The Everyday Economist

Our friend Don Boudreaux offers his thoughts on Earth Day.

We started the parade in a post a couple of days ago, in which it’s pointed out that most business people hate capitalism, because capitalism implies competitiion, which business people hate. Especially monopolists like Bill Gates.

That’s Stephen Bainbridge.   It sounds a bit cynical, but remember that the late, great Milton Friedman used to say that businesses love freedom for everyone else, but want special privileges for themselves.

John Tamny considers Bill Gates’ notion of ‘kind’ capitalism to be a misnomer:

Instead, capitalism is better than kind for engendering a form of ruthless benevolence whereby capital is constantly being directed away from the businesses and entrepreneurs who fail to give people what they want, and redirected toward those who are. With profit paramount in capitalist systems, capital rarely lies dormant such that its overseers can use it in ways inimical to the interests of the rich and poor alike.

[...]

Furthermore, [Greg] Clark writes that when we look at how the rich live, “their current lifestyle predicts powerfully how we will all eventually live if economic growth continues.” Sure enough, this writer experienced the shock of seeing a wealthy Beverly Hills resident talking into a bulky hand-held cell phone in the mid-‘80s, but by the new millennium cell phones were ubiquitous; the only thing remarkable about them in recent years having to do with those not in possession of one.Some, including Gates, might point to the wealth gap wrought by capitalism as a problem in and of itself, but returning to the proliferation of cell phones, capitalism is an engine that rewards profits; the profits frequently resulting from mass production of goods marketable to a broad spectrum of economic classes.

Tamny sounds downright Shumpetarian

Alvaro Vargas Llosa writes:

Is global capitalism making the poor even poorer, or is it in fact rescuing millions of people out of their misery?I recently had the chance to participate in a series of debates here about this issue organized by Foreign Policy magazine and Letras Libres, a Mexican cultural publication  Nothing I heard at that meeting changed my conviction that the glass is half-full despite the doomsayers who predict horrific calamities. 

The essay is excellent, but the fact that we still need to have this debate is somewhat silly. Too often, we are stuck on the debate regarding the distribution of income when discussing the success of capitalism.  However, the distribution of income is a flawed measurement and represents the conditions only at a given point in time.  Such analysis does not measure advancement and success over a longer period of time.  Similarly, this analysis regards income as the only variable for measuring one’s standard of living.

It is a shame that more people do not read Schumpeter.  If they did, they would understand why capitalism and economic growth actually benefit those at the bottom by providing them with goods and services that previously only the rich could afford.  And perhaps more importantly, it does this without coercion, force, or central authority to direct it.