The future of capitalism

When the Bilderberg conference met in Switzerland a month ago, many of their topics of discussion were predictable: Russia, China, and Brexit. (Organizers did not foresee the importance of including Iran on their list.) One of the more intriguing topics was “the future of capitalism.” In spite of the hostility that some American politicians (mostly Democrats) express toward capitalism, I see little reason to doubt that capitalism will remain for many generations.

According to Wikipedia, capitalism had its origins in the Italian Renaissance; the guild system of the Middle Ages and the emergence of modern banking during the same time period are also significant to the beginnings of capitalism. The age of exploration and the industrial revolution both strengthened the power of capitalism. While some countries, including Spain and Portugal, saw government investment in exploration and colonialization, Great Britain and the Netherlands experienced private investment in those areas. Joint stock companies funded the explorers and traders, accepting the risk of such ventures for the sake of the expected profits; the government did little more than tax the profits that were produced.

Karl Marx predicted that capitalism would be overthrown by angry workers in the most industrialized countries. Instead, the first Marxist revolution arose in Russia, and it was followed by Marxist movements in less industrialized countries. Government regulations, along with the growing power of labor unions, responded to complaints about capitalism, reducing its laissez-faire (“leave it alone”) tendencies, but preserving its existence. Regulations about workplace safety, pollution control, and labor laws are accepted by modern capitalists, although debate continues regarding the proper level of government regulation. So long as businesses are privately owned, even though they are regulated, capitalism will continue to exist in the world.

The primary opponent of capitalism is socialism. Many socialist countries are dominated by Marxist movements, generally identified with a Communist Party. During the last hundred years, people have fled such countries in great numbers. Since the Communist Party tended to be totalitarian, restricting the freedom of citizens, it is not easy to separate the political and economic factors involved. Strictly speaking, capitalism and socialism are economic systems that could exist under monarchies or republics, in democracies and in dictatorships. As a result, it may be unfair to judge socialism solely by the number of East Germans, Vietnamese, Cubans, and others who have fled totalitarian socialism, even at the risk of their lives.

But when the economies of East and West Germany are compared before their union in 1989, or when North Korea and South Korea are compared, the results are clear. In fact, the capitalist nations of east Asia after the end of World War II were so successful that, by the 1980s, the government of China decided to return to capitalism, even though the government is still run by a group that calls itself Communist. China’s economic failures under Marxist socialism and its success since it turned to capitalism are another case study for comparison of the two systems.

Advocates of socialism claim that it is more fair, that it divides wealth among all the people rather than allowing wealth to accumulate in the hands of a few successful capitalists. Government regulation again tempers capitalism, breaking apart monopolies and trusts and cartels, setting minimum wages for workers, and in extreme cases (such as during a major war) controlling prices as well as wages. Meanwhile, competition among capitalists for customers and for workers grants advantages to customers and workers that they would not gain in a fully socialist system. If the government owned and managed all the businesses in a country, waste and carelessness would increase, because workers and managers would have less incentive to be careful, efficient, and productive.

In same cases, government competition with private businesses benefits consumers. The United States Postal Service is required to deliver letters and packages everywhere in the country; UPS, FedEx, and DHL must follow the same policy to remain competitive. Competition between federal health insurance (Medicare and Medicaid) and private health insurers could also benefit consumers.

In many cases, people demand more government control out of a sense of what rights belong to citizens. At first, human rights were largely considered freedoms: freedom of speech, freedom of religion, freedom to assemble, and so forth. As the right to life was used to support government programs to feed the hungry and shelter the homeless, the concept of human rights expanded. Basic education was seen as a human right, so the government opened schools; now some politicians want to consider college education a right for all citizens. In the same way, treating health care as a human right, some politicians want the government not only to regulate doctors and hospitals but to control them, determining costs and fees and subsidizing health care for low income citizens through taxation of wealthier citizens. Such a move would be detrimental to capitalism.

Even though some loud voices deplore capitalism and want to replace it with socialism, it seems likely that capitalism will remain. Voters will, in the long run, reject politicians that favor socialism and will support politicians who see the greatness of the nation linked to capitalism and private enterprise. J.

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Labor Day

The industrial revolution changed the world. One thousand years ago, Chinese technology created a new and better version of steel. Over the centuries that recipe spread, until it reached the British Isles, where iron and coal were abundant and were near each other, and where transportation by water made it easy to distribute what was manufactured. Labor-saving devices such as mechanical spinners and looms allowed increased production, and what happened in Britain began to happen in other European countries, in North America, and eventually throughout the world.

Capitalism had already begun to develop in medieval Europe. Workers formed guilds which controlled each craft, putting the power of production into the hands of workers. Along with the guilds came financial leagues which led to modern banking and a new financial system. With the industrial revolution came a new form of capitalism. Only those who had access to wealth could buy the new machines. Now workers came into the factories and worked for the investors instead of working at home and controlling their own careers. Following the precepts of capitalism, investors and factory owners paid as little as they could to workers and got as much work out of them as possible, thereby keeping prices low for their customers which allowed them to gain a profit.

Many people realized the problems implicit in the system of capitalism. Even Adam Smith, who wrote the book defining and defending capitalism, explained that workers needed to be treated well to produce a better product—and to be the customers that the factories required. Karl Marx was not the first thinker to attack capitalism, but he offered the most dramatic solution. He complained that the system was rigged to keep the many workers under the control of the few people who had wealth. Government and even religion, he said, always took the side of the wealthy few against the many workers. Marx predicted that the workers would rise in revolt. They would overthrow the wealthy few, along with government and religion, and create a new and fairer system. For a time, the government would own and control the factories and farms on behalf of the people (socialism). After a while the government would wither and die and the people would own the factories and the farms. They would distribute the wealth they produced according to the workers’ needs, and each worker would willingly labor according to his or her ability (communism).

Marx said that the revolution would begin in the countries where the industrial revolution began and would spread as industry had spread. When it had reached the entire world, then the conversion from socialism to communism could happen. Marx did not foresee any way the workers could achieve their goals of proper wages and decent working conditions without violent revolution. He did not foresee any way that capitalism could be preserved.

Marx was wrong. Workers in Europe and North America found ways to organize themselves into unions which could speak to the owners of factories on behalf of all the workers. Christian sensibilities took the side of the workers and implored factory owners to treat them better—fair wages, fewer hours of work, better and safer working conditions. Swayed by Christians and by the growing power of the labor unions, governments began making laws to require the workers in factories to be treated properly. Child labor was gradually abolished, work hours were regulated, and inspectors were sent into factories to guarantee the safety of the workers. Although there were exceptions, generally governments required factory owners to permit their workers to form unions that would negotiate with the owners for the good of the workers. Socialism and communism were not necessary. Capitalism, under limited government regulation, could be preserved, with investors and customers and workers all benefiting from the system.

In the United States we celebrate workers and their contribution to the nation and the world with a holiday called Labor Day. Unlike Memorial Day (which was originally May 30, until it was moved to the last Monday in May), Labor Day has always been celebrated on a Monday, the first Monday in September. Originally that Monday was meant to be a time when workers would parade through the streets of the city to be recognized by their fellow citizens. It was, naturally, an extra day without work for the laborers, a day when they could gather with their families and those of their coworkers in picnics and other festive occasions. Labor Day weekend has become the social end to summer, as Memorial Day weekend is the social beginning of summer.

Every Memorial Day a few people speak out about the importance of recalling the reason for the holiday. Memorial Day is not just about cook-outs and the beginning of summer. On Memorial Day we remember soldiers who lost their lives fighting for their country. I have written such reminders myself. Scolding Americans because we have forgotten the meaning of Labor Day happens far less often. Of course we should be grateful to those workers whose labor improves our lives. We might not go into factories and shake the hands of laborers there, but each of us can mark this Labor Day weekend in some appropriate way. Be kind to the restaurant workers and grocery store workers you encounter. Thank them for doing their jobs. Think of those other laborers who do not get time off for the holiday—police officers, fire fighters, hospital workers, pastors, and all those expected to continue working on a holiday weekend.

Labor Day recognizes workers. It also reminds us of a process—the way labor unions, governments, and Christians concerned about the lives of factory workers combined to assist those workers. Along the way, they rescued capitalism from the danger of revolt. We continue to debate how much regulation is necessary and which laws hinder capitalism excessively. We should debate these things. On Labor Day, though, we also rejoice and are glad for the good things we have because of the work of our neighbors. J.

Bluster and North Korea

Nobody would be worried about missiles fired from North Korea if the Yalta Conference of February 1945 had turned out differently.

The Yalta Conference was the second of three meetings involving the heads of state of the United States, the United Kingdom, and the Soviet Union during World War II. President Franklin Roosevelt, Prime Minister Winston Churchill, and Premier Joseph Stalin had met in Tehran, Iran, in 1943. All three also attended the Yalta Conference on the Crimean Peninsula in the Black Sea. The third meeting, held in Potsdam, Germany, also included Stalin, but Roosevelt had died and been replaced by Harry S Truman. Churchill was still alive, but Clement Attlee had displaced Churchill as Prime Minister.

These meetings had two purposes. They helped the allied governments cooperate in their war against the Axis powers, and they also helped those governments plan for the post-war era. For example, as the United States and the United Kingdom planned their D-Day invasion, they were able to persuade Stalin in Tehran to launch an invasion of German-held territory at about the same time to pin German troops on the eastern front. The partition of Germany following the war was also determined at these conferences.

Probably the most important agreement made in Yalta was that each of the allied powers would set up governments in the lands that they captured from the Axis. Aside from eastern Germany, the Soviet Union also formed governments in Poland, Czechoslovakia, Romania, Bulgaria, and Hungary at the end of the war. Churchill and Roosevelt had insisted that free elections be held-especially in Poland-and Stalin promised that such elections would be held. Instead, all those countries were placed under governments following the Soviet system, and they remained under Communist Party rule until 1989.

Stalin also promised that the Soviet Union would enter the war against Japan roughly three months after the surrender of Germany. This promise he kept. In the beginning of August, Soviet troops entered Korea and began battling the Japanese forces occupying the country. This Soviet invasion factored into President Truman’s decision to rush the end of the war by dropping atomic bombs on two Japanese cities, although his fear of the loss of life that would be caused by a conventional invasion of Japan was a larger concern. When Japan surrendered, Soviet forces had captured the northern half of Korea, and they invoked the Yalta agreement to create a Soviet-sponsored government there as well. Roosevelt and Churchill had never intended Korea to be divided, but Truman and Attlee were not about to concede all of Korea to the Communists. Korea was split into two countries, and today it remains two countries under separate governments.

North Korea is the only Communist nation to be ruled by a single dynasty. Three generations of the Kim family have ruled North Korea since 1945. In 1950 North Korea invaded South Korea, setting off a three-year war which would later spawn an eleven-year television show called MASH. The United Nations condemned the invasion. Soviet representatives in the UN were absent that day, so they failed to veto the UN’s decision to send troops to support South Korea. (This is generally offered as proof that Kim and North Korea were invading on their own and not under instructions from the Soviet Union.) When the UN forces prevailed against the North Korean army, Chairman Mao sent reinforcements from the Peoples Republic of China, and the war became a stalemate that was settled by treaty in 1953, leaving things much as they had been before 1950.

The division of Korea became an interesting test case for different economic beliefs. With the support of the United States, South Korea built a capitalist economy, while North Korea built a socialist economy inspired by that of the Soviet Union. South Korea has blossomed into an economic power, while North Korea has remained stagnant economically. The government of North Korea has invested heavily in military equipment, including atomic weaponry and missile technology. With little opportunity to boast about anything else, the North Korean government regularly reminds the world of its power. The United States in particular has responded to these reminders with its own reminders of American military power.

I teach history classes. I am more qualified to discuss the past than to predict the future. I can say with confidence, though, that governments like those in North Korea and Cuba are doomed to failure sooner or later. No matter how hard they try, despots can only fool their people for a while. News of what people in other countries possess leads to discontent and a desire for change. At some point the mistakes made at the Yalta Conference will be upended and freedom will prevail, even in North Korea. J.

 

Definitions

As a history teacher, I must define a few words so that the students and I can use them properly in the classroom. I want my students to know to true meaning of words such as “conservative,” “liberal,” “capitalist,” “socialist,” and “communist.” When we all use those words the same way, our conversations are much more productive.

Conservatives want to conserve things. They want to keep things the way they are. A conservative is likely to say, “If it’s not broken, don’t try to fix it.” Liberals want to change things. They don’t think things are good enough, and so they want to fix what is broken. A liberal is likely to say, “We can make it better.”

Actually, conservative and liberal are two words that cover some territory on a broad spectrum. A conservative wants to keep things the way they are, but a reactionary wants to change things back to the way they used to be. A liberal wants to improve the system, but a radical wants to destroy the system and replace it with a new system. Moderates are between conservatives and liberals. They want to change some things, but they want other things to stay the same. Convinced conservatives and convinced liberals think of moderates as weak and indecisive. They find it hard to fathom why anyone would want to remain in the middle between two choices. Yet political opinions are generally shaped like a bell curve. I suspect more people are moderate than are either conservative or liberal.

People sometimes change their minds, becoming more conservative or more liberal because of different experiences and new perspectives. Ideas can also change, generally from liberal to conservative. A new idea is going to be liberal at first. To adopt a new idea is to want to change. Two hundred years later, that idea has become old. Conservatives want to keep that idea, not to change it; but liberals might reject that idea that used to be liberal, because they think things can be better.

Limiting the power of government was once a liberal idea. Now it is a conservative idea. Defending human rights, such as freedom of speech and freedom of religion, was once a liberal idea. Now it is a conservative idea. Abolishing slavery was once a liberal idea. Allowing women to vote was once a liberal idea. Even capitalism was once a liberal idea. Once an idea has been around for a while and people have gotten used to it, the idea is now a conservative idea.

Capitalism has its origin in the High Middle Ages of Europe. As an economic idea, though, it was not expressed clearly until the late eighteenth century. When people thought at all about economics, they assumed that a limited amount of value exists in the world. For one person to gain wealth, someone somewhere would have to lose wealth. Nations competed for limited forms of wealth, such as precious metals. Explorers claimed newly-discovered lands for European governments, believing that they had to compete to see who would be wealthiest and strongest and safest. Adam Smith was one of the first writers to show that value in the world can increase, benefiting all people. A diamond found in a mine has value, but after a jeweler has spent hours cutting and polishing that diamond, the gem is more valuable, even though it is smaller. Wool sheared from a sheep has value. After the carder and spinner and weaver and fuller and tailor have worked with that wool to produce garments, the wool is far more valuable, even though much of it has been lost in the process.

Liberals at that time, believing in limited government, also believed that the government should be uninvolved in the national economy. They were convinced that the economy would regulate itself and would become stronger, benefiting all people, if the government would just get out of the way and let things happen. Private owners would be motivated to do their best to succeed with their property. They wanted customers to buy their products. Some would try to improve the quality of their products to attract customers, while others would try to cut costs to attract customers. Those seeking quality would pay their workers more to attract the better workers; but those who tried to cut costs might not need to pay workers as much, since their expenses would be smaller. Competition would waver between the higher quality and the lower cost, value would increase, and everyone would benefit. Liberal capitalists did not see any way that the government could help that process other than by staying out of the way.

Unregulated capitalists had critics by the middle of the nineteenth century. Capitalists hired children to work in their factories; those children worked from before sunrise until after sunset, labored in dark and dangerous conditions, and brought home less money than an adult would have expected for the same work. Liberals thought that conditions could be better. Some formed utopian communities, but others looked to the government to take over the factories and fix the problem. They figured that if the government owned the factories, they would improve working conditions, pay better wages, produce quality products, and sell those products for less, since the government would not be seeking to make a profit. Radicals (including Marx and Engels) expected the workers to rise in revolt, take over the factories, entrust them to the government for a time, and eventually replace the government with a world-wide utopian community in which each person would work for all and each would receive what he or she needed from all.

“Capitalism,” then, is defined as private ownership of the means of creating value, whether farms, factories, oil wells and refineries, or hospitals and medical clinics. “Socialism” is defined as government ownership of the same means of creating value. “Communism” is defined as shared ownership of these means without government control.

These definitions became confused when the Bolshevik Party in Russia changed its name to the Communist Party. They based this name on their promise of communism in the future, even though they named the country which they ruled the Union of Soviet Socialist Republics. For seventy years the Communist Party ruled the USSR, but the country remained socialist; it never became communist.

During the Cold War, Americans spoke of the struggle between communists and the free world. Other countries were ruled by Communist parties, but all of those countries were socialist. Moreover, all those governments were totalitarian, controlling the lives of citizens by controlling elections, education, communication, and every workplace, as well as law enforcement. It was a crime to disagree with the government. When citizens protested their governments, they were arrested or killed. People voted with their feet when they had their chance. Between three and four million Germans left East Germany to live in West Germany before the Berlin Wall was built; not many left West Germany to live in East Germany. When Vietnam was divided into a communist North Vietnam and a noncommunist South Vietnam, one million people traveled from North to South. Only ninety thousand traveled the opposite direction. When Fidel Castro said in 1980 that anyone who wanted to leave Cuba was free to go, 125,000 gathered at the port of Mariel waiting for transportation to the United States. That many Americans have not tried to escape to Cuba in the entire fifty-five years that Castro’s Communist Party has ruled Cuba.

Small groups of people have experimented with communism. Even the early Christians were communist, according to Acts 4:32. No country has ever been communist, and no country ever will be communist, because governments are not good at surrendering their power to the people. Socialism has been tried at various times in various places with various levels of satisfaction among the citizens.

If unregulated capitalism was so bad, why did the workers of the industrialized nations not rise in revolt as Marx and Engels predicted? Marx and Engels did not envision regulated capitalism, in which the governments make laws about how farms and factories will operate, even though the government does not claim ownership of the farms and factories. Laws restricted child labor and eventually placed limits on the number of hours any worker could work. Laws allowed inspectors into factories to ensure that the factories were safe for workers and that their products were safe for customers to use. Laws forced capitalists to allow their workers to gather into labor unions which could then represent the workers and negotiate with the business owners. Capitalism survived and thrived because of its compromise with regulation. By 1988 it was easy to compare East Germany to West Germany, North Korea to South Korea, China and Vietnam to Japan and Singapore and Taiwan. In every comparison, it was easy to see that regulated capitalism produced a better life for citizens than totalitarian socialism.

Yet in regulated capitalism citizens often disagree with one another about the amount of regulation that is ideal. This conversation is part of an idea that has been called “the social contract.” On another day, I will write about that contract and what it means for people living under regulated capitalism. This post is too long already. J.