Why Anticapitalism grows; H. Hazlitt

Henry Hazlitt A CORRESPONDENT who describes himself as "a 26-year old college graduate who strongly supports a system of free enterprise," re cently 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 al legations 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 criti cisms 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.

409 410 THE FREEMAN July With these preliminary re marks, let me try to give brief answers to your ten questions. 1. Capitalism does depend upon the consumption of natural re sources, and some of these could eventually be depleted. But this must happen under any conceiv able 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 sci entific forestry, for example). 2. There will probably always be some efforts toward collusion and private price-fixing. Encour aging 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 con sumers because they can be sup plied with the commodity at a lower cost. If big automobile companies consume more steel than a small hardware manufac turer, this does not necessarily mean that big companies are us ing steel more wastefully.

4. Private capitalism means free competition. Capitalism has far less tendency toward concen tration than does socialism, and well-drafted laws can prevent coercive methods of concentra tion. True, big companies can sometimes lower prices exces sively to try to drive out small competitors, but they can do this only at a serious cost to them selves. 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 pre vious 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 govern ment 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 man1983 WHY ANTICAPITALISM GROWS 411 agement of their company pri marily 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 ex tensively will soon go broke and be eliminated in favor of hon estly-run companies. 7. There is no scientific way of measuring "productivity" in a service-oriented economy. Most of the current attempts to mea sure it rest on fallacious as sumptions. 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 noth ing 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 condi tions supplied by the employer.

In any case, almost everywhere today the employer is legally obliged to pay "workmen's com pensation" for most such inju ries. 9. True, capitalism does not supply "equal" housing or "equal" pay. If we tried to do the latter, regardless of the difference be tween the skills and industry of different workers or even whether a man did not work at all, we would soon destroy all in centives to production and have little creation of housing or any thing else. 10. There is nothing "inhu man" about capitalism itself. It does not legally compel compas sion or charity on the part ofpri vate individuals, but neither does it stand in the way. Socialism assumes that nobody will help the poor unless the politicians com pel 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 great est number of human beings, and provides the more successful with a surplus above their needs ca pable· of being turned over to the less successful, voluntarily or 412 THE FREEMAN through taxation. Without capi talism' in short, most of its present detractors wouldn't be around today to denounce it.

A Flawed System One final word. Your ques tions tacitly assume that capi talism is the system we are now in fact living under. We are not. We are living under what the late Ludwig von Mises called "sabo taged" capitalism. We are living under a network of government interventions that discourage or prevent capitalism from doing its work. With the "progressive" in come tax, the government expro priates a crucial part of precisely the funds that would otherwise be invested in increased produc tion and employment. By impos ing minimum wage laws, en couraging coercive unionism, and subsidizing unemployment, gov ernment has brought about ex cessive American wage rates in many lines-making our auto mobile and steel industries at the moment unable to compete against foreign imports, and bringing about chronic unem ployment. Having done this, the politicians denounce our domes tic manufacturers for no longer being "competitive," "aggres sive," or "innovative," and pro pose still more interventions to force them to be so. Thus anti capitalism begets still more an ticapitalism.

I enclose a copy of my short pamphlet "Understanding 'Aus trian' Economics" (published by the Foundation for Economic Education) which adds a list of books that I hope will increase your understanding of the work ings of capitalism and its pro posed alternatives. If) Henry Hazlitt, a frequent con tributor to The Freeman, has a long and distinguishedcareer as an economist, journalist, editor, and literary critic. His well-known Economics in One Lesson further answers many of the more common questions about capitalism.That book is available from The Foundation for Economic Edu cation, Irvington-on-Hudson,NY 10533 @ $4.95 in paperback. Also available upon request, copies of "Understanding Aus trian Economics": Single copy no charge 3 copies $1.00 10 or more 20 cents each Donald B. Billings The MoralCase for Competitive Capitalism What is under attack is the capitalist system; and it is attacked mainly on ethical grounds, as being material istic, selfish, unjust, immoral, sav agely competitive, callous, cruel, de structive. If the capitalistic system is really worth preserving, it is futile today to defend it merely on technical grounds (as being more productive, for example) unless we can show also that the socialist attacks on ethical grounds are false and baseless.!