Has Capitalism Failed?
By
Robert Villegas
Has Capitalism Failed?
By Robert Villegas
© Copyright 2016 by Robert Villegas. No part of this book may be reproduced in any manner without the express written agreement of the author and his designated legal authority. All Rights Reserved.
Published in the USA
ISBN 978-1534700048
Library of Congress Control Number: 2016910633
[email protected]
Table of Contents
Introduction
Has Capitalism Failed?
Is Capitalism Evil?
Inflation and Monetary Policy
Economics in One Lesson by Henry Hazlitt
How to See the Unseen
Laissez nous Faire "Leave us Alone"
The Fallacy of Re-Distribution
Notes on Individual Rights and Statism
Obama's Role in the Economic Crisis
Plucking Out the Parasites
Capitalism, the Perfect System
Introduction
“…if an Englishman—or for that matter, any other man in any country of the world—says today to his friends that he is opposed to capitalism, there is a wonderful way to answer him: “You know that the population of this planet is now ten times greater than it was in the ages preceding capitalism; you know that all men today enjoy a higher standard of living than your ancestors did before the age of capitalism. But how do you know that you are the one out of ten who would have lived in the absence of capitalism? The mere fact that you are living today is proof that capitalism has succeeded, whether or not you consider your own life very valuable.”[1]
The truth of this statement is important when one considers the efforts to destroy and replace capitalism by our politicians, college professors, intellectuals and street protestors. We have most likely all seen pictures of mobs carrying signs and banners, “Capitalism has Failed” and “Capitalism is Evil”. Virtually none of the people carrying these signs would be alive today were it not for the fact that capitalism was allowed to flourish in the 19th century. None of us would have the benefit of modern medical science, automobiles, airplanes, cell phones, television, movies and the Internet were it not for the fact that the genesis of these life-saving modern instruments was an age of full unregulated capitalism.
What would happen if the world decided to do away with all profits? Do you know? The socialists would say that their system, and particularly they, as leaders of society, would still be able to generate all the wonderful products ascribed to capitalism. They would cry that their creation of “rights” to jobs, health care, education, day care, retirement and whatever other “rights” they imagine will create a new world of abundance and life will be better for everyone. They assure us that they are kindly and good people and would never allow government to become dictatorial and oppressive like other socialist governments in the past. Their socialism would be “democratic”; kind and approved of by the people. It would not dictate or force anyone, and, this time, the people would vote on all measures.[2]
Today, young socialists declare themselves part of the “We Generation”. They think that collective action will finally be accomplished because they, in their infinite wisdom, will finally make it work. Unlike the foolish people of the past, they really mean it this time; they intend to complete the promise of collective action through sacrifice.
Needless to say, we foolish people of the past, chuckle at the naiveté of these promises and point out that past socialist leaders also meant it. Indeed, they meant it so much that they sent millions into the ovens, prisons and concentration camps – millions comprising the enemies of socialism; the selfish people who did not chuckle as they were directed by men with rifles to get in line and experience the justice of the collective ideal known as socialism.
I wrote this book to provide my thoughts about the fundamental principles and events that are going to affect our lives during the coming years. I think it is important that hard working citizens learn the real issues that affect their lives and take definitive action to stop government when it steps out of bounds. The Constitution, as it was originally written, does not allow the government to violate the rights of citizens, even if those citizens are part of the “We Generation”, wise, wonderful and self-sacrificial.
In this book, we are going to take a look at capitalism and decide if it really has failed. We will look at capitalism from the perspective of the individual and even attempt to analyze the criticisms of capitalism made by those wise socialists who seem to have all the answers for the lives of men.
Has Capitalism Failed?
I hope you agree with me that proposals to make monumental changes in our economic system should be made while armed with all of the facts. I ask my readers to clear the slate in their minds about the evils of capitalism and have an open mind. Like many of us who advocate capitalism, we decided to make sure we understood capitalism before we let the monsters with rifles come onto our streets and tell us how to live our lives. I suggest that you do the same before you decide to pick up a rifle and/or throw a Molotov Cocktail through a bank window.
“The capitalist system was termed “capitalism” not by a friend of the system, but by an individual who considered it to be the worst of all historical systems, the greatest evil that ever had befallen mankind. That man was Karl Marx. Nevertheless, there is no reason to reject Marx’s term, because it describes clearly the source of the great social improvements brought about by capitalism. Those improvements are the result of capital accumulation; they are based on the fact that people, as a rule, do not consume everything they have produced, that they save—and invest—a part of it.”[3]
The main business of American industry is production, not theft or forgery. Only the influence of an anti-capitalist philosophy that focuses moral worth primarily upon sacrifice could cloud men's minds to the exacting kind of virtue required of the men who choose to be productive. If you wonder why some CEOs make so much money, it is because their leadership enables their corporations to successfully sell to and benefit more people than other companies. Capitalism is about the efficient use of capital and that involves the efficient production of quality products, sold at a price customers are willing to pay and delivered cost-effectively and quickly. If you think that just anyone can do this, you have no idea how to do it.
And it is this same misunderstanding of capitalism that moves many people to damn man for being too concerned with materialistic things; that tells man he has produced too much and should give away the fruits of his production. It tells him that to produce is so easy, but to give so hard. It is blind to man's true greatness because it refuses to regard production as an essential, necessary and highly desirable virtue. And because it does not really protect the rights of people to be moral, this anti-capitalist philosophy lets loose the most radical of haters; the people who would just as soon crush the skull of an honest man rather than ask him for a job.
It is this same philosophy that advocates a welfare-state to forcibly divest men of their incomes for the sake of the nonproductive. And, finally, it is the same philosophy that refuses to consider that a capitalist society can do more good (even for the nonproductive) than any welfare society. To prove this last point, we will analyze some of the essential elements of capitalism, their causes, and their consequences. They are mass production, the division of labor, capital accumulation, corporate organization and monetary policy.
MASS PRODUCTION
A uniquely capitalist invention is the concept of mass production that lowers the cost of production and spreads the benefits to virtually all parties in society. Mass production enables the “m
aking” of complex products on an assembly line which employs many workers, each performing a specific task in a pre-determined sequence that results in the creation of products such as automobiles, guns, farm machinery, turrets and lathes and even such small products as cell phones, furniture, television sets and other electronic equipment to name a few. The benefit of the production process is that highly valued products can be built efficiently and in a very timely manner at a very low price compared to products made by a single individual.
In spite of the fact that socialists have said that capitalism is about the rich making money at the expense of the poor, mass production is specifically aimed at the masses including the poor. It has also spawned such terms as mass marketing, global marketing and mass distribution so that more products can be delivered to more people.
When speaking about mass production in eighteenth century London, Mises avers:
“It was the beginning of mass production, the fundamental principle of capitalistic industry. Whereas the old processing industries serving the rich people in the cities had existed almost exclusively for the demands of the upper classes, the new capitalist industries began to produce things that could be purchased by the general population. It was mass production to satisfy the needs of the masses.”[4]
With the advent of mass production, the individual, for the first time in history, was able to purchase amazing products that benefited him tremendously. The anti-capitalist radicals who continuously proclaim a separation between rich and poor in capitalism have completely missed the point that capitalism makes the lives of "the lower classes" better. Capitalism is truly the system that bridges the gap between rich and poor because it elevates the standard of living of every man and makes more products available to all men at prices most of them can afford.
Businessmen like Henry Ford and many others recognized that by lowering the costs of production they could lower prices; which made their products available to the average man and increased the number of customers. Automobiles, oil and gas, household appliances, and in our time, computers and cell phones have made the lives of all people better and at very reasonable prices compared to the benefit. Mass production has made it possible for the average man today to live a life better than the kings and lords of the past.
A side benefit of mass production is that it makes products other businessmen can utilize too. For instance, J.D. Rockefeller of Standard Oil, in his successful efforts to bring down the cost of producing kerosene, created an opportunity for Henry Ford who needed an inexpensive fuel for his new Ford automobiles. Had not Rockefeller found ways to make gasoline, a byproduct of the distilling process, in larger quantities for lower prices, Ford would never have been able to sell his cars at lower prices to the masses.
Ford’s cars needed a cheap fuel and, before Standard Oil, other automobile fuels were not cheap. There was no private agreement between Rockefeller and Ford to do this; there was only the common principle of mass production that made it possible, releasing at the same time the energies of other men who could now improve their lives and be more productive. None of this could have been possible in a socialist system intent on preventing evil capitalists from making profits.
Yet, capitalism is constantly vilified for creating a gap between rich and poor while many people (previously poor) are now millionaires due to their innovative ideas and ingenuity. Capitalism is the only system that opened up the ability of every man to be productive. All they had to do was be willing to work. Capitalism even provided, free of charge to the workers, the new machines that created the new jobs for the poor. And if you were frugal in your spending, you could make money in a factory, save some of it and invest in other businesses that were growing. Eventually, you could take your money, start your own business and join the economic push for better products and services. You, the average man, could become rich.
To quote Ludwig von Mises:
"This is the fundamental principle of capitalism as it exists today in all of those countries in which there is a highly developed system of mass production: Big business, the target of the most fanatic attacks by the so-called leftists, produces almost exclusively to satisfy the wants of the masses. Enterprises producing luxury goods solely for the well-to-do can never attain the magnitude of big businesses. And today, it is the people who work in large factories who are the main consumers of the products made in those factories. This is the fundamental difference between the capitalistic principles of production and the feudalistic principles of the preceding ages."
The reason capitalism overtook communism is because capitalism improved the lives of more people than communism, made them happier, freer, more affluent and more productive. Communism, mired in the separation of classes, produced no such improvements. The workers, the people whom the violent communist revolutions were supposed to have given power, merely toiled in poorly maintained factories and dangerous working conditions. They refused to be productive for people who were skimming the fruits of their labor in order to have better apartments, better vodka and caviar for themselves.
When a government is at war with freedom the first casualty of that war is the individual. The second casualty is mass production. Communism tried to steal the benefits of capitalism while promising to create a system that would beat it – but they forgot that the essential element of capitalism was freedom not the machines of mass production that they wanted to expropriate. And since the masses were not free, not adequately paid, they were seldom able to purchase the inferior products; and they were perennially disappointed because the "managers" chose to produce products they did not demand. The system was inefficient because it was not focused on production for the "masses" but instead was focused on mass production of unwanted inferior products. The result was long lines and cynicism.
THE DIVISION OF LABOR
At the base of any advanced civilization is the division of labor. The complexity that this division achieves, if it is based upon production, is the complexity and extent of that society's success as a civilization. A tribe whose basic division is that of chief, witch doctor, hunters, and child raisers can hardly achieve the diversity necessary for a trip to the moon, although they often find good reason to worship the moon.
The advanced case of the division of labor must be distinguished from these crude forms found in primitive societies. The advanced forms represent more than an economic advance; an intellectual advance is required; an advance that is achieved by the men who realize that specific resources can be much more efficiently employed if each devotes more time and study to specific delimited activities in cooperation with others who perform other delimited activities. It also requires the knowledge that, when the individual devotes his time and skills exclusively to one type of task, he will be able to create more valuable goods for trade with others.
As mentioned above, the advanced division of labor represents an intellectual achievement through which the best thinkers realize the potential benefit of an abstract idea and put it to use. The abstract idea becomes an established asset of the individual in society, a principle that makes it a better place in which to live, and if the division of labor is allowed to flourish without regulation, it adds increasing benefit to the life of every individual in that society. Multiply this by thousands of entrepreneurs engaged in millions of transactions and you have a thriving economy.
An individual specializing in a specific task can get more work done in a shorter period of time, can devote his time to improving his skills and timeliness and can, over time, improve the quality of his product and earn more money. This impacts the work done by others performing related tasks, making it possible for them to do more while benefiting from the work of the others. Cycles of excellence develop that grow exponentially over time.
The enemy of the division of labor is the man who walks into a factory and smashes all the equipment. This is the predatory politician who wants to ensure that the businessman cannot afford to repair and upgrade the equipment
without first getting his permission. There are four tools that this metaphorical destroyer uses:
1. Taxes
Taxes basically steal the peoples’ money. If the individual were allowed to keep his money, he would spend it on making his life better. He would either buy more things that improve his domestic life or invest it in businesses that will create better and more products. Either way, if he keeps the money he earns, his life is better.
Taking money away from an individual, under other circumstances is considered theft. When we judge theft, we have no respect for the thief. We don’t ask what the thief is going to do with the money, even whether he is using it for a “good” reason. We will do everything possible to return the money and punish the criminal. But if the government takes a person’s money, we consider it is for a good cause. Even if the money is wasted or goes to a rich person, we never judge this form of theft to be a bad act.
The general assumption is that people taxed part of their income will never “miss” the money since they don’t see it in their bank accounts. Another view is that since they have steady jobs, they will quickly recover the amount taken from them. These are highly cynical views of the concept known as “earning your own money”.
The reason many people never “miss” the money taken from them by taxes is because they don’t visualize what their lives would have been like had they been able to keep the money they earned. They also buy into the notion that the money is going to a cause that makes society better. In fact, taxes are spent in ways that the individual would not always approve and that means they are almost always wasted.
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