Surprise! You’re a capitalist!

This article is a submission to an essay contest organised by CapX. You can check out the contest here, which continues until the end of March.

Here’s what you should be thankful for

Every family has their habits when it comes to staying in touch with the elderly. To many it is a regular chore for which every feasible excuse to not indulge in it will be greeted with open arms. However, those people are missing out on the most valuable economics lesson they could possibly get, one which neither their university professors nor their graphs can visualise this superbly. The lovely old ladies and gentlemen who are your parents, grandparents or great-grandparents (for those who enjoy the luck of a very long life) are eyewitnesses of the advantages of free-market capitalism.

In fact, not only are they eyewitnesses, they are among the very few generations to have witnessed the most radical changes that occurred through capitalism. There are two main factors to be considered that we will address subsequently: economic mobility and technological progress.

Economic mobility is the ability that your environment grants you in order to improve your living standards. My grandfather used to complain that a croissant in the local bakery would cost more than twice as much as with the old currency, but he later recognised that he was able to buy considerably more pastry that he would have when he started working. Now, how was that possible?

In comparison to his ancestors, who were working under a seignior or a corrupt monarchy, my grandfather was working just as hard, with one decisive and fundamental difference: he, uniquely, worked for himself and his family, and not to the benefit of someone else. As the rule of law and property rights became essential tools of governance, his father and himself were allowed to buy land and keep the fruits of their own labour. Never before did a generation have this much opportunity to lift itself out of poverty. As a result, the generation of my father was the first one to not work on a field: a historical abnormality.

This effect has been fostered by technological progress. When the knowledge that lies in society is liberated, meaning that individuals work for the generation of personal profit, they invent the technology of the future. The mechanisation of common agriculture happened because farmers intended to produce faster and more efficiently, creating value (which could then be reinvested in the means of production). Technological innovation goes hand in hand with free-market capitalism.

Here’s what you should be angry about

It is generally preferable to not define a term by explaining what it is not. However, in this case we’re facing a notable exception. The almost demonic image that just the mention of capitalism produces in the heads of too many people needs some clarification. Former US congressman and presidential candidate Ron Paul accurately said:

“Capitalism shouldn’t be condemned because we haven’t had capitalism.”

I’ll put on my Donald Trump voice for a second and say “the system is rigged”. There’s no doubt that it is indeed rigged, but the rigger isn’t capitalism, but a dangerous mix of cronyism and big government. For the illustration of this point, let us use two different and commonly known kinds of government intervention:

There is nothing about bank bailouts that could possibly be considered as a form of capitalism. Capitalism implies private property, voluntary exchange and competitive markets. When paired with the existence of a government, capitalism requires the rule of law, free and equal access to the market for all actors and it rejects favouritism. The 2008 bank bailouts which happened in both the US and Europe are in themselves anti-capitalist, because instead of leaving financial institutions to the fate of the risks they took, governments financially encouraged their behaviour at the expense of the taxpayer.

The same goes for farming subsidies, which despite the political pretence, benefit large companies the most  – Monsanto, Cargill, Dreyfus and the like – and are nothing but a tool of protectionism to keep foreign imports out. It is a system which enriches the already wealthy, impoverishes those already poor and increases food prices for everyone, while being inherently contrary to the basic principles of free market capitalism.

If you object to a system which gives unfair regulatory advantages to big companies, hands out blanket checks to people who behave irresponsibly with savings of those who depend on them, and hampers competition to jack up prices for ordinary people, then your rightful anger shouldn’t be towards capitalism, but towards government which has continuously repudiated the advantageous nature of free market economics.

– – –

So if you’re aspiring to achieve more in your life, to create a valuable service to your neighbour for the generation of a profit that will improve the living conditions of you and your family; when you’re dissatisfied with the current technological achievements and demand longer battery life, a lower-emissions car, better medicine and medical treatment or even a shuttle to the moon; when you believe that instead of lowering the amount of competition to benefit a few, the government should open the market to benefit all; if all this applies to you…

…then surprise, you’re a capitalist.

About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

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