In Friedrich Hayek’s 1954 book Capitalism and historians, the late French philosopher and political economist Bertrand de Jouvenel noted a disconcerting historical trend: “Curiously, the fall in the favor of the money maker coincides with an increase in his social utility.
Going through the history of capitalism from its inception at the end of the 18th century until the middle of the 20th century when he wrote, De Jouvenel was struck by an ironic and counter-intuitive phenomenon. By “money maker” he meant the capitalist entrepreneurs who got rich by providing the masses with more consumer goods. The entrepreneurs generated economic growth which improved the standard of living; hence their “social utility”.
De Jouvenel rightly wrote “strangely enough” to characterize the fact that as capitalists raised the standard of living of each succeeding generation, hatred of capitalists increased rather than decreased. It is paradoxical, but true. The more prosperous our society has become, the more the creators of this prosperity and the system that enables it have been vilified. How dare these wicked capitalists break the iron grip that abject poverty has exercised over masses of human beings throughout millennia of history!
This world chart per inhabitant the wealth of the past two thousand years tells an incredible story. (A chart of United States per inhabitant GDP growth shows a similar trajectory over the past 230 years.)
Mass poverty has been the norm for centuries. This finally began to change in the late 1700s with the emergence of capitalism. The 19th century socialist reaction to capitalism condemned capitalism for failing to make every human being prosper equally and simultaneously. It’s true: some prospered before others. As I explained before, the reason that there was no faster economic progress for more people in the 1800s was not that the evil capitalists exploited the workers, but simply that they did not. there weren’t enough capitalists to “exploit” (employ) more workers and mass produce. more goods.
Looking at the graph, you can see that economic growth accelerated explosively in the 20th century. (Note that growth became much faster after the end of slavery, which debunks the fallacious claim that America’s great wealth depended on slavery.) In the United States, per inhabitant income increased (in 1990 dollars) from 5,301 dollars in 1913 to 31,178 dollars in 2008 and life expectancy from 53 to 78 years. In short, more Americans are living longer with higher standards of living than ever because of our capitalist system. This happened despite the considerable handicaps of bureaucratic regulation, the wasting of barrels of pork and the redistribution of wealth by the government. (There is also more prosperity outside the United States than ever before. See the graph above and my article “Ready for some good news?”)
Despite the astonishing success of the free enterprise system in producing unprecedented prosperity, antagonism towards capitalism grows and popular politicians adopt platforms that are essentially socialist. Indeed, the paradox of prosperity that De Jouvenel noticed almost seventy years ago remains firmly intact, for capitalism has never been so successful and never more hated by its beneficiaries than today.
The current fascination with socialism and hatred of capitalism reflects a combination of willful historical blindness, lack of simple common sense and inexcusable economic ignorance:
- Anyone who even casually knows the history of the twentieth century should know that socialism has failed miserably, causing economic regression and impoverishment wherever it has been tried.
- Common sense should recognize that since capitalism is a system in which entrepreneurs compete with each other to produce what people want, and socialism is a system in which producers produce what the state wants, it is obvious that people prosper more under capitalism.
- The most appalling and bitterly ironic about so many Americans enthusiastically, if not fanatically, espousing socialism in 2020 is that this year marks the centenary of the most important economic discovery of the 20th century: in 1920, Austrian economist Ludwig von Mises argued with compelling logic that socialism must inevitably break down and reduce economically rational production because it erases the market-based price system necessary to coordinate production. Shame on the economic profession for remaining silent on this fundamental truth and for allowing dangerous economic ignorance to persist.
Fact: It was free market capitalism that made us rich beyond the wildest dreams of our great-great-grandparents. Fact: the socialist alternative simply does not work. Anyone who favors replacing the world’s largest wealth-creating system with a proven wealth-destroying system is rejecting prosperity, renouncing rationality and destroying the courts. This is the sad reality of the prosperity paradox.
#prosperity #paradox #Dateway