The Free Market As Utopia

January 8, 2009

[First published March 22, 2006] As a freedomist, I often despair of intellectuals ever seeing the free market as it really is. First, the name for it that has stuck like glue is “capitalism,” which immediately shunts perspective onto the track of wealth, huge corporations, capital formation, and such. In this view, the utopian nature and idealism of the free market is lost.

Moreover, through socialist polemics and constant mindless repetition, capitalism is portrayed as the incarnation of greed. You know how this goes. Entrepreneurs and business people are only out to make a profit, and economic competition as nothing more than capitalists climbing over each other to profit from the poor. This is viewed as he antithesis of economic system wherein each tries to help others and provide for their needs, rather than people trying to get rich at each other’s expense — an outlook that lies at the root of much leftist and socialist thought today. Even many that strongly support a free market, see greed as its driving force. This not only gives ammunition to the enemies of this freedom, but also mischaracterizes it altogether by reference to something that is an aspect of the system and not its central, psychological dynamic.

Imagine a utopia where people are highly motivated to provide services and fulfillment to others, usually total strangers. They see this as being in their own self-interest. Many of these people also spend sixty to seventy hours a week trying to provide such services. Also, imagine — unbelievable as it may seem — that in this utopia some of these people spend their life savings and borrow huge sums of money to discover or provide new things that they believe other people might want. That is, in this society the chief preoccupation of people is to satisfy the wants of others, or to determine how they might do this, and do so with the least expense to those getting the services or goods.

Such an unbelievable other-directed society does seem utopian. But if we could have such a society, would it not be inherently moral? Is this not the dream of many communitarians, philosophers, and theologians — that people spend their time, energy, and resources to provide others with what they need and want?

This utopia does exist. It is the free market.

Lawyers, doctors, teachers, intellectuals, writers, authors, journalists, movie stars, business owners, financiers, stockowners, and all other individuals making up the whole population comprise the free market, as do all large and small businesses. The automobile repair shop, the computer discount house, the Italian restaurant, the Chinese laundry, the small Catholic college, the mom and pop grocery store, and so on and so on, exist to give people a particular service. If this service is unwanted or the business charges too high a price, then it goes bankrupt. Moreover, entrepreneurs are constantly trying to invent new businesses or services that will fill some need or want not yet recognized by others. If no such want exists, or its fulfillment is not worth the cost, the businesses fail. Such working and striving to satisfy others is a moral ideal. Due to near 200 years of socialist misinformation and distortion, that this is the essence of the free market is widely unappreciated.

Of course, profit is involved, but in spite of socialists having turned this into an expletive, the idea is simple – people often do things for the benefits they receive, which may be monetary, but also may be love, prestige, power, and psychic satisfaction. Nothing evil, greedy, or exploitive about this. One can easily describe the “profit motive” of those on the left when they write their anti-capitalist or anti-American polemics, although through their control over the major media and the educational institutions, they have managed to identify capitalism as uniquely driven by a profit motive.

And what is not much taught or much discussed is how we all have immeasurably benefited from a technological revolution that began in the eighteenth and nineteenth centuries, one that was really a revolution in freedom. As government loosened its stranglehold on national economies and foreign trade, as it allowed creative and enterprising people to produce new things, there was a surge in new inventions, new businesses, and the earnings and wages of the poor. Before this revolution, laws tied workers to a farm or manor and forced them to live the most basic and poorest of lives. They often faced the threat of starvation if a harvest was meager, if they lost or broke their tools, or if they were dispossessed of their land by the government or feudal lords. They wore the most basic and plainest of clothes and ate the simplest and cheapest food. The revolution of freedom liberated the poor from this kind of servitude, assured them of a basic wage, and enabled them to improve their consumption. Much to the complaint of the upper classes, which saw this as “putting on airs,” the poor began to dress in better, more colorful clothes, and to eat a greater variety of foods.

Just consider how freedom promotes a continuous reduction of the cost of goods compared to the average wage, such that even the most complex and advanced products are available to the common person. An example of this is the rapid evolution of the handheld calculator.

When I was a graduate student working on my M.A. thesis in 1960, I had to calculate statistics on a large Monroe mechanical desktop calculator. I had to punch the numbers into it, move some switches to do a specific calculation, and physically crank it (like starting an old car) to get the results. By computer standards today, this Monroe was painfully slow and clumsy, but it was still better than doing the arithmetic by hand. I could calculate sums, cross products, and correlations, but it took me about two months and a sore arm to do all the necessary calculations. My university paid about $1,100 for the machine then, or about $6,408 in current money.

By the early 1970s, I could pick up a handheld Hewlett Packard electronic calculator that would do all these calculations and many more, such as logarithms and trigonometric functions, store one figure or calculation in memory, and function on a small battery. It cost about $400, or about $1,709 in today’s dollars.

Now I can get such a handheld calculator for $10; paying slightly more will get me a calculator that will do much more than the obsolete Hewlett Packard. And for about $900 I now can buy a personal computer — for example an iMac with monitor, keyboard, modem, CD drive, and an internal hard disk — that has a capability undreamed of a mere decade ago and on which I could have done all the necessary calculations for my M.A. thesis in seconds, not months. This is comparable to the free market, through innovation and competition, bringing the price of a new automobile in 1960 down to the cost of a new shirt today — which makes one wonder what the price of an automobile now would be without any government regulations on its production and quality.

I did my Ph.D. dissertation on the Northwestern University mainframe, a central IBM computer worth tens of millions of dollars in current money. It had a memory of 36 kilobytes and filled a huge, air-conditioned room with its blinking lights, spinning tapes, massive central processor, very slow printer, batch punch-card input, and bustling attendants. The whole atmosphere of computer, lights, air-conditioned room, and all the rest created a feeling of almost spiritual mystery. To use this monster, I had to learn to write my own computer programs, and to change some of its functions I had to rewire part of the computer. That was in 1962 and 1963.

Today I sit before a flat seventeen-inch color monitor connected to a new Macintosh G5 that has one gigabyte of memory (nearly 28,000 times the memory on the mainframe), a 28.5-gigabyte hard disk, a DVD-rewritable drive, a cable modem, and a color printer. The total cost of all this was about $3,500. Incredible power at an unbelievably low cost compared to what I could have bought only one human generation ago. This is the fruit of people being free to search and think of ways they can satisfy the needs or desires of others, and to invest their time and resources in trying to do so.

Link of Note

”A Shiv in the Back: How politicized college courses mangle education” (10/6/2004) By Bruce Thornton

A review of Ben Shapiro’s Brainwashed: How Universities Indoctrinate America’s Youth.

Among other comments on the leftist nature of the American university, note this:

On issue after issue—tax cuts, liberal media bias, “social justice,” and the general evil of stupid conservatives and Republicans—the University speaks with one mindless voice, repeating clichés and stale progressive ideas with nary a nod to any opposing viewpoint.

This numbing orthodoxy partly results from old-line Marxist received wisdom that, despite being repudiated by history, lives on in the groves of academe like some wood-boring beetle. Despite its success at creating wealth for vast numbers of people, capitalism is condemned for increasing poverty and income inequality. For example, a tenured professor at the University of Texas calls capitalism “‘a system based on exploitation and domination and racism and war — and lots of other things.'” An article assigned in a geography course — yes, geography — at UCLA stated that free-market capitalism “‘do[es] not have a good track record in feeding people, nor in tackling the underlying structures of poverty which consign over one quarter of the world’s population to hunger.'” As compared to what other economic system, one might ask? “Last time I checked,” Shapiro responds, non-market systems “had starved twenty million people in the USSR, thirty million people in China, and millions more throughout the world.” This disconnect between ideological bromides and the simple facts of history, evident in the presumed bastions of critical thinking and factual accuracy, should disturb us all.

The Solution to Mass Poverty

December 12, 2008

[First published May 24, 2005] Lately in international organization circles, there has been much to do about poverty, with some sad facts being focused upon (from the Guardian Unlimited link here):

One third of deaths – some 18 million people a year – are caused by poverty.

An estimated 600m children live in absolute poverty. Every year more than 10 million children die of hunger and preventable diseases.

Income per person in the poorest countries in Africa has fallen by a quarter in the past 20 years.

More than half a million women die in pregnancy and childbirth every year – one death a minute.

Clear to all is that the effort to ameliorate the conditions of the poor in one country after another has failed. In the resulting soul searching, especially at the World Bank that has been in the forefront of this effort, a reevaluation of their approach to poverty concludes that they have placed too much effort on lessening poverty, rather than fostering economic growth, an increase which, to invent an expression, will lift all boats.

Still, as I go through the articles on this, one thing is missing, which is the real solution. Look again at Table 4.1 and its plot in Figure 4.1 that I showed in a previous blog:

Table  4.1
Figure 4.1

Note the strong relationship between measure of poverty (HPI) and human development (HDI), and the internal freedom, really the liberal democraticness, of a country.

The degree to which a country is free is strongly related to its economic freedom, which in turn is inversely related to the impoverishment of its people. And the theoretical reason for this is well known among free market economists, so there is theory and fact and fact for this solution.

So, why don’t the international organizations get it? To push economic solutions, to focus on poverty, is accepted internationally even by the mass of dictators that benefit from the poverty-development give-aways, and the periodical forgiveness of their debts (we are due for another round of the fleecing of the taxpayers of the democracies). And to focus on poverty and development to lessen mass poverty is compassionate and objective. But, to focus on democratic freedom . . . . well, now, that is . . . being political and internationall partisan, you know. And where is the profit for dictators in that?

Link of Note

”World Bank failing to reduce poverty in poorest countries” (5/20/05) Financial Express

The article says:

The World Bank, the largest financer of projects in developing nations, is failing in its mission to reduce poverty in the poorest countries by paying too little attention to boosting economic growth, an internal audit found.

In the past 15 years, the bank put too much emphasis on social development and cut spending on bridges, dams, pipelines and other projects that have a more dramatic impact on economic growth, according to the report, obtained by Bloomberg News.

The World Bank’s model to fight poverty in the poorest of nations had, in practice, paid insufficient attention to fighting poverty growth, the 115-page report said. “Without growth, no sustainable poverty reduction is likely.”

There is nothing on democracy or freedom in the article. And I’m afraid this refocus on growth will mean more grants to the dictators, and a recycling of the international forgiveness of their debts in order to facilitate growth. Heavy sigh.

Democratic Peace