Capitalism Isn't About Exploitation
I have seen this image floating around the Internet for years, and it is finally time for me to put it to rest. Contrary to its message, capitalism, the economic system that emerges insofar as private property rights are respected, does not lead to exploitation and does, in fact, bring everybody out of poverty into prosperity.
Let’s look at this image first. It shows the supposed (coercive) hierarchy of capitalism.
The first level is the poor and exploited laborers who are nearly dying for the upper classes. They are poor as dirt and never will be richer.
The next level looks like the bourgeoisie, i.e., the businessmen. They are thoroughly enjoying the laborers’ food, or rather the product of the laborers’ work.
The third level shows the military: the people who coerce and keep the laborers as laborers.
The fourth level is interesting because it is a bunch of religious leaders, implying religion is key to capitalism.
The fifth level is just as interesting as the fourth level of the hierarchy. Those on this level are state politicians and rulers.
The sixth and last level has a money bag on top labeled “capitalism.”
I will start from the top level and go down to analyze each level.
Capitalism, as depicted by the money bag, is on top of the hierarchy, and clearly the money bag represents greed. The problem here is that greed, i.e. self-interest, is part of human nature; the economic framework of a society does not change this truth. The difference lies in what people are using as a means for power. In capitalism it is money, and in socialism it is political force.
A state is the antithesis of capitalism. The state confiscates privately owned scarce resources to operate, in other words it taxes the populace. (Unless it is a "voluntary" state like Ayn Rand imagined.) The state might at times protect private property rights, but this does not mean that it is a part of capitalism. If one does say that it supports a private property ethic, then one runs into a contradiction. The person claiming this would be saying that the institution that must first violate private property rights protects private property rights. So, any statesman is not respecting private property rights in his capacity as a politician and as such cannot be considered as a person who upholds capitalism.
Religious leaders are not a necessary part in a free society. It is imaginable an atheist society that based on the private property ethic. Furthermore, anytime the religious leaders use the state they are not supporting the private property ethic.
The state military also falls into the same class as politicians, they do not support capitalism.
Businessmen, investors, entrepreneurs, etc. in capitalism do not exploit workers. Two parties in an employment arrangement, an employer and employee, voluntarily agree to the wages and benefits the worker will receive in compensation for work. Both believe they will be better off because of this arrangement, otherwise they would not accept it. This can hardly be exploitative in nature since it is voluntary and both see it as ex ante beneficial.
Workers become richer in capitalism. Capitalism allows for action free from aggressive coercion, which allows for optimal capital investment, use, maintenance, etc. The more machines can produce and the more efficiently they can produce the higher the wages of the workers. It is the state which hinders capital accumulation by brute force and sets up incentives to discourage capital accumulation, thus slowing the growth of workers’ wages.
There might be some who still object because they believe in the labor theory of value and Marx’s class warfare, but it is not the subject of this post to dispel such myths as the labor theory of value. Another post will cover those topics.
I am Nick Sinard, an amateur economist and philosopher that follows in the rationalist tradition, specifically the Mises-Rothbard-Hoppe tradition. You can find my material at www.NickSinard.com and www.Facebook.com/TheNickSinard . I'll soon be putting up videos on YouTube about an array of topics, including "What is libertarianism?" You can find my YT channel at https://www.youtube.com/channel/UCFGA8_Ti30AbYiADPCo8Qgw
People find it hard to under stand the open market system. Forcing things yields horrible results as Obama Care has shown.....as more and more insurers are pulling out. The capitalist system is about making everything cheap and better with innovation......if you build a better mouse trap....it will sell. Liberal Progressives, just don't understand that, bc most of them don't actually make anything. I think a lot of the thinking coming out of today's youth has to do with SHOP CLASS being pulled from schools......kids want to buy..they don't want to make and create..and that is a big part of what will keep our economy stagnant.
Outside US free healthcare is a thing, in Spain for example if you get ill you can get a free diagnostic and treatment if it is a severe illness (cancer, prosthesis, etc.). Here people is happy with our healthcare, you get healed for free and it is paid with the taxes we all pay.
Of course we also have private healthcare but people prefer public one (because you need to pass a lot of tests to enter there and only the most qualifies people enter and because it is free).
It looks like early communist party propaganda to me. I'll bet the history behind those names and the company that published it would be interesting reading too.
That would also explain the religious figures being there with communism being no fan of the church.
Loved the read by the way!
I've come to see capitalism in slightly different terms, but with perhaps a similar meaning to those you use in this article. Capitalism is the philosophy that offers a positive environment for rational self-interest. It assumes from the outset that the individual is the smallest minority possible - and does not require the sacrifice of the self. All of the variations of Socialism are merely tribalism with academic trimmings. I'd better stop there - it's a big subject. I wish you well.
Thank you for your comment. Would I be correct to assume Ayn Rand convinced you of capitalism?
I must admit when I first read 'Atlas Shrugged', it was a revelation. And, her other works and philosophy have had a significant influence on my thinking. That said, my focus has been geared more toward the psychology of individualism. The relevance of capitalism in this context is, as I'm sure you know, obvious.
The fee market doesn't have to be complicated. I like to think of it as any interaction between people that isn't coerced. Simple really.
Economics is the study of pump and dumps and rent seeking behavior, with the only rational game theory motive being to become a slumlord - me
Good post. As the saying goes: "Government ideas, so good that they must be enforced at gunpoint." Unnatural laws distort market signals, create imbalances between supply and demand, and are morally invalid. When one wakes up to the non-aggression principle, the repugnance of the force that the majority of the population has grown to embrace is apparent.
Well, I take issue with that slogan, to be quite honest. I believe my ideas are so good, i.e. justifiable, that they are justified to be enforced at gunpoint, if it is a proportional amount of force or threat of force being used in response to aggression.
Coercion isn't necessarily unjustified, so that isn't what libertarians are against. Libertarians are against aggressive coercion.
Nice picture. But as for me sometimes the structure and hierarchy in this pyramid may be different.. Those who in the very bottom could sometimes kick-off those who is on the level up (of course in case of planned "support" of those guys under the sack of money and above the marksmen. ))
Of course, if you take certain assumptions about human nature capitalism makes sense. I mean the whole narrative is already written for you... inner sin phenomena helps you to believe that you are actually bad, greedy, as you say, for example, and it is part of one's nature. However, if you start questioning things that are basic (as we think in our society) and fundamental, it will help you to see many new opportunities and transform your life within another holistic understanding.
Hi! This post has a Flesch-Kincaid grade level of 9.4 and reading ease of 56%. This puts the writing level on par with Michael Crichton and Mitt Romney.