Heroes of Capitalism

I enjoy many good blogs, many of which are represented on the "My Reading" list that appears on the right side of this blog page. However, I want to draw attention to a great new one I discovered, "Heroes of Capitalism." Each day this blog features a businessman who improved our lives. Actually, the last part of that sentence is redundant because a successful businessman in a capitalist economy always improves our lives by creating goods that we value and purchase from him in trade.

The businessmen cited so far range from the well-known (Henry Ford and Steve Jobs) to the obscure (James Wright and Peter Hodgson, developers of "Silly Putty"), but all of them are benefactors to man. We can all thank them and have already done so, simply by purchasing and using their products, but this website goes further by publicly acknowledging their achievements.

Men like this need to be recognized. They are the "human face" of capitalism, the social system that frees them, and all of us, to produce. If I stop to think about it, nearly every second of my life I am using one of their products and my life has been made healthier, happier, longer, and full of great enjoyable things as a result.

Thank you, businessmen, and thank you to the producers of "Heroes of Capitalism" for bringing their good work to the attention of the world.

Bush Is No Champion of the Free Market

Bush Is No Champion of the Free Market

November 14, 2008. Reprinted with permission from the Ayn Rand Institute.

Washington, D.C.—In a recent speech on the financial crisis, President Bush said, “If you seek economic growth, if you seek opportunity, if you seek social justice and human dignity, the free market system is the way to go.”

According to Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “It’s true that free markets are the source of economic prosperity and individual liberty—but President Bush, while he may pay lip service to free markets, has been a consistent opponent of them.

“Did Bush abolish the countless regulations and controls strangling businessmen? No. But he did sign into law Sarbanes-Oxley—the largest expansion of business regulation in decades. Did Bush consistently push for free trade? No. But he did give us a new steel tariff. Did Bush attempt to roll back America’s massive welfare state? No. But he did pass the prescription drug benefit, the largest new entitlement program since Lyndon Johnson’s Great Society. Did Bush curtail government spending? Far from it. Bush presided over an unprecedented increase in the federal budget: from $1 trillion at the time he took office to more than $3 trillion today. This is to say nothing of Bush’s response to the financial crisis. He has completely evaded his administration’s responsibility for the Fed and housing policies that created the housing bubble. Instead, he has led the chorus blaming the market and calling for unprecedented handouts, bailouts, and nationalizations as the cure.

“If Bush is a friend of the free market, who needs enemies? By praising the free market while systematically undermining it, Bush has done more to discredit capitalism than any open critic could. Like a con artist who undercuts the reputation of Mercedes by selling lemon look-alikes, Bush has now led people to associate his failed policies with capitalism. That association needs to be erased. We must make it clear: Bush is no friend of free markets.”

Ignorant Billionaire Fashions Noose

Karl Marx once said, “The last capitalist we hang shall be the one who sold us the rope.” Bill Gates has been selling long stretches of that rope lately. In his speech today at the World Economic Forum, a gathering of leading businessmen, politicians and aid officials, Bill Gates said, “We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well.” He went on to exhort fellow business leaders to devote their personal time and energy to finding ways of helping the poor.

Admittedly, Gates calls on executives to serve “a twin mission” of “making profits” while simultaneously “improving the lives of those who don’t benefit from market forces.” Just how businessmen are to make profits in regions, such as the Third World, that have essentially outlawed market forces is not explained.

Gates’ premise in these statements is that capitalism serves only the rich. Moreover, capitalism, on its own, is incapable of benefiting the poor.

This premise is dangerously wrong. A clear-headed reading of economic history, a clear understanding of economic science and, most importantly, a proper understanding of philosophy, will prove the correct point. Economic history tells us that capitalism is the only system that radically lifted the standard of living of the poor, such that today’s poor in Western, industrialized, semi-capitalistic countries are far wealthier than even the rich of the Middle Ages or ancient times. Their lifespans have more than doubled, they have comforts such as air conditioning and heat and entertainments such as television and the Internet that no one could have imagined in ancient times. These advances did not materialize out of thin air. Rather, they were the result of capitalists who made billions by inventing and selling the life-enhancing and labor-saving devices that improved human lives, such as vaccines, mass-produced automobiles and food, and electricity. High on this list is the benefit of mass-scale, low-cost computing that Bill Gates himself helped to pioneer.

Economics tells us that all wealth must be created by profit-seeking businessmen, or at the very least by self-interested individuals pursuing their own benefit. Without profits, businessmen lack both the incentive and the means to create. Factories are not built out of thin air, nor are salaries paid out of thin air. The accumulated capital borne of profits pays for the creation of factories and the goods those factories produce.

Bill Gates is also ignorant of philosophy. Philosophy teaches us that certain conditions are required for men to exert the effort required to produce goods. Specifically, production depends on having secure property rights, which means the right to make an unlimited profit. Together, philosophy and economics teach us that one man’s gain is another man’s gain, if everyone deals with each other through the principle of trade. This means that no one can use force to steal the wealth of another. Underpinning the right to property and the principle of trade is every person’s right to his own life, which means the right to use his own mind to produce the things he needs, without interference from others.

Bill Gates is not explicitly calling for stealing the wealth of the rich in order to give it to the poor. He hopes, somehow, that businessmen can serve “a twin mission” of “making profits” while simultaneously “improving the lives of those who don’t benefit from market forces.” But isn’t that what businessmen already do today, at least to the degree to which countries respect property rights and allow them to earn a profit?

What Bill Gates is calling for, without explicitly naming it, is for businessmen to give away their wealth and personal energy the way he has to corrupt Third World countries where it is all but impossible to earn a profit. Where businessmen can serve the twin masters of making a profit and helping the poor, they are doing it already. They do it simply by selling their goods for a profit. Isn’t that what Coca-Cola or McDonald’s or Microsoft (to name three products widely enjoyed by both the poor and rich in Western societies) are already doing in Europe, the United States and Japan?

Capitalists are not selling products in Africa because they are subject to the arbitrary vagaries of dictatorial governments that will steal their wealth at every opportunity. They will steal their wealth through arbitrary and confiscatory taxation, nationalizations, inflation and, endemic throughout the Third World, Mafia-style extortion and bribery demanded to do business. Property rights are an unheard-of concept in the Third World. They are violated every day, egregiously, with one consistent result: massive poverty and frequent episodes of death due to disease, starvation and mass murder.

The only cure for all this is one thing: capitalism. But capitalism is what Bill Gates is setting out to destroy whether he intended to or not. Bill Gates is destroying capitalism by smearing it with the Marxist falsehood that it only serves the rich and does not help the poor. Bill Gates cited a laundry list of books that have influenced him, some of which are quite good, such as the writings of the economists Adam Smith, Julian Simon and Hernando de Soto. However, the one author who best explains the roots of capitalism, and therefore the roots of prosperity, is the one not mentioned: philosopher/novelist Ayn Rand. I would commend to him, at a minimum, her novel Atlas Shrugged, and her collection of essays, Capitalism: The Unknown Ideal, if he wishes to learn what it truly takes for individuals and societies to become wealthy.

What Bill Gates doesn’t get is that wealth is only created through the productive efforts of businessmen. Businessmen and everyone who benefits from their products – i.e., all of us -- need capitalism, the system based on the recognition of the right to property and its root, a man’s right to his own life. Bill Gates just doesn’t get it, and the world is poorer as a result.

The Businessman's Hall of Fame

The New York Times, without intending it, has published the businessman's hall of fame. By ranking these great business figures in order of the wealth they created, the NYT has allowed us to honor the greatest businessmen of the past 200 years, ranked by the measure of their achievement.

Wealth is the measure of the businessman, for what is wealth than the measure of the value of the products he has made? Wealth comes from profit, which is the difference between value received for a product less the cost of manufacturing it. If consumers everywhere pay more for the personal computer or the Model T Ford then it cost to make it, that difference is an objective measure of the value created. If the product is so popular that millions of PC's and Model T's are sold, then millions of customers have benefited from the entrepreneurial ingenuity of the businessmen.

I honor the wealthiest businessmen. They are those who have created the most beneficial, useful, enjoyable products that all of us enjoy. Hats off to Bill Gates (the 5th wealthiest) and Warren Buffett (the 16th wealthiest), for making the software for the fabulously useful personal computer on which I am writing this, and for providing capital to America's most efficient companies, respectively. Hats off to John D. Rockefeller, the leader of the Hall of Fame, who created the modern oil industry, the seminal industry that continues to fuel our industrial economy.

Hats off to all of the Hall of Famers. In a future world, we will see sculptures of your figures in a real world Hall of Fame. Schoolchildren will learn your stories, and emulate you, and some of them will add themselves to your august glory.

[Hat tip to NoodleFood for the link to the New York Times article.]

The One Minute Case for Unrestrained Profit

PROFIT IS THE ENGINE OF PRODUCTION

Restraining profit by taxing it or limiting it has the effect of limiting production. Restraining profit means an economy will produce fewer goods, of less variety, and at higher price. Innovation suffers. As a result, to the extent profits are restrained, all consumers suffer. Profit drives production in several ways:

PROFIT IS THE INCENTIVE FOR PRODUCTION

The profit motive is the supreme motivator of productive business activity. The creativity of scientists, the entrepreneurship of businessmen, and the resourcefulness of financiers are all motivated, in whole or part, by the pursuit of profits.

PROFIT PROVIDES THE MEANS OF PRODUCTION

Profits and savings are the ultimate source of the investment capital (money) that finances construction of factories, research laboratories, distribution centers, ships, warehouses, and all of the equipment that is used to invent, produce and distribute the goods that we consume. To restrict profits is to deny a source of capital necessary for production.

PROFIT DIRECTS CAPITAL TO THE PRODUCTION OF GOODS MOST URGENTLY WANTED

The highest profits are earned by the businessmen who can supply the goods most wanted by customers. iPods, portable generators after a hurricane, personal computers, fashionable clothes, and all of the goods consumers want most, are made by those who make the greatest profits. The profitability of an enterprise is the ultimate measuring stick of how well it has satisfied its customers. A money losing business is either making products consumers do not want or charging too much for them.

PROFITS RESULT IN EVERYONE'S GAIN

Profits do not come from the net loss of anyone. On the contrary, profit results from the creation of goods that people voluntarily buy in the marketplace. A businessman who makes a huge profit makes things that are good enough that many people want them and willingly buy them from him.

PROFIT IS PROPERTY

Profits are the property of the shareholders and other investor/owners of the business. Restricting or taxing profits is not just impractical, but is theft.

HONEST PROFITS ARE AN ESSENTIAL FEATURE OF CAPITALISM

A profit honestly earned in a capitalist society is beneficial and good for all. Profits must be distinguished from the money a businessman might get because of special governmental favors, such as tariffs, regulations or subsidies. These interventions are contrary to capitalism and allow some businessmen to gain at other people’s expense. Their gain is not profits, but a form of theft.

Further reading

• Capitalism: The Unknown Ideal by Ayn Rand
• Atlas Shrugged by Ayn Rand
• “Profit and Loss” by Ludwig von Mises

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I published this on an interesting new web-site called The One Minute Case. It has a clever premise. State a case on various topics succinctly, and provide suggestions for further reading. I liken it to a Wikipedia for busy capitalists. I wish it success, with many new entries and readers.

To the Moon and Beyond, the Capitalist Way

As laudable as the goal of going to the moon is in and of itself, going there should not be the task of government. Remember that the tremendous resources consumed by the moon effort were resources taken (i.e., stolen) from every American. Nothing justifies theft of property, especially if it is by the government. As for whether we would go the moon or Mars or another star strictly through private enterprise, we would... if there was a profit in it. That is the only way we should go there because if there is a profit, that means there is a net creation of value. A simple definition of profit is simply that the benefits exceed the costs. What is left over is profit. So, if the benefits of going to the moon exceeded the considerable costs, it would be profitable and private enterprise would do it. Finally, on a practical level, observe that the principle of bureaucratic wastefulness that applies to all government efforts even applies to our space programs. Today, private entrepreneurs are developing space vehicles at tiny fractions of the cost of the Space Shuttle or the Saturn V rocket. These are innovative designs, quite different than the rocket technology used by NASA which is not that different from the German rockets developed in World War II by Werner von Braun. I am fully confident that if simply left alone by the government, private, for-profit companies will exploit the solar system for tourism, materials production and sheer exploration. Government can stay out of the way by eliminating silly FAA-type restrictions on rocket flights, reforming the courts to prevent specious lawsuits that retard technological innovation (e.g.: asbestos paranoia), and simply reducing spending and taxes so that the money is there to finance something as glorious as space flight. On a personal level, I intend to be a space tourist. I am glad that I am likely to see a vital (private, for-profit) space tourism industry emerge in my lifetime.