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17 January 2017 17:02 (South Africa)
Opinionista Ivo Vegter

Capitalism is not unkind

  • Ivo Vegter
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

A common misrepresentation of capitalism caricatures it as unkind – Dickensian and Darwinian – in its focus on dog-eat-dog competition, reward for success, and punishment for failure.

They're all over television, and in every magazine: people who denounce the coldness and competition of capitalism, and make of socialist sharing a virtue. Ayn Rand, in The Fountainhead and Atlas Shrugged, made as good a case as any against living for others, instead of living for yourself. Her arguments bear re-reading.

The notion that capitalist competition is alienating and dehumanising is false. The irony is that it not only rewards productive work, but also encourages cooperation for the benefit of others. In that sense, it is the most humanising of virtues, and sets us apart from animals.

Grayson Lilburne, a student of Ludwig Von Mises and Murray Rothbard, reminds us that the Greek poet Hesiod distinguished between two kinds of competition:

"So, after all, there was not one kind of Strife alone, but all over the earth there are two. As for the one, a man would praise her when he came to understand her; but the other is blameworthy: and they are wholly different in nature. For one fosters evil war and battle, being cruel: her no man loves; but perforce, through the will of the deathless gods, men pay harsh Strife her honour due. But the other is the elder daughter of dark Night, and the son of Cronos who sits above and dwells in the aether, set her in the roots of the earth: and she is far kinder to men. She stirs up even the shiftless to toil; for a man grows eager to work when he considers his neighbour, a rich man who hastens to plough and plant and put his house in good order; and neighbour vies with is neighbour as he hurries after wealth. This Strife is wholesome for men. And potter is angry with potter, and craftsman with craftsman, and beggar is jealous of beggar, and minstrel of minstrel.

Wholesome strife is the motivating factor that enjoins us to find something worth doing, and do it. What is worth doing? Unless you're rich and at leisure, or concerned merely with your own subsistence, it is that function that you are best able to perform and which other people most want from you. You cannot profit in a capitalist society if you do not serve the wants and needs of your fellow human beings

Moreover, the better you do so, the more you stand to profit. With "better", I mean not just the quality of the product or service you supply, but also the price at which you're able to supply it. If someone else is able to deliver a better product or a cheaper price (or both), they will better serve the needs and wants of society, and be rewarded accordingly. Competition does not exist to improve the well-being of the competitors. On the contrary: it improves the well-being of customers. Though apparently motivated by selfish greed, competitors have to serve society in order to satisfy their own desire for profit

One can go even further. If you are not able to compete successfully against your neighbour, it often benefits you both to join together in a cooperative venture. By voluntarily contracting to combine your skills, capital, and capacity, a cooperative venture often proves to be even better at supplying the needs and wants of customers, and produces higher profits as a reward

Contrasting this process with animal competition in which the survival of one can imply the demise of another, Ludwig von Mises puts it thus: "Social cooperation under the division of labor removes such antagonisms. It substitutes partnership and mutuality for hostility. The members of society are united in a common venture.

It is a cliché to argue that a supermarket represents all that is wrong with society. It pays low wages and puts mom-and-pop shops out of business. Ask most small towns without a decent supermarket if they want one, however, and they'll answer in the affirmative. Unless you're rich enough to compensate for the higher prices and limited choice offered by those darling little shops in those darling little towns, what you want is lots of choice and low prices. Not everyone is rich enough to travel to neighbouring towns to compensate for the lack of local choice. So by offering low prices, a supermarket benefits all its customers, and reduces their cost of living. Better yet, it forces others to compete, and either offer higher quality of equally low prices, thereby further improving the quality of life of the community. Seen in this light, supermarkets benefit the broader community, of which the shop's own employees are part

Those who insist on casting capitalism as a ruthless system of Darwinian competition also neglect to consider the fact that in a free market, you are indeed free. Nothing in capitalism precludes charitable giving or volunteering for community organisations. On the contrary: the quality of life and leisure produced by capitalism leaves much time for community and much wealth to support charity. Better yet, nobody will have cause for resentment that their neighbours helped themselves to their wealth by employing the force of the state. Nobody will feel they've done their bit once they've contributed on pain of punishment to society, as high taxes or outright socialism force them to do

The notion that those who oppose capitalism are somehow endowed with a "social conscience" is mistaken. Their intent may be good, their instinct noble, but the road to hell is paved with good intentions. The defining characteristic of civilisation is that it transcends instinct, and substitutes reason as a motive for action

One could argue that the opposite holds true: the more regulated a society becomes, the more vicious and rapacious its members. The less you can benefit by working harder and better serving those around you, the more you have to jostle for power and patronage. It is in such a world that one person's benefit derives not from benefiting another, but at their expense

When faced with the tired clichés of those who feign social consciousness, so common at Christmastime, remind them that a company is a cooperative venture that cannot profit without benefiting others. It cannot employ force to coerce customers to do business with it, and in a voluntary transaction, both parties profit. Only once politicians step in to dispense patronage or limit competition, or laws are made to require customers to buy what a company sells, or the state intrudes to expropriate what citizens rightfully earn, does a free country devolve into a pre-civilised state in which slavery, grasping greed and ruthless animal competition hold sway

The caricature of capitalism as uncaring, unkind and ruthless is a joke, and Ebenezer Scrooge is a fiction.

  • Ivo Vegter
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

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