Capitalism is the supreme expression of human creativity and freedom, an economy of mind overcoming the constraints of material power. It is not simply a practical success, a “worst of all systems except for the rest of them,” a faute de mieux compromise redeemed by charities and regulators and proverbially “saved by the New Deal.” It is dynamic, a force that pushes human enterprise down spirals of declining costs and greater abundance. The cost of capturing technology is mastery of the underlying science. The means of production of entrepreneurs are not land, labor, or capital but minds and hearts. Enduring are only the contributions of mind and morality.This is a read it all article - particularly if one finds themselves frequently debating those who like to run down capitalism while profiting from capitalism because it doesn't fit their political ideology - or their definition of 'fairness' and fulfilling 'social justice'.
All progress comes from the creative minority. Under capitalism, wealth is less a stock of goods than a flow of ideas, the defining characteristic of which is surprise. Creativity is the foundation of wealth. As Princeton economist Albert Hirschman has put it, “creativity always comes as a surprise to us.” If it were not surprising, we could plan it, and socialism would work. Joseph Schumpeter propounded the basic rule when he declared capitalism “a form of change” that “never can be stationary.” The landscape of capitalism may seem solid and settled and something that can be captured; but capitalism is really a noosphere, a mindscape, as empty in proportion to the nuggets at its nucleus as the expanse of the solar system in relation to the sun.
The first edition of Wealth and Poverty (1981) sprang from a period of essentially balanced budgets and trade surplus under Jimmy Carter and helped launch a siege of deficits and trade gaps under Ronald Reagan. During the Carter years, the government was mostly in the black while everyone else was in the red. Under Reagan, though, the trillion-dollar rise in government liabilities was dwarfed by a $17 trillion expansion of private-sector assets thanks to creative entrepreneurs. Over the decades following the Reagan revolution, government liabilities continued to expand, but once again private-sector-asset values increased, by $60 trillion more. Only over the past ten years or so have liabilities risen faster than assets, which have crashed. Improvements in policy and tax rates can instantly upgrade the value of all the assets in the economy without any physical change in their material composition.
The key issue in economics is not aligning incentives with some putative public good but aligning power with knowledge. Business investments bring both a financial and an epistemic yield. Capitalism catalytically joins the two. Capitalist economies grow because they award wealth to its creators, who have already proven that they can increase it. Their proof was always the service of others rather than themselves.
As Peter Drucker has written, within companies there are no profit centers, only cost centers. Whether a particular cost yields a profit is determined voluntarily by customers and investors. Capitalism feeds on information that is outside of the company itself and therefore under the control of others. Only an altruistic orientation can tap the outside incandescence of information and learning that determine the success of capitalism’s gifts.
It highlights the fundamental choice we have this election - one between a vision that is based on central planning and central control or one that is based on creativity and uncertainty that is inherent in a capitalistic society where things are 'messy' - but award wealth to their creators which in turn encourages and fuels other creators.
In the immigration boom of the late 19th and early 20th century, the vast majority of those who came to this country did so with little real assets. They came with a desire to embrace the American vision / dream. Their creativity, work ethic, and embracing of traditional American values was what brought them, or their children out of the poverty they were in when they arrived, and fueled a massive expansion of the middle class.
The second great economic boom of the 20th century, in the post-World War Two area, millions took advantage of a true rarity - a government program that was an unqualified success - the GI Bill. While many chose to continue to work in traditional fields, others went to college and helped create / fuel more success aligning power with knowledge and creativity. The middle class of this country expanded once again - impeded in the latter half of the 20th century only by the efforts of politicians to 'control' and 'centrally manage' results in the name of the 'Great Society'.
By the 1970's, our President was saying that America's best days were past and we were caught in a 'malaise'. But another President, unwilling to accept this, provided a new spark with optimism, confidence, and changing policy and tax rates to launch another major boom - one which continued until our current President effectively killed it with his economic and political policies around 'fairness', 'social justice', and centralized planning / picking 'winners and losers'.
A generation beyond the 1970's, we find ourselves caught back in a similar boat. Will we, as voters, choose to follow the direction of the 1980's which launched nearly three decades of growth and expansion or will we choose to double down on the policies that run contrary to capitalism and unique American values / dream?