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The Free Market
The Mises Institute monthly, free with membership


May 1998
Volume 16, Number 5

Capital Day, 1998
by William H. Peterson

Labor Day, 1998. Time for picnics and taking it easy. Time too for thousands of blue-collar faithful to gather in Detroit not far from the United Automobile Workers Solidarity House to hail pet politicos and union chiefs and speechify, talk up income redistribution, snitch credit for America's high living standards, and gratuitously attack Wall Street, the rich, and corporate greed.

Such direct and indirect attacks on the free market prompted Ludwig von Mises to write a book, The Anti-Capitalistic Mentality, 42 years ago to expose their fallacies and misconceptions.

So an outworn class war staggers on, despite a union membership drop underway for the last 44 years, a drop by more than half as a percentage of the national work force. Today about 40 percent of the government work force is unionized as against only about 10 percent of a much larger U.S. private work force. Still, real wages and the number of private jobs grow, and the U.S. has the highest living standards of any industrialized country.

How? In a word, capital. Capital is the builder, generator, and servant of society. The more capital the merrier for wages and jobs. Capital--including human capital such as truck-driving and software engineering and the physical tools of production from shopping malls to blast furnaces--boosts productivity and almost entirely accounts for real wage gains and job creation. Capital complements labor, and vice versa. Capital and labor are partners in production, not adversaries.

Yet, if many of America's 16 million union members get confused and thus harangue capital, such confusion stems in part from intellectual elites who still resonate with the lingering passions of Marxism. Karl Marx coined the laughable term "scientific socialism" and dubbed "capitalism" as "a system of plunder." Working from a Ricardian labor input theory of value, he equated profits with "surplus value," value stolen from its rightful owners, labor.

Why, then, do workers in capitalist countries enjoy by far the greatest civil liberties as well as the highest living standards? How has longevity in these countries advanced from under 30 years of age to over 75 in the 250 years since the birth of the Industrial Revolution?

Anticapitalists will sometimes admit (writes Henry Hazlitt in Is Politics Insoluable?) that government has nothing to give save what it first takes away, that the state must thereby rob Peter to pay Paul. But this admission, if made, is as a rule politically finessed so that the state appears to rob only rich Peter to support poor Paul. Enter the transfer payment state--with each transfer linked to political support--otherwise known as the welfare state.

Capital is the enemy all right, to all the anticapitalists. We need a Capital Day in 1998, a day to celebrate the owners of capital and recognize the sacrifices they undergo on behalf of all of us.

Ownership of capital, writes Mises, is "not a privilege but a social liability." Capitalists are forced to serve society--or else. They are "compelled to employ their property for the best possible satisfaction of the consumers. If they are slow and inept in the performance of their duties, they are penalized by losses. If they do not learn the lesson and do not reform their conduct of affairs, they lose their wealth. No investment is safe forever. He who does not use his property in servicing the consumers in the most efficient way is doomed to failure."

So Mises holds that in the extraordinary democracy of the marketplace, with its strictly voluntary basis of cooperation, with its literally billions of votes cast daily, with its self-regulating feature of the price system which erases shortages and surpluses almost as quickly as they arise, it is not the capitalists and entrepreneurs who are in charge, but the sovereign consumers with their power of the purse.

In political democracy, the majority wins and the minority loses out. But in the market, "no vote is cast in vain. Every penny spent has the power to work upon the production process. The publishers cater not only to the majority by publishing detective stories, but also the minority reading lyrical poetry and philosophical tracts." It's true that the rich cast more votes than the poor. But "this inequality is itself the outcome of a previous voting process. To be rich, in a pure market economy, is the outcome of success in filling best the demands of the consumers."

Capitalism's detractors and foes are legion, their arguments seemingly sophisticated but at base empty. They can be beat. So, savers and investors, inventors and entrepreneurs, capitalists and workers (who through their pension funds and insurance policies are at least indirect capitalists), unite! Don't let another Labor Day go by unchallenged.

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William Peterson is an adjunct scholar of the Mises Institute.

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