Friedman stated that the only cases in recorded history in which the masses have escaped from gruelling poverty “are where they have had capitalism and largely free trade.”
It is a truism often stated by economists and politicians and widely accepted as true by the public. The question is: did the masses escape from gruelling poverty because of capitalism or in spite of it?
Dictionary.com defines Capitalism as an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations.
Capitalism is about ownership.; ownership that allows those who own and/or invest in, the means of production to benefit from their ownership and/or investment.
As to the distribution and exchange of the wealth produced, one needs to remember that capitalism is about ownership and that wealth distribution and exchange is based on ownership.
When it comes to those who do not hold ownership of the means of production capitalism does not care if those who labour to produce the wealth live in poverty. Indeed, by its nature capitalism and its emphasis on ownership creates barriers that serve to keep individuals relegated to poverty.
Repetition by economists, business, pundits and media that capitalism is responsible for the masses escaping grueling poverty has created a myth that people and politicians believe.
However, a thoughtful examination of history shows capitalism does not care about the distribution of wealth or income and is perfectly happy to make a few men extremely wealthy and powerful while workers labour and live in poverty.
Capitalism emerged in the 16th century . By the 17th century capitalism was well established with merchants coming to be economically dominant, in terms of finances and wealth.
By the period 1800 to 1843 capitalism had been around for 300 years. The economic and social conditions of the period were reflected in Charles. Dickens’s 1843 A Christmas Carol – poor houses, indentured servitude, slavery, child labour, rampant poverty.
North America’s transcontinental railroads are soaked in the blood of the Chinese and other labourers who built them. It is not simply that capitalism has no ethics, but that capitalism promotes a broad range of unethical behaviours in pursuit of increased income and wealth.
In the US in the late 1800’s early 1900’s John Jacob Astor, Andrew Carnegie, Jay Gould, Andrew W. Mellon, J. P. Morgan, William Randolph Hearst, John D. Rockefeller, Henry Huttleston Rogers, Charles M. Schwab, Cornelius Vanderbilt and others all achieved great wealth and prosperity while those whose labour built those fortunes struggled to survive.
It was only as corporations lost the ability to use violence against workers; only as organization by workers delivered votes and thus political power and influence; only as workers gained job protection and employment rights that workers in gaining access to a free labour market gained the leverage to receive a larger portion of the wealth resulting from their labours.
While capitalism may serve to increase the pool of wealth, the widespread prosperity cited by Friedman and others results from political and social changes that widen the distribution of income – and wealth.
That it was political and social changes that led to wider distribution of income and prosperity, that capitalism will make a few very wealth while most live and labour in poverty are not the only uncomfortable realities that the proponents of capitalism and the pursuit of income like to ignore..
There are non-financial costs and consequences such as the effect on the ethics and behaviour or the focus on the short term. Not that proponents don’t like to ignore financial costs and consequences as well.
At the time of Milton Friedman’s essay the US side of the Niagara River was lined with chemical plants increasing income by dumping their wastes into the Niagara River to reduce costs..
Billions of dollars and decades later the consumption of fish from Lake Ontario is limited because of the toxic pollution capitalism promoted. And the dumping of toxic waste remains a problem because the cost of proper disposal means there are savings and increased income to be found in the illegal dumping of toxic waste..
Perhaps the most dangerous aspect of capitalism that economists, business and proponents of capitalism ignore is Capitalism’s feral nature. Without restraints capitalism will turn on you, promoting behaviour that results in significant, even fatal, financial costs. .
Ronald Reagan’s slogan ‘set business free’ ignored that what business was being set free from were the restainst [laws and regulations] imposed by the US government during the Great Depression to prevent business from engaging in the behaviours that had setup and triggered the Great Depression.
Once set free of those restraints the resulting pursuit of increasing income left American taxpayers in debt to pay for the $750 billion cost to bailout the banking system.
An oft ignored uncomfortable reality is that economists, pundits, business all support laissez-faire capitalism – until capitalism needs a bailout or other financial benefits to continue to pursue increasing income at which point they find numerous excuses for intervention.
Capitalism is not a magic panacea of wealth and prosperity for all.
Despite the blandishments of economista and other proponents of unfettered capitalism, capitalism is neither friendly nor benevolent.
Capitalism is amoral, indifferent and has no ethics. It appeals to, promotes and reinforces the worst of human nature.
Capitalism is not some tame house pet. It will turn feral and turn on those who fail to recognize capitalism’s true nature. Through it’s pursuit of income and wealth it leads the unwary into behaviour that is self destructive and that creates economic pain.