not merely hire more workers to do menial tasks. He realizes that in order for a business trade is to be a win for both parties, he must work hard. And he realizes, more importantly, that in a free society, each party to a transaction has the right to withhold participation if he sees that the trade is not good for him. And, this also applies to employees who disagree with corporate policies. They have a right to withhold their support by refusing to work for the company and supporting other employers with “better” policies.

In fact, unions cannot bring benefits to the workers that the companies don’t have the ability to pay for in the first place. Unions can not exist without the companies and they bring nothing to the equation except the ability to restrict production and cause needless and unnecessary costs to the companies. These additional costs place the companies in an unfair competitive situation and require that they find ways to mitigate me in order to stay viable against competitors.

The entire basis of unionism, the idea that capitalism is “dog-eat-dog”, is a myth invented by Marxists. It represents a cognitive disconnect for anyone who believes the myth. And, because of this “cognitive” mistake, we have the spectacle of anti-capitalist economic policemen (regulators), union officials and their politicians seeking to limit and control business trades. Marxists see cheating, lying, stealing and defrauding everywhere and, when they get control of government, they disrupt economic activity, jail honest businessmen, distort free economic activity and create huge losses to both producers and consumers – in the name of protecting against exploitation that does not take place.

Unions and Marsists generally have no problem with government interference in the economy. This makes them advocates of statism, the same types of governments that caused so much havoc in our previous century. Statism is coercive society justified in its manipulations by the anti-concept of “social justice”. When government puts its hand on the scales between “predatory” capitalism and the poor, the result is not a fair society but an unfair society in which the productive and moral people are exploited and punished for their abilities.

Statism, not capitalism, is the basic cause of exploitation. To assume that a person should be punished for offering good products for sale is a reversal of morality and a travesty of justice. To claim that a person should act only for the sake of others is to destroy the foundation for action and to sentence men to lives of inactivity, despair and slavery. Coercion accomplishes only theft and cruelty.

Marx and other critics did not understand that capitalism operates upon a rational view of self-interest, not the Social-Darwinist view of conflict. They followed the trends of the time and accepted the idea that man is essentially an evil creature whose self-interests are detrimental to others. Today, the “zero-sum” view does tremendous damage to society. The critics of capitalism did not realize that there are transactions, those based upon self-interest and the pursuit of values, where two individuals can exchange money, which is a neutral form of value, and both can win. They do not realize that in a capitalist system, the overwhelming majority of transactions are “win/win”.

The critics also operate under the false assumption that, in a capitalist system, the individual who cheats others, does not win. Any individual, businessperson or otherwise, who cheats his customers (or employees) will suffer a loss of trust and business. It is not rational for an individual to think that he benefits by cheating or harming others.

The critics also ignore the fact that capitalism is not a system. No one has to create rules to implement it. The only thing the government must do is protect properly conceived constitutional rights. In this case, acts that are considered theft, fraud, breaking contracts, etc. are violations of individual rights and can be handled by the judicial system. No additional government agencies, departments, programs or regulations are necessary. This is because capitalism is what happens naturally in society when men ban force in their dealings.

Capitalism is the economic expression of human freedom. It is not dog-eat-dog in any way and any capitalist who thinks so will soon learn that he can’t get ahead by being a predator, Hollywood fiction and Gordon Gekko notwithstanding. Greed is not good, self-interest is good.

Anti-capitalists assume (with only anecdotal evidence) that the entrepreneur is a criminal by nature. This is because they do not understand that man must use reason in order to survive. If men are free to use reason without interference, then each man will operate according to a singular truth in any given context and, since all men function in the same reality, they are able to agree upon whether a given transaction is in their respective self-interest. All workers’ strikes, government regulations and government interventions are based upon a lie that the capitalist is an irrational predator. And, even more importantly, there is no justification for overthrowing capitalism. Such efforts are anti-reason, anti-mind, anti-freedom and pro-poverty. When you overthrow a system that is based in freedom, you can only replace it with a system based on force and anti-reason. You can only replace it with statism.

Those people who assume that capitalists are predators fail at understanding reality. By assuming a negative nature to people, they treat capitalists and individuals as if they were evil – and in the process, engage in inappropriate ridicule, pass unworkable regulations and make life difficult for people who are merely trying to trade value for value. The communists, and those who agree with them, have blinded themselves to the true nature of a system that enables cooperation and peace and improves the lives of millions of people.

What does this make of the communists, socialists and other haters of capitalism? It makes them enemies of man who are operating on false premises and creating havoc with society in the process. It makes them afraid of a system that is not evil but benevolent. Their fear of capitalism is ill-founded, destructive and conflict-ridden. The critics of capitalism are not saviors, benefactors nor patriotic. They are fearful haters of a system that brings rewards and opportunities to all men who freely and honestly participate.

In an age of high technology and advanced communications, I find it amazing that the arguments of the anti-capitalists are made up of ancient Marxist lies that are inappropriate for modern times. These "revolutionaries" are apparently oblivious to the advances that capitalism has brought about in their own lives. Rather than look around at the improvements in society, they spend their time talking to each other and repeating ideas that were never relevant in the real world. Perhaps it is time those of us who actually produce value realize that these losers are not trying to create a better world...but are the reason why people suffer. Perhaps it is time that we ask them to stop living off of us.

(1) Inside Job, Sony Pictures Classic

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