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Henry Hazlitt Responds to 10 Common Objections to Capitalism
From The Mises Institute.
"A correspondent who describes himself as "a 26-year old
college graduate who strongly supports a system of free enterprise,"
recently wrote me to say that he is "continuously confronted with
questions that are most difficult to answer." He appended a list of 10
of them, and asked for my comments.
I offer my answer here. To save space, I have not repeated his questions, assuming they can be clearly guessed from my replies.
Dear Mr._____________________ :
The
number of faults that have been alleged against capitalism are without
limit. Few of the allegations have any merit, and when they do the
reason will usually be found to lie deep in the weaknesses of human
nature itself. Practically all the criticisms tacitly assume that
the imputed faults could be easily cured by some form of socialism
or communism, or some ad hoc government intervention that would,
in fact, usually make the complained-about condition much worse.
With these preliminary remarks, let me try to give brief answers to your ten questions.
1.
Capitalism does depend upon the consumption of natural resources, and
some of these could eventually be depleted. But this must happen under
any conceivable system of production when the population becomes large
enough in comparison with the resources. But capitalism has proved
resourceful in finding substitutes or for providing for renewal of
resources (as in scientific forestry, for example).
2. There will
probably always be some efforts toward collusion and private
price-fixing. Encouraging private competition is probably the best cure
for this, plus appropriate laws against clearly harmful collusion.
3.
Not only do utilities often give lower rates to those who use more
power; nearly all sellers give lower rates to bigger consumers because
they can be supplied with the commodity at a lower cost. If big
automobile companies consume more steel than a small
hardware manufacturer, this does not necessarily mean that big companies
are using steel more wastefully.
4. Private capitalism means free
competition. Capitalism has far less tendency toward concentration than
does socialism, and well drafted laws can prevent coercive methods of
concentration. True, big companies can sometimes lower prices
excessively to try to drive out small competitors, but they can do this
only at a serious cost to themselves. It is more often alleged than
proved that such practices happen with any real frequency.
5.
True, adequate capital is sometimes difficult for small producers to
obtain. But it can be obtained by savings, by previous profits
from small-scale operations, or by borrowing. The borrowing can be
done if a would-be enterpriser can convince a friend or a bank that he
is likely to be successful. For a government agency to supply capital
to individuals to become producers would only breed favoritism,
corruption, and scandalous waste.
6. True, officers or directors
of big corporations can sometimes try to use the capital and management
of their company primarily to enrich themselves. Such practices can be
minimized by watchful stockholders and appropriate corporate laws and
law enforcement. But companies in which the practices occur extensively
will soon go broke and be eliminated in favor of honestly-run companies.
7.
There is no scientific way of measuring "productivity" in
a service-oriented economy. Most of the current attempts to measure
it rest on fallacious assumptions. The total value of output is
essentially subjective, and not objectively measurable. The official GNP
calculations are largely fraudulent. A short crop of wheat or corn, for
example, usually sells for a greater money total than an
above-normal crop. If we could produce everything anybody wanted, the
national income would be zero. As nothing would be scarce, nothing
could command a price.
8. It is sometimes difficult to know what
injuries on the job are the fault of the individual worker and what of
bad working conditions supplied by the employer. In any case, almost
everywhere today the employer is legally obliged to pay "workmen's
compensation" for most such injuries.
9. True, capitalism does not
supply "equal" housing or "equal" pay. If we tried to do the latter,
regardless of the difference between the skills and industry of
different workers or even whether a man did not work at all, we would
soon destroy all incentives to production and have little creation of
housing or anything else.
10. There is nothing "inhuman" about
capitalism itself. It does not legally compel compassion or charity on
the part of private individuals, but neither does it stand in the way.
Socialism assumes that nobody will help the poor unless the politicians
compel him to. Capitalism is, in fact, the most "human" of all systems.
It provides the greatest amount of material goods and services, both
necessities and luxuries, for humanity. It supports the greatest number
of human beings, and provides the more successful with a surplus above
their needs capable of being turned over to the less successful,
voluntarily or through taxation. Without capitalism, in short, most of
its present detractors wouldn't be around today to denounce it.
A Flawed System
One
final word. Your questions tacitly assume that capitalism is the system
we are now in fact living under. We are not. We are living under what
the late Ludwig von Mises called "sabotaged" capitalism.
We are
living under a network of government interventions that discourage or
prevent capitalism from doing its work. With the "progressive" income
tax, the government expropriates a crucial part of precisely the funds
that would otherwise be invested in increased production and employment.
By imposing minimum wage laws, encouraging coercive unionism, and
subsidizing unemployment, government has brought about excessive
American wage rates in many lines—making our automobile and steel
industries at the moment unable to compete against foreign imports, and
bringing about chronic unemployment. Having done this, the politicians
denounce our domestic manufacturers for no longer being "competitive,"
"aggressive," or "innovative," and propose still more interventions to
force them to be so. Thus anticapitalism begets still more
anticapitalism."
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