[matej.ogorevc]

Yesterday I got into a conversation with a friend who said (something to the effect of, I can’ remember the precise wording) that capitalism was the survival of the fittest and look what a mess this got us into.

I felt it necessary to respond, so I wrote a few words on the subject. If anyone can find errors in this text I’d be grateful!

Here it is:

The term capitalism itself was of course coined by none other than the lovable aristocrat Karl Marx himself. He used the term to describe an economic system where owners of capital rather than lords and aristocrats were able to make economic decisions about production in society as was the case in the manorial and feudal system. Later on classical liberlas such as Ludwig von Mises and others were quite happy to use this term since it described rather well precisely what they were arguing in favor of. Namely, that economic decisions in society be left to those who were, through economy and entreprenourship, able to amass ever greater amounts of capital by satisfying the demands of their customers. And therein lies the difference. Wheras before persons of nobility, regardless of their merit, were able to determine production and extract income from their subjects through coercion, in this new system called capitalism there were no limits nor subscribed production proceses. Anyone could become a capitalist, provided only they saved and had the insight to invest in capital equiptment that would prove valuable as a means of satisfying consumer demands. Private property rights became central to this economic system since any infringement on property rights would necessarily mean an expropriation of property, which greatly reduces the incentive to invest in capital. Capital will only be invested in and accumulated if the investor can expect to generate an income from it and a system with built-in disincentives to invest in capital is destructive of capital accumulation and could hardly be called capitalism.

However, I cannot blame you for using the term capitalism to describe our current state of affairs, many people have done so in the past and continue to do it at present. After all, capital is a class of inanimate objects and attaching an –ism to it can hardly describe a series of interactions between individuals in a society. But I would still prefer to use the term capitalism to describe the free market and resort to the use of corporatism, fascism or socialism to describe the modern economy. Common to all these systems, which vary in degree, rather than character, is an economy centrally planned by an institution who’s decrees are encofrced by violence and intimidation. And this description is much more akin to the world today than a system where private property is absolute and the only way of gaining property is through voluntary exchange and homesteading.

When you say survival of the fittest, that only begs the question – fittest for what? In the precapitalist society where no large scale markets existed, exchange was very limited and most people produced for their own needs, most rich people, with the exception of the few merchants, were rich because they exhibited the the greatest skills in warfare. They supressed their fellow men and were able to extract from them because they were the fittest in physical strength and could just take what others had produced. However, with the advent of capital, i.e. tools and machinery for large scale production, one was able to become rich by producing for, and not taking from, the masses. In such a system one could only succeed, save a few exceptions, of course, by producing something people wanted and could afford. In such a system survival of the fittest means the fittest in producing things the public values and one could hardly see anything wrong with that. Virute, rather than violence, then, becomes the norm. You will also notice that this is not descriptive of our social order today. The whole edifice of the State run society is founded in coercion, confiscation and violence.

Either way, if by survival of the fittest you mean survival of the fittest to tax, regulate, punish and coerce then yes, capitalism is what we have and it’s horrible and I denounce it. But we woudl also be well justified to say capitalism is the survival of the fittest in serving their customers, in which case we are light years away from any such social order.

So when you say capitalism is to blame for all this mess, you should probably qualify it with a bit more than »survival of the fittest«.

[lrcammarosano]

Excellent analysis!

What is often missing in critiques and defenses of capitalism or more aptly named the “free market”, is the choice provided to the consumer. Most defenses focus on the entrepreneur or capitalist and his behaviour -often portrayed as rapacious.

The behaviour of the consumer, which is often equal to the rapaciousness of the capitalist or entrepreneur, illicits less attention.

In a Marxist or feudal system choices are limited because there are no entrepreneurs competing for the economics affections of consumers.

In such a system the consumer is not free to make economic choices and such a right would be of no effect as these systems do not produce choices.

Thankfully, for consistency purposes, Marxist and feudal systems also restrict the personal freedom of consumers to make economic choices along with the right of entrepreneurs to compete for consumers’ economic affections.

As such Marxist and feudal systems are consistent-no one makes other than the state or a designated producer and no one gets to choose anything other than what the state or its designated producers can produce.

In a vibrant free market, entrepreneurs produce a wide array of products at different quality and price points. Both entrepreneurs are free to produce and consumers are free to choose.

This type of abundant market is missing in a Marxist or feudal system.

In an economy such as our own which has elements of a free market (where entrepreneurs produce a wide array of products at difference price points) and also elements of state control where government can favor one competitor over another through tax breaks, subsidies, bailouts etc, the consumer while free to make economic choices is limited by the choices that the government allows.

If consumers are against the greedy capitalists, they can very easily take that frustration out in the market place.

Don’t like Steve Jobs-don’t go see his Pixar movies or buy his apple products.
Capitalists only get rich by serving the masses and providing them with things they want. If enough “vote with their dollars” Pixar and Apple will lose their dominant market positions

A problem arises however when a company becomes through political bribery under the wing of the government.

For example, don’t like Goldman Sachs? There isn’t much you can do. You can not bank there. But that is not where they make their money-they are going to make their money as a result of their favored position in acting as a dealer in US Treasuries, or in the underwriting of municipal bonds or proprietary trading.

Ditto for GE. Don’t like their power? You can try not buying their light bulbs, but that won’t work as their light bulbs are mandated by an act of congress-so you have to buy them.

In a true free market the excesses of the entrepreneur or “greedy capitalists” are kept in check by the choices that free consumers have. If prices are raised or quality suffers consumers will vote with their feet and either not buy form the offending company or buy from a competitor.

True free market capitalism is self correcting and sustaining.

The mess we are in is because “greedy capitalists” have formed unholy alliances with government to protect their money making positions or to grant them new ones.

In a true free market the survival of the fittest mentality only applies to the producers, not the consumers. Producers must do what ever they can to please consumers or THEY shall persish.

Unfortunately, producers have learned to use government to protect themselves against the ravages of competition and consumers suffer.

[cboyack]

Somewhat related, I remembered a couple quotes from Man, Economy, and State by Murray Rothbard.

It is a reflection on nature, not on the free market, that everyone is “free to starve.”

A common complaint is that the free market would not insure the elimination of poverty, that it would “leave people free to starve,” and that it is far better to be “kindhearted” and give “charity” free rein by taxing the rest of the populace in order to subsidize the poor and the substandard.

In the first place, the “freedom-to-starve” argument confuses the “war against nature,” which we all conduct, with the problem of freedom from interference by other persons. We are always “free to starve” unless we pursue our conquest of nature, for that is our natural condition. But “freedom” refers to absence of molestation by other persons; it is purely an interpersonal
problem.

[lrcammarosano]

On Topic Book and a great read:
The Anti Capitalist Mentality by Mises

[matej.ogorevc]

Thank you both for your time and input.
Much appreciated!

[Author]

Posts