:: Some thoughts... ::

:: Wednesday, October 09, 2002 ::

Unfair: (Moral Case for Capitalism Part II.)

This is the most oft cited charge against Capitalism because it incorporates so many complaints and appeals to an innate sense of fairness that everyone should be given a chance. As my Dad used to tell me, when I would complain about things being “unfair,” life isn’t “fair.” First, we must answer the question of what is meant by the word fair. The critics of Capitalism use it to mean that everyone should be equal. In other words it’s not “fair” that person x has more than person y. This is precisely the position that Karl Marx and later Vladimir Lenin took. It wasn’t “fair” to them that owners of capital as they termed them were richer than the “proletariat.” The proletariat was used as a fancy term for industrial workers. In the last presidential campaign, Al Gore echoed the same theme with his “people vs. the powerful” rhetoric. Fairness can best be described as applying equal standards to all people regardless of any other factors. This eliminates any chance of special treatment or a singling out of a certain person or persons. That would be fair. Capitalism does this, communism does not. In a free market the salary paid to a certain worker is the product of a multitude of things. It combines the heads of at least 2, if not thousands, even millions of people. The salary that a worker is paid is inevitably a combination of all these separate decisions. It is the decision of the worker to determine the minimum amount he is willing to accept in exchange for his time. Also, his prospective employer determines the market rate for a similar set of services from the other workers and determines the maximum the employer is willing to pay the prospective worker. In other words, it is a freely entered into contract. Unfairness may be many things but it is not a contract of exchange that is freely entered in to. Alternative forms of economic organization have led to amazing inequities as resources are not distributed or able to be distributed on free contract basis. This is generally readily conceded except by dyed-in-the-wool communists. Absent the true believers most people recognize this is as so. This brings us back to Capitalism. Capitalism, especially the American variant is criticized for the extremities of income distribution. This is what is oft cited as unfair. It is said that the factory worker works extremely hard yet is hardly compensated compared to how hard he works. In comparison the CEO makes millions and has a “cushy” job. This is offered as being self evidently “unfair” without further need for argument. That is certainly a lazy argument. There is no reason to think that people should all be compensated the same. This is what the communists attempted. The work of a janitor had the same value as a heart surgeon. This is the logical end result of the argument that states that CEO wages are unfair. Society places different values on the services and labor of various people. A sports player it could be argued is not worth millions of dollars a year, but we as a society certainly pay enough to bear his salary. Also, remember that salary is based upon the value the employer expects to add as a result of a given employee’s service and how replaceable that employee’s services are. The problem with the communist system of paying people was that no one would want to become a heart surgeon because the reward was not worth the effort. In the Capitalist system incentives exist for people to work hard and innovate. People are rewarded on the basis of their previous work (demonstrates capability and work ethic) and learned skill. There are relatively few heart surgeons and they provide a relatively valuable service (extending lives), hence they are compensated relatively more than factory workers. Factory workers have generally lower or easily taught skills, and there is many more of them. This serves to drive down the wages of the factory worker. There is theoretically nothing stopping a factory worker from bettering himself and becoming a heart surgeon. The opportunity cost may be greater for someone from a relatively poor family, but the opportunity still exists. In sum, there are two main issues relating to unfairness. Certain occupations are not judged to make enough. This is a subjective opinion based on purely the speaker’s feelings. The market in a Capitalist society combines many such feelings together to create an “average” wage for a given occupation. The saying says two heads are better than one, so it should follow that a million are better than one. A subjective opinion is not grounds to declare the unfairness of capitalism, or anything else because your opinion is as valid as any other. The market in a Capitalist system is very eglatarian as it takes into account many different opinions. As always, if you are employer feel free to pay more than the market wage to your employees. Capitalism provides that choice. The second argument is an extension of that. Unfair is a very subjective word. Capitalism by compensating people relative to the value they create for society as a whole, creates a system that rewards hard work. In a sense people are paid what they are worth. Worth is not based on the decision of one individual but of a thousand or millions. Also, remember that the person who enters into an employment contract with the employer does so willing at a wage they feel to be worth their time. Of course, feel free to disagree, but remember have an argument, not just that it is “unfair” because that is no argument at all. Capitalism therefore is moral in this case because it seeks to empower as many people as possible in the decision making process. What could be better?

EMAIL ME
:: Nathan 4:28 PM [+] ::
...

The Moral Case for Capitalism

The great debate on the left centers around (sadly it still does) on the question of whether Capitalism is moral. Many kind hearted people argue that we should be protected from the “ruthless”, “Darwinian,” or name your cliché, market. Kind hearted they may be, but most certainly they are either incompetent (if they should know better), willfully misleading (for whatever purpose) or they don’t truly understand what capitalism is. Most people from my experience lack a good understanding of what Capitalism is or at least ideally what it should be. Capitalism is blamed for all manner of ills and evils. The claimed symptoms betray fundamental misunderstandings of both the capitalist system and morality.
Capitalism at its very roots is about allowing people the freedom to make the choices that suit them the best. In other words, Capitalism as an economic system seeks to give the people within the system the freedom to choose without constraint. Some may argue with this definition but remember I am not arguing about what it exists currently, but what should ideally exist. It is also a simplistic definition as it does not get into the nature of money, interest rates and all the other complexities that have arisen over the years. At its very primeval root, Capitalism is about choice. Capitalism believes that people understand themselves the best and should be free to make choices in that regard. In contrast, the other systems that have been dreamed up all seek to restrict choice and impose limits, often coercively on these choices. Capitalism is moral because it empowers the individual to make the choices that make them the happiest. Without getting further into debates about moral limitations to freedom, of which this author believes there are, trade in goods and services should be free from restriction. Most reasonable people can accept that Capitalism is about freedom of choice but inevitably a “special case” objection will come up. In the following I will attempt to address some of the major “special case” objections:

Objections to Capitalism:

Exploits the poor: This objection arises when talking about the free movement of goods across national boundaries. To understand this statement, we must first understand what exploiting or exploitation means: According to the dictionary, exploitation is “the utilization of another person or group for selfish purposes.” This fits perfectly with the anti-capitalists idea that corporations are unseemly, even evil entities that are extremely selfish. Tomorrow you will go to work (if you have a job) and you will expect compensation for your hard work. Instead, I propose that you donate your time to your company in the interests of being unselfish. I hardly think that anyone would take that offer up, for our time is value and we exchange our time and labor for a paycheck. The paycheck represents what we as workers desire for a given amount of time and effort and what our employer is willing to give up for our time and effort. In general we may not be happy with our salary but it represents the best deal we can get and in reality since we are working as part of a freely entered into agreement it was we are willing to accept for our time and effort. In the same sense, the “poor” person who happens to live in Mozambique, Indonesia or some other place is faced with the same choice. That person in Indonesia feels that working in a shoe factory is the best and most rewarding use of their time. Why then, does the anti-capitalist feel the need to interfere and try to decide what is in the best interest of the fellow working in Indonesia. It is a conceit of the highest order, not to mention an interference in the personal choice of Indonesian to work and obtain the best exchange for his time. Presented in this light, the problem of the “exploited” worker seems to be no problem at all. He is also “exploiting” the company for which he works. The other flip side to thist, is what I term the Jaguar and Ferrari argument. What I mean by that, is the person who feels that the poor Indonesian is “entitled” to a Jaguar and a Ferrari. It is an idealistic, pie in the sky argument that is at its root rather preposterous. I answer, yes it would be nice if we could all have Jaguars and Ferrari’s, but then they wouldn’t really mean anything. Value, you see is relative… well more later..

:: Nathan 4:31 PM [+] ::
...