Ruminations on Capitalism for Black Friday

On this, the greatest feast day in the calendar of buying and selling, I thought I would share a few of my own thoughts on the subject.

Pretty Pictures
People on the Right like to think about economics like this:

But people on the Left prefer to think about it like this:

(The Leftists, of course, being elitist intellectuals, use fancier adjectives than the Rightists.)

I have a different point of view:

The useful thing about capitalism is that it's a really scalable way to govern access to resources. It's all well and good to say "We all own that chair together!" (Socialists, pay attention.) But only one person can actually sit in it at once, so if we all own all chairs together, then we need some kind of Ministry of Chair Sitting to decide who gets to sit in which chairs when. Not only is that a huge bottleneck for all chair-related decisions, but the we-all-own-all-chairs state of the world rapidly becomes indistinguishable from the the-Minister-of-Chair-Sitting-owns-all-chairs state. We're at the Socialism end of the arrow.

It's much more efficient to say "You decide who can sit in that chair, and you decide who can sit in that chair, and you ...." Private ownership scales very efficiently, by which I mean that it is not particularly more difficult to decide who can sit in any particular chair if there are 300 million people and 300 million chairs than if there are only two of each.

Win-Win
This kind of system -- in which individuals are empowered to make resource-allocation decisions -- naturally leads to competition. Everyone wants to make sure he or she has access to a chair whenever he or she wants one. That's not a bad thing; competition focuses the mind, and with so many minds focused on making chairs available, there's a possibility for everyone to benefit.

There's another possibility, though. There's the possibility that some individuals are so much better than their competitors that they eventually acquire almost all of the chairs. (Rightists, now it's your turn to pay attention.) Those of you who were uncomfortable with the the-Minister-of-Chair-Sitting-owns-all-chairs state of the world ought to be equally uncomfortable with the my-rich-neighbor-owns-all-chairs state. Either way, there are no chairs for the rest of us. And people without any hope of a chair of their own are vulnerable to exploitation by those who can offer them the use of a chair from time to time. (Warning: metaphor breaking down!) If the market in chairs is so restricted that they've no hope of winning, those people may stop trying, dragging down the economy with them. They're also more likely to turn to crime to obtain a chair by alternate means. This is the Feudalism end of the arrow. I've drawn it diametrically opposite to the Socialism end, but in some ways the two ends are very similar: a large portion of the resources of the community are in a very few hands, to the detriment not only of the many, but of all.

Capitalism is the state of tension in between the two extremes. It's the competitive game, but played under strict, transparent rules to make sure that winnings are not ill-gotten and that they are not so disproportionate in one round as to make the result of the next round a foregone conclusion. (This is the flow in the overly-glib "equal opportunities vs. equal outcomes" arguments some conservatives make: the outcome of one generation is the opportunity for the next.) There will almost always be one side that seems to be winning at any one time; that's OK. If we keep the rules strict but fair, the other side will get its chance in this tug of war a little later. Remember: when one team in the game of tug-of-war gets all the rope, the game is over. But the capitalist's goal is to keep playing.

Appendix: A Historical Perspective
I recently heard a Libertarian pundit say something like, "If we could just turn the clock back to about 1913, we Libertarians think that would be about right." Folks, there's a reason why Socialism arose during those late years of the Industrial Revolution. It arose in reaction to the economic injustice of the day. A small class of people controlled most of the means of production and most of the good fruits of that production ("robber barons," anyone?). As a result, things often didn't go well between labor and management, you might say.

I see a pattern:

By the late 18th century, the injustices of political feudalism led to populist political uprisings in the American colonies and later in France. In the latter, the Revolution pulled the country far to another extreme and eventually failed. Meanwhile, the more moderate revolution in America (if revolutions are ever "moderate") proved stable and the people who lived under it by and large prospered.

By the early 20th century, massive injustice resulting from a form of economic feudalism led to economic upheaval: the rise of socialism. An extreme form, communism, took hold in many countries but eventually collapsed under its own weight. Meanwhile, capitalist democracies sought to limit the same abuses that had led to the rise of their socialist adversaries: poor working conditions, long hours, indebtedness, and other exploitative practices. Regulations against these practices proved successful, and the people of these countries prospered even while the standard bearers of socialist movements stumbled and fell.

So when you're listening to all of the political name calling, just remember: it's not about capitalism vs. socialism. It's about what kind of decision-making process allows us to move nimbly; it's about more opportunity for more people more often. But that kind of wishy-washy mumbo-jumbo doesn't make for a good sound bite, does it? Folks, capitalism is hard. It's also worth it. Keep up the good work.