Matt Ridley, author of The Rational Optimist, writes in a blog post that Capitalism represents the interests of the rich, whereas the market represents the interests of the poor. Let’s hear it for the market as the antidote to capitalism.
The market, when allowed to flourish, tears apart monopoly and generates freedom and fairness better than any other human institution. Today’s private sector, by contrast, is increasingly dominated by companies that are privileged by government through cosy contract, soft subsidy, convenient regulation and crony conversation. That is why it is producing such unfair outcomes.
[Read the whole thing]
With this, he obscures with the use of what Ayn Rand would call anticoncepts what would have otherwise been a decent article. What he is referring to as capitalism is actually cronyism or, as Michael Strong likes to call it, crapitalism.
Alternatively, he refers to the public and private sectors while creating a false dichotomy that should be reconsidered. The real divide is between voluntary relationships and coercive relationships. And when you bring capitalists closer to the political decision-making process, what you have is no longer the sort of voluntary exchanges in the realm of the market, but a guarantee to a businessman that would otherwise not survive while facing competition from other firms:
The monopoly problem mankind has to face today is not an outgrowth of the operation of the market economy. It is a product of purposive action on the part of governments. It is not one of the evils inherent in capitalism as the demagogues trumpet. (Mises, Human Action)
Markets are not enough for Capitalism
As Joyce Appleby, author of The Relentless Revolution, notes, “Capitalism is a cultural system, and not simply an economic one [...] it cannot be explained by material factors alone”. That’s precisely what Deirdre McCloskey is trying to tell us in her trilogy of books about the bourgeoisie (2 out of 3 published so far).
What Deirdre says is that there was a change in the minds of the people, in the way we thought about markets and commerce, and that this side of the story has been mostly ignored by the accounts of mere capital accumulation.
As she says:
Give the middle class dignity and liberty for the first time in human history and here’s what you get: the steam engine, the automatic textile loom, the assembly line, the symphony orches- tra, the railway, the corporation, abolitionism, the steam printing press, cheap paper, wide literacy, cheap steel, cheap plate glass, the modern university, the modern newspaper, clean water, reinforced concrete, the women’s movement, the electric light, the elevator, the automobile, petroleum, vacations in Yellowstone, plastics, half a million new English-language books a year, hybrid corn, penicillin, the airplane, clean urban air, civil rights, open-heart surgery, and the computer.
In short, if Ridley wants human flourishing via the markets, to have them operate without the “aid” of politicians and demagogues, he should advocate for Capitalism (with upper case, that’s right), and realize that despite that free markets have always aided people even when the former is absent, what we really need is to go back to valuing creative destruction, and to a proper understanding of the C word.
Hat Tips: Tom Palmer for his wonderful compilation in which Deirdre’s article is included / GIS for pointing to the article.