Are Capitalists Thieves?

     I hesitate to even use the word "capitalist."  Capitalist
means too many different things to different people.  In this
column "capitalist" means "investor," nothing more, nothing less. 
To illustrate what happens when capitalists invest we will
consider investment in computer development.

     In 1989 I bought a computer and printer for about
$3,000.  Some companies were still selling similar computers for
$5,000.  Today anyone can buy a far superior computer for
$1,000 or less.

     Why are computers so much cheaper now?  Capitalists
invested in computer research and production.  Without that
investment computers would be no better or cheaper today than
in 1989.  In fact, in today's inflation devalued dollars, computers
would cost more than in 1989.

     Some capitalist investors earned millions on their
investments.  From whom did they steal it?  They made
millions, you only saved a couple of thousand dollars on a
computer.  Sounds like the investors won.  What really
happened?

     You and I save a couple of thousand dollars or more each
time we buy a computer, and we get a far better computer. 
With those thousands of dollars saved we can buy something we
wouldn't have otherwise had.  Those purchases also create new
jobs for workers replaced by computers.

     Millions of computer buyers reap similar gains. 
Computer buyers as a group gained millions of dollars from the
investments made by someone else.  Those computer buyers
benefited from the investment for which they didn't lift a finger
or risk one red cent, or any other color cent.

     Who gained the most, the buyers or the investors? 
Obviously the computer buyers gained by far the most from the
capitalists' investments.  How do I know that?  Do I have some
complex equation that gave the answer?

     There is nothing complex about it.  Each computer buyer
saved $2,000 or more on each computer.  The investors total
revenue was $1,000 per computer.  Most of that was
reimbursement for the cost of production.  Profits most likely
were $100 or less per computer.

     If the entire price of the computers was profit, the benefit
to the buyers was at least twice the benefit to the capitalists.  If
profits were a more realistic, but still high $100, the buyers
benefited 20 times as much as the capitalists did.  The buyers
also got the benefit of the far better computers developed at the
capitalists' expense.  If someone it being ripped off by the
capitalists, it certainly isn't the computer buyers.

     And, as the infomercials say, there is still more.  Those
computers made possible by the capitalists also greatly increased
the productivity of many, if not most, workers.  This increase in
productivity resulted either in higher wages for workers or, lower
prices for consumers.  Either way they raised our standard of
living.

     If anyone owes anyone, the consumers who gained the
most owe the capitalists who invested.  But, no one owes
anyone.  The customers have already paid the capitalists their
profits. When the capitalists sold the computers they accepted
the sale price as payment in full.  The buyers owe nothing more. 
It might be nice if the buyers thanked the capitalists, or at least
quit cursing them.

     The capitalists weren't motivated by their desire to
provide thousands of dollars of benefits for computer buyers. 
They were motivated by self interest to seek the $100 or so of
profits.  The total profits may look out of proportion.  It is only
because a few investors reaped the profits while the much
greater benefits to consumers were spread among millions.

     Consumers benefit far more than capitalists from all
productive investments.  The great drop in computer prices only
serves to make the results more obvious.  Investment is merely
one example of how free people seeking to serve their own self
interest endlessly confer incidental benefits on others.  Investors
through the ages have lifted the human race from
hunter-gatherers to where we are today.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum

Is Liberty Justice?

     The mid nineteenth century French economist and
legislator, Frederic Bastiat, asserted "Liberty is justice."  The flip
side of his proposition is that without liberty justice is
impossible.

     Bastiat defined injustice as exploitation.  It was unjust for
any person to use force, threats and fraud to exploit another.  In
perfect liberty exploitation would be impossible.  No one would
force or trick another to act against his own self interest.  No
one would serve another when such service would be detrimental
to the server.

     Bastiat also recognized that we all endlessly seek to serve
our own self interest.  When two individuals voluntarily
cooperate with each other, each seeks to serve his own self
interest.  In liberty the result cannot be exploitation.  If either
individual believes the relationship does not serve his self
interest, he will choose not to participate.  In liberty the only
way we can enlist the cooperation of another is to honestly
convince him that he will benefit from the cooperation.

     Employees serve employers because the employees
believe they will benefit from the relationship.  Likewise,
employers serve employees to serve the employers' self interest. 
In the absence of liberty the slave serves the master because the
master says "Serve me, or I  will hurt you."

     The slave chooses to serve because without liberty the
slave believes it is in his self interest to serve and avoid the hurt
from the master.  The master exploits the slave.  Unless one
believes that exploiting slaves isn't unjust, the slave's lack of
liberty creates injustice.  In liberty there would be no slavery,
robbery, murder or rape.  If slavery, robbery, murder and rape
are unjust, Bastiat's claim that "Liberty is justice" is passing its
test.

     Bastiat considered numerous human interactions and
showed how in each case lack of liberty, and only lack of
liberty, created injustice.  To Bastiat, unequal distribution of
wealth wasn't automatically unjust.  Such inequality is unjust
only when it is caused by exploitation.  Exploitation always is
the product of lack of liberty.

     In liberty the only way one individual has more wealth
than another is if the more successful one produces more, or
receives more gifts.  Bastiat didn't believe that being productive
or receiving gifts was unjust.  He went to great lengths to
explain how the efforts of the more productive individuals often
benefited the less productive.

     If liberty is justice, anything that impairs liberty is unjust. 
That which advances liberty is just.  What does this say about
government?  Bastiat wasn't anti government.  He was a member
of parliament.  The main thrust of Bastiat's writing was criticism
of government's infringements on liberty.   These he believed
were unjust.

     When government defends the liberty of individuals,
government is on the side of justice.  When government
infringes the liberty of individuals, it is on the side of injustice.

     Liberty is impossible when individuals are subject to
threats of "Do it my way, or I will hurt you."  This creates what
at first may seem to be a paradox.  It is sometimes a defense of
liberty to threaten "Do it my way, or I will hurt you."

     Threatening would be robbers "Don't rob, or I will hurt
you" defends liberty.  Threats, and actions against aggressors and
fraudsters are defenses of liberty.  If such threats were
completely successful, the need for such threats would cease. 
Everyone would be living in  perfect liberty.  According to
Bastiat this would be perfect justice.

     In perfect justice we would still have to deal with the
consequences of living in an imperfect world.  We would deal
with those consequences through voluntary cooperation rather
than with threats and exploitation.  We would direct all of our
energy at improving natural conditions, rather than battling to
exploit each other.  This does make liberty sound like justice. 
The works of Frederic Bastiat deserve far more consideration
than they receive.  They can be downloaded free from
www.mises.org.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum

Who Will Exploit?

     Exploitation is the use of fraud, force and/or threats of
force to take something the owner wouldn't voluntarily give up. 
The "Occupy Wall Street" crowd protested that big business was
exploiting people.  Business people want to use as little effort as
possible while selling at the highest possible price.  They want
more for less.  Adam Smith observed, "People of the same trade
seldom meet together, even for merriment and diversion, but the
conversation ends in a conspiracy against the public, or in some
contrivance to raise prices."

     The temptation is always there for business people to use
fraud, force and threats of force to get more for less. 
Government, by use of its own force and threats, can stand in
the way and block business people from yielding to temptation. 
Government can, and does, use its force and threats to aid
business people who yield to temptation.

     Keep in mind that politicians are no more noble and
moral than business people.  They too want to gain as much as
possible with as little effort as possible.

     There are two ways businesses can get more for less. 
One is to charge higher prices.  The other is to pay less for
labor.  Material, equipment and supplies are the products of
labor.  Thus, paying less for these is paying less for labor.

     Workers also want to get as much as they can for a little
effort as possible.  The universal chant of the labor union
movement was, and still is, "More pay, less work."

     Essentially everyone in every capacity wants more for
less.  Given the opportunity, everyone is a potential exploiter. 
Any society based primarily on exploitation, rather than
production, doesn't have a bright future.  In the long term it has
no future at all.

     Give any group in society the power to exploit and it
will.  Government and labor will as eagerly exploit as will
businesses.  Even consumers will exploit if given the chance. 
They to want more for less.

     The purpose of production is consumption.  All
exploitation results in less  production at higher costs. 
Consumers bear all the cost of all exploitation.  Whenever one
producer-consumer gains by exploitation, other consumers lose.

     Consumers may directly exploit other consumers.  This is
the mission of thieves and robbers.  Forcibly taking from one for
another is always exploitation.  It doesn't matter whether the
exploiter is business, government, labor or consumers.  The end
is always the same.  Some consumers end up with less.  On
average everyone ends up with less.

     The biggest exploiter will always be the most powerful
one.  The weaker ones will seek to enlist the aid of the powerful
exploiter.  The powerful exploiter always needs the support of
others to maintain and increase its power to exploit.  Thus, the
weaker groups make deals with the powerful exploiter to get
assistance in their exploitation.

     If no one has the power to exploit, everyone is free to
peaceably produce and trade with everyone else.   Exploitation is
impossible in such an environment.  Do to natural limits on
production no one will have everything he wants.  Each will
have all that he is able to produce.  The effort not wasted on
exploitation will be used to produce more.

     Those who are the best producers will have the most. 
History shows that such fortunate producers commonly share
with the less fortunate, either by providing them with more
productive work, or out right charity.

     The important questions are: Who makes exploitation
possible?  How can we stop exploitation?  Business, labor
unions, and consumers have almost no ability to exploit without
the approval and support of government.  They are nothing more
than branches on the exploitation tree.  Cut off a branch and two
will grow back.  The only way to end exploitation is to dig out
its government roots.  Government is the mother of exploitation.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum

How Important Is the Concentration of Wealth?

     Savings and investment are essential for the increased
productivity that yields an increased standard of living.  To
increase productivity someone must devote his present efforts to
making tools and facilities that will allow workers to be more
productive in the future.

     The saver has to be one who produces more than he
needed for survival.  The person who can produce only enough
to survive can't save and invest, no matter how much he might
want to.  He would perish if he tried to save.

     For various reasons, some are more productive than
others.  Those who can produce more than enough to survive
have the capacity to save and invest.  By saving and investing in
tools and equipment these investors increase their productivity.

     They can also allow others to use the savings to increase
their productivity.  A successful saver may be able to provide
more tools than he can use himself.  He can let others use those
tools to increase their productivity.  He is likely to require the
beneficiaries of the tools to give a share of the increased
production to the investor.  This is certainly reasonable.  The
user of the tools gained from the productivity and thrift of the
investor.

     He who saves and invests thus can increase his savings
and investment.  In turn he can provide even more tools for
himself and others to use.  There is no natural limit on how long
or how much the productive savings and investment can continue
to grow.

     The users of the tools increase their productivity thus
gaining the ability to become savers too, if they want to.  The
faster savings and investment grow, the faster prosperity grows.

     Those productive enough to save and invest don't have to
save and invest.  They can simply use their increased
productivity to increase their immediate consumption.  If
everyone quits saving and investing, society will use up its
productive tools rather than producing more.  Inevitably,
productivity and the standard of living will collapse.

     With no investment, tools will wear out and disappear. 
Everyone will be back to eking out subsistence with his bare
hands.

     Suppose that those first savers had chosen to be
philanthropists rather than saver-investors.  They gave away their
wealth so that everyone had an equal share.  It is obvious that
some people are inclined to save while others are inclined to
spend as much as they can.  It is also obvious that a person
living on the edge of survival will be most likely to spend new
found wealth on increased consumption, rather than to save and
invest.

     Thus, equal distribution of potential savings will
inevitably decrease, or even eliminate savings.  It is undeniable
that for a time the recipients of the lost savings could live better. 
The cost of the lost savings will be paid in the future. 
Productivity and the standard of living will either not increase at
all, or will increase very slowly.  Everyone will remain poorer
than if the potential savers had saved and invested.

     Accumulation of wealth by those who will save and
invest is essential to the future prosperity and well being of
everyone.  The poor who have little to invest benefit more from
the increased savings of the wealthy than do the wealthy who
already are well off.

     A very productive person who spends, or gives away,
everything and saves nothing contributes nothing to increasing
productivity.  He is of no more value to future prosperity than
the poor person who doesn't save because he has nothing to
save.  There are good reasons for looking on wasteful
spendthrifts with disfavor.

     We should not look with disfavor upon those who earn
and invest millions, or billions, of dollars.  They drive the
increase in prosperity that benefits everyone.  Eliminate
accumulations of savings and investment and we will all be
headed back to a very dark age.

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Copyright 2013
Albert D. McCallum