The title of this article is actually a title of a book. It was originally delivered as a series of lectures in Argentina in 1959. That was 63 years ago.
In an era that which everything new is warmly embraced and anything old is regarded with suspicion, what does a more than six-decade-old book have to say in the 21st century?
There is a popular saying that “You cannot judge a book by its cover.” I think the same principle applies to its age.
The current book form of those lectures is the result of the diligence of the wife of that forgotten economist. It took twenty years before those lectures were published as a book.
The central argument of that economist in all his lectures is that the best economic policy is to limit the power of the civil government to its legitimate function. Providing the kind of ideological idea that is conducive to the free operation of the market is central to such a task. The focus of its policies should be the protection of life, freedom, and private property of citizens both from domestic and foreign aggression. This unpopular economist expounded his central argument into six lectures on capitalism, socialism, interventionism, inflation, foreign investment, and policies and ideas.
And I just want to start with capitalism.
Straw Man Capitalism
I thought I knew what capitalism is. We love to criticize this socio-economic system during our post-graduate studies.
We were clueless at that time. I came up with this conclusion after more or less seven years of studying the subject since 2009. None of the serious economists I know uphold such a caricature version of capitalism that we attacked. If you were to ask us during those times about our understanding of what capitalism is, we will probably respond with the “ah” and “eh” for we ourselves didn’t know the very character of the thing that we attacked.
I just want to think that such cluelessness is confined only among our batch at that time. I am worried that such an intellectual gap might also describe even the so-called prestigious colleges and universities in many different places.
The first lecture centers on misconceptions about capitalism. It is about interconnected economic facts that are not widely known about capitalism. Examples of these facts include its historical setting and distinction from feudalism, its contribution to population growth, savings, and higher standard of living, and the origin of animosity against it.
Feudalism
The socio-economic system where capitalism emerged is known in history as feudalism. Most people do not appreciate capitalism for they fail to compare it to its predecessor. Under feudalism, the people did not have access to products and services that aristocrats enjoyed. And add to it the fact, that there was no social mobility.
Capitalism replaced the socio-economic structure of feudalism. Access to products and services that the elites enjoy was opened to the public and any individual can now climb up to the social ladder through innovative ideas and entrepreneurship.
Improved Standard of Living
During the previous social structure, the mortality rate was so high due to poverty, malnutrition, and starvation. The entrance of capitalism increased the standard of living and contributed to the increase of the human population. Savings played an important role in the growth of capital that benefit not only the savers but other players in the market as well such as the entrepreneurs, unemployed, producers of raw materials, and existing wage-earners (p.11).
Origin of Animosity
Another unpopular fact is connected to the origin of animosity against capitalism. People are fooled to believe that hatred towards capitalism originated from the masses, the working class, the "proletariat". This is a "successful" historical distortion. Enmity against capitalism actually originated among the aristocrats (Even the term "capitalism" did not come from the proletariat. It was actually coined by Karl Marx himself, a bourgeois and capitalism's strongest enemy, p. 10).
The aristocrats didn't like capitalism for it diminished their economic power. This is how this forgotten economist narrated this fact:
It is a fact that the hatred of capitalism originated not with the masses, not among the workers themselves, but among the landed aristocracy—the gentry, the nobility, of England and the European continent. . . . They blamed capitalism for something that was not very pleasant for them: at the beginning of the nineteenth century, the higher wages paid by industry to its workers forced the landed gentry to pay equally higher wages to their agricultural workers. The aristocracy attacked the industries by criticizing the standard of living of the masses of the workers." (p. 6).
The Unspeakable Horror of Capitalism
Other historical distortions include the so-called "unspeakable horror of capitalism", which this unpopular economist designates as "one of the greatest falsehoods of history". This is related to the exploitation of women and children. He then corrected this story:
The mothers who worked in the factories had nothing to cook with; they did not leave their homes and their kitchens to go into the factories, they went into factories because they had no kitchens, and if they had a kitchen they had no food to cook in those kitchens. And the children did not come from comfortable nurseries. They were starving and dying. (pp.6-7).
The So-called Socio-economic Gap
Additional misconceptions concerning capitalism are related to wage rates and the socio-economic gap between the rich and the poor. As a result of Marxian influence, people think that employers determine wage rates. They fail to see that ultimately consumers determine the wage rate of employees (p.9).
Concerning the alleged widening gap between the rich and the poor inherent in capitalism, Marxists argue that as wealth is concentrated only in the hands of the few, mass revolution is inevitable.
This neglected economist refused to accept such faulty analysis for facts showing that nations that embraced capitalism actually improved the condition of the masses. So, the argument is completely mistaken. He asserts:
The scornful depiction of capitalism by some people as a system designed to make the rich become richer and the poor become poorer is wrong from beginning to end (p.12).
The Role of Labor Unions
Finally, another faulty idea is the belief that labor unions could improve the economic condition of the working class. This detested economist refuted labor unions' advocacy for higher wage rates, shorter work hours, and public ownership of means of production that actually make the economic situation of the working class worse. Among numerous Marxist themes, this ignored economist specifically identified the "iron law of wages" theory as fallacious for its model was taken from biology.
Personal Thoughts
Realizing that misconceptions about capitalism abound, to be an apologist for the resurgence of this socio-economic system is very unpopular. It may even invite hostility from those who want to completely destroy this system.
I decided to post this kind of content on CENT because I read somewhere else that economics is one of the reasons why the token has been created in the first place. It just so happened that very few are interested in the subject due to its tight reasoning. Add to it the fact that people today are more visual than text-oriented. They don’t like to read a long-argued article, which is a typical characteristic of economic content.
Another reason is that my blog on blogpost.com has no audience. Add to it the fact that google marked my blog as “unsafe”.
And for my primary reason, I dream to see an increasing number of people listening to the message of the strongest defender of capitalism such as that forgotten economist who delivered a series of lectures 63 years ago.
Note:
I first published this article on blogspot.com nine years ago.