by Jim Powell at http://www.cato.org/publications/commentary/why-there-is-no-human-progress-without-capitalism
President Obama is on the warpath, attacking
capitalism, but Republican candidates haven’t offered much of a
counter-attack. This is a bit of a mystery, since the case for
capitalism is overwhelming.
For thousands of years, there was virtually no such thing as human
progress. The great French historian Fernand Braudel observed, “Peasants
represented immense numbers of people, the vast majority of human
beings... constant poverty... For century upon century, clothing
remained unchanged... the general rule was changelessness.” In Europe,
peasant possessions were generally limited to little more than a shirt, a
pair of pants, perhaps a simple jacket, a bench, a table and a
straw-filled sack that served as a mattress. In India, there were hardly
any chairs or tables to be found. There were few chairs in Islamic
lands. Multitudes perished because of famines — France alone had
hundreds of famines before 1800. Famine undermined the ability of people
to resist common deadly diseases like typhoid fever, purple fever,
whooping cough, sweating sickness, diphtheria, smallpox, influenza,
syphilis and the plague.
Capitalism, as economic freedom is often called, has changed the
world for the better by harnessing individual self-interest — the most
reliable motivator there is. In markets, functioning without subsidies,
special favors or bailouts, entrepreneurs have had powerful incentives
to provide what consumers want.
Markets, cities and civilization arose along trade routes where it
was convenient for people to gather, such as on rivers or a coast.
“Markets,” Braudel declared, “endlessly worked on economies, stirring
them up, bringing them to life.” Historian Will Durant added that “Trade
was the great disturber of the primitive world.”
In many places, local people used common property for grazing, but
they didn’t have any incentive to improve common property, since
somebody else would gain at least part of the benefit. Then in England
during the 1700s, higher grain prices led property owners to begin
enclosing common property. In many cases, local people received cash
settlements. In other cases, common property was enclosed by act of
Parliament, and the affected local people were often angry. But once
land was enclosed, owners had incentives to improve it, because they
would benefit. They drained marshes, grew more crops, built walls and
erected buildings including houses for laborers who worked on their
property. Agricultural output went up, helping to banish famines.
Meanwhile, the Industrial Revolution gained momentum with the
development of English textile mills. Entrepreneurs produced not
luxuries for the rich but cheap cotton clothing for the multitudes. This
made possible improved sanitation, since people could wear one set of
clothing while they washed the other set. Most important, England’s
population was increasing rapidly, and without the Industrial
Revolution, millions would have starved, as happened in rural Ireland
during the 1840s. “England was delivered, not by her rulers,” historian
Thomas S. Ashton wrote after World War II, “but by those who, seeking no
doubt their own narrow ends, devised new instruments of production.
There are today on the plains of India and China people plague-ridden
and hungry, living lives little better, to outward appearance, than
those of the cattle that toil with them by day and share their places of
sleep by night. Such Asiatic standards, and such unmechanized horrors,
are the lot of those who increase their numbers without passing through
an Industrial Revolution.”
But aristocratic landowners weren’t happy, because textile mills
created jobs that attracted large numbers of people away from farm work
on their estates. The original smears against capitalist factories were
made during the 1800s by English aristocrats and later picked up by
socialists, much as we are now beginning to see Obama campaign
strategists relish the prospect of exploiting recent Republican swipes
at capitalism.
Capitalist entrepreneurs created stupendous numbers of jobs that were
productive, because they helped provide what consumers wanted. During
the early years of the 20th century, when millions of immigrants landed
in America, the unemployment rate dropped as low as 1.6 percent. Not
only that: economist Thomas Sowell reported: “Immigrants begin
economically below the level of existing members of their own ethnic
group already in the country, but eventually they surpass them.”
Many immigrants launched what became giant business enterprises.
Notable immigrant job creators included John Jacob Astor, Adolphus
Busch, William Colgate, Alexander Graham Bell, Samuel Goldwyn, Louis B.
Mayer and Helena Rubenstein.
Of course, there have been countless failures when entrepreneurs and
their employees weren’t able to keep up with changing markets. Since
consumers always want the most for the least, competition tends to drive
down prices. Consequently, costs must be minimized, which can mean
reducing head count — payroll is the largest cost for most businesses.
Fortunately, if government doesn’t have excessive taxes, regulations or
other obstacles to enterprise, capitalism achieves the highest growth
rates of any economic system, creating more and more new jobs.
Capitalists have done far more than serve consumers. In addition,
many supported charitable enterprises that helped relieve human
suffering. Such private individuals could take action much more quickly
than government officials who had to cultivate political support for
appropriations. It was no coincidence that great charitable enterprises
developed along with great business enterprises during the nineteenth
century, before there was a welfare state... For instance:
* In 1833, New York silk merchants Lewis and Arthur Tappan joined
Boston abolitionist William Lloyd Garrison to help form the American
Anti-Slavery Society. The Tappans lost their business during the Panic
of 1837, but they subsequently developed America’s first credit
reporting service that became Dun & Bradstreet. Meanwhile, Lewis
Tappan worked to free enslaved Africans who were jailed in New Haven
after they had seized control of their ship, the
Amistad — the
case went to the U.S. Supreme Court (1841), and the Africans were
acquitted. Lewis Tappan was also a major benefactor of Oberlin College
that enrolled women as well as men, blacks as well as whites.
* George Williams was an English farm boy who went to London and got a
job working for a cloth merchant. He observed how easy it was for young
men to get into trouble — they commonly spent their spare time in
taverns and brothels. Williams started what became the Young Men’s
Christian Association (YMCA) in 1844. Before long, it was opened to men,
women and children of all races, religions and nationalities.
Increasingly, YMCAs promoted physical health through sports. Basketball,
football and racquetball all originated at YMCAs. Branches have opened
around the world.
* In 1859, Geneva-born businessman Henri Dunant was horrified to
arrive in Solferino, Italy after French and Italian forces had fought
the Austrians. The battlefield was littered with some 38,000 bodies, and
nobody was taking care of the wounded. In 1863, he helped found the
International Committee of the Red Cross, and he helped establish Red
Cross organizations in other European countries. In 1901, Dunant was
awarded the first Nobel Prize.
* In 1865, William Booth, an English Methodist lay preacher, together
with his wife Catherine, established the Christian Revival Society in
London’s impoverished East End. The Booths held nightly meetings aimed
at inspiring alcoholics, prostitutes and thieves to take responsibility
for their lives and do good. The Booths recruited neighborhood people to
help open soup kitchens for feeding the poor. By 1878, their operations
had expanded considerably, they changed the name of their organization
to the Salvation Army. Branches were opened in 58 countries and colonies
during Booth’s lifetime.
* One of the most remarkable cases of private sector charity involved
the fabled investment banker Jacob Schiff and nurse Lillian Wald who
was the daughter of German-Polish-Jewish immigrants. She had taken care
of many poor, sick people in Manhattan’s Lower East Side slums. Wald and
another nurse, Mary Brewster, started what became the Visiting Nurse
Service of New York, and Schiff provided financial backing for 27 years —
until he died.
* In the Old World, art collections were often built up from plunder,
but in the New World art has been a byproduct of capitalism — long
before the National Endowment for the Arts existed. Without the wealth
entrepreneurs created, many people who had artistic talent might have
been tilling fields. Museums were born during the Industrial Revolution.
Entrepreneurs and their heirs like the Rockefellers, Guggenheims,
Havemeyers and Mellons supported museums. Unlike European museums that
catered mainly to artists and scholars, American museums aimed to
educate the public. As Joseph Choate, a founder of New York’s
Metropolitan Museum, put it in 1880: “the diffusion of knowledge of art
in its higher forms of beauty would tend directly to humanize, to
educate and refine a practical and laborious people; that through the
great masterpieces of painting and sculpture...could never be within
their reach, yet it might be possible in the progress of time to gather
together a collection of works of merit, which should impart some
knowledge of art and its history to a people who were yet to take almost
their first steps in that department of knowledge.”
In the heyday of laissez faire capitalism, before public schools were
widespread, parents assumed more responsibility for educating their
children, and America became a highly literate country. Best evidence of
this: the amazing number of books, particularly children’s books. In
1840, Cincinnati, the smallest center of the U.S. book trade, issued an
estimated 2 million books. In 1855, the
American Publisher’s Circular
reported that more books were sold in the United States than in Great
Britain, a much more prosperous country. An estimated 30 to 40 percent
of what U.S. publishers issued were textbooks.
The New England Primer,
a catechism, sold 500,000 copies. By 1859, Noah Webster’s spelling book
had sold an incredible 30 million copies — this was approximately equal
to the U.S. population at the time. The most popular American
textbooks, the
Readers developed by William Holmes McGuffey,
sold an amazing 125 million copies. Peter Parley sold over 7 million
copies of his books —
Peter Parley’s Tales of America (1827),
Parley’s Winter Evening Tales (1828),
Parley’s Juvenile Tales (1830) and
Parley’s Geography for Children (1840). Anna Sewall’s
Black Beauty, initially published in London, sold 3 million copies in the United States. James Fenimore Cooper’s
Last of the Mohigans sold over 2 million copies. Books like
She,
Heidi,
Little Women,
Treasure Island,
Little Lord Fauntleroy,
Uncle Remus,
Peck’s Bad Boy and
The Adventures of Tom Sawyer were also among the children’s bestsellers.
The most successful 19th century entrepreneurs didn’t have much
formal schooling, but they had a keen appreciation of learning. This was
decades before there was a federal Department of Education. In 1881,
Andrew Carnegie created an endowment that over the years spent some $55
million to build more than 1,600 libraries across America. In 1895, New
York Public Library was formed by consolidating the private libraries of
furrier John Jacob Astor, real estate entrepreneur James Lenox and
railroad and mining attorney Samuel Tilden. New York Public Library now
has some 206,000 prints, 400,000 sheets of music, 6.5 million books and
13.5 million manuscripts.
During the 19th century, successful entrepreneurs funded great
colleges and universities before there was a permanent income tax to
encourage deductible philanthropic contributions. In 1861, about 20
Boston scientists and entrepreneurs contributed $100,000 to start the
Massachusetts Institute of Technology. In 1868, Western Union investor
and land speculator Ezra Cornell started the university that bears his
name. In 1873, Baltimore grocer and railroad investor Johns Hopkins
died, leaving $7 million to help fund a major university that opened
three years later. Railroad entrepreneur Leland Stanford started his
university in 1885 as a memorial for his son and operated it on his
farm. John D. Rockefeller gave $35 million to help establish the
University of Chicago.
Decades before women had the vote, entrepreneurs supported education
for women by launching women’s colleges like Mount Holyoke (1837),
Vassar (1861), Smith (1871), Wellesley (1875), Radcliffe (1879), Bryn
Mawr (1885) and Barnard (1889).
Moreover, the Industrial Revolution, in the United States as well as
Europe, made life easier for women in countless ways. Mass-produced
soap, clothing, cosmetics, canned food and myriad other things meant
that women didn’t have to spend huge amounts of time making everything
they needed. During the 19th century, kerosene lamps replaced
troublesome whale-oil lamps, and gas lights and later electric lights
replaced kerosene. With so much labor saved, women began to have leisure
time, and many used it to start clubs. A large number were for
self-improvement. They encouraged the study of literature, history,
science, current affairs and foreign languages. There were circulating
libraries for members. Such clubs helped women with little formal
education to gain more knowledge about the world. Professional women
formed clubs to discuss their mutual concerns. While government
officials suppressed information about and access to birth control
methods, large numbers of women obtained both from private businesses
like Sears, Robuck.
Capitalism created opportunities for women to gain financial
independence. Initially, women earned money outside the home mainly by
performing domestic service, as maids, cooks and cleaning women. Then
during the 19th century, factory jobs provided new opportunities.
Factory owners didn’t care what the proper role of women was supposed to
be. They hired women because they were willing to work for less than
men, and they were often more conscientious workers than men. The
invention of the telegraph, typewriter and telephone created nicer
office job options for millions of women. Women got ahead more rapidly
in business than in licensed professions and much more rapidly than in
politics.
We need to understand how far we have come and how we got here. As
historian Braudel reminds us, “Wherever the market is absent, or
insignificant, one is certain to be observing the lowest plane of human
existence.”
After the “progressive” expansion of political power during the past
century, America still has the Constitution and enough of a market
economy left that it could be restored.
Capitalism is worth defending. Hopefully, the presidential candidates will learn how to do it.