The Cultural Desirability of Capitalism – 2

Economic Temptation: Is this the danger posed by capitalism? 
(c) Can Stock Photo

I will now continue the discussion of how desirable capitalism is as an economic system in our culture that I began in my last post. At the end of that post, I had given my view that interactions of materialistic impulses that harm society are not issues to be handled by economic institutions, but by regulatory law. The main reason for treating problems engendered by materialism this way is that the justifications for such regulations are non-economic; economic institutions are simply the wrong tool for the job. I also warned the electorate should be very, very careful about becoming enthusiastic in curbing their fellow citizens’ economic freedoms with such regulations, Nowadays, more often than not, such restrictions do more to hurt society economically than help it in other ways. As a current case in point I cited the Dodd-Frank Act.   

Other Controversies on the Cultural Effects of Capitalism

The reactions I have seen and read from people who did not think capitalism was good for society (at least not without some modification of the institutions) are the following:

1. Although Chease may not believe that capitalism is actually based on materialism, many people I have met through my life did believe that. Such folks tended to believe some variation of socialism that took Capitalism’s materialistic temptations away from people would be the best arrangement.
2. Another group of people wonder if our society is rich enough and does not need more wealth. Many people associated with environmentalism as a cause hold such a belief. They wonder if society should be aiming for a steady-state economy that consumed the same amount of resources and produced the same amount of wealth, year after year. The hope would be the economy would permanently consume only renewable resources. The people belonging to this group can also belong to the first one listed above.
3. Probably the most numerous and consequential group of dissidents from the currently existing capitalism are people who believe income and wealth are unjustly concentrated in the hands of the very few. These are people like Sen. Bernie Sanders, who believe most people are modern-day serfs living under the oppression of a modern-day economic nobility. Members of this group could also be members of the previous two groups.

In fact an individual could easily belong to all three of these groups at once. In what follows, I will examine these notions one-by-one.

Is Capitalism Based on Materialism?

How can we think about this claim? To proceed, we must be exact in our definition of materialism so that we can compare materialism with what is necessary for capitalism to work. Is materialism a necessary prerequisite for capitalism?

First, I should be clear that I am thinking about economic materialism, not philosophic materialism. What I am concerned with is an all-consuming desire for material goods at the cost of a social, mental, or spiritual life. Is a capitalist economy dependent on economic agents being materialistic in this sense? By an economic agent I mean individuals and groups of individuals, such as companies, who buy and sell goods and services. It should be obvious that capitalism is compatible with a society in which all economic agents are materialistic.

However, capitalism is also compatible with economic agents who have other, non-materialistic values. Let us take as an example agents who greatly value their mental life. Whereas a materialist would say that he who dies with the most toys wins the game of life, a thinker would say that he who dies with the most thoughts wins. A person who values most their social relationships with family and friends would say he who dies with the most friends wins. A spiritualist might say he who dies with the closest relationship with God wins.

Of course, human beings are very complex creatures, and there is nothing saying people can not have a mixture of all these values. However, let us say a group of individuals, say a community of monks, has only spiritual values. Yet they still have a need for economic goods, such as food, a supply of their holy literature for study and contemplation, buildings to house them, and so on. Clearly, similar as well as different material needs are present with groups holding different values. People who value their mental life will need books, computers, and communications with others interested in the same aspects of reality as they are. If they are physicists, they may need a membership with the American Physical Society, or they may need physical equipment for a laboratory. One does not need to be a materialist to have a need for material, economic goods.

A capitalist economy does not operate differently for non-materialists than for materialists. As a system it senses economic needs and arranges for their supply no matter what the values of the economic agent. What precisely those values are are the responsibility of other societal institutions, such as families, churches, and schools. The economy, whether capitalist or socialist, merely responds to the economic demands of all groups.

In principle a socialist economy also should operate identically for non-materialists as for materialists. However, once most or all economic power is possessed by the state, the state inevitably devolves into a more autocratic institution. If some economic agents are not in the political favor of those who control the government, they may be denied some or all of their economic needs. Good luck to any religious groups petitioning a communist government for more places of worship! We have seen such persecution of religious groups in the histories of the Soviet Union and the People’s Republic of China. The process by which a government possessing all economic power tends to transform from a democracy into a much more autocratic state has been explored by Friedrich Hayek in his classic book The Road to Serfdom (reference [E2]). I believe we have seen the beginnings of such a process here in the United States, even though American economic centralization is only beginning to proceed through heavy federal regulations, such as regulations from the Dodd-Frank Act and the EPA. We have seen attempts at producing more autocratic government in the  Obama administration’s IRS targeting of conservative groups to silence them during elections. We have seen them as well in the Obama administration’s violation of the U.S. Constitution through presidential edicts. I have discussed these things in the post The Corruption of the Democratic Party.

Does Our Society Even Need More Wealth?

Let us now address the concerns of those like environmentalists who think we should strive for a steady-state economy that consumes only renewable resources. Eventually we will have to achieve something like that due to finite resources as long as we are confined to this planet. However, this begs the following  question: How much wealth is enough?

Certainly, those in the lowest 60% of income in the U.S. would protest they have many unmet economic needs and would strongly resist going to a steady-state economy. I myself am pretty well off, but there are a large number of things I want that would very much improve my satisfaction with life: things like more modern computers, foreign travel, and the ability to fund scuba diving. If I am not satisfied, I can well imagine the dissatisfaction of those below me on the economic ladder. It would be very unjust for me or anyone else to those on the lower rungs of that ladder to tell them to be satisfied with what they have.

Many would say we should skew our mixed economy more toward the Socialist end of the spectrum to transfer wealth from the more well-off to those who are the poorest. Then we might have enough wealth to go for a steady-state economy. However, this is a very foolish path to take, because that path would create a huge hole in necessary investments. If we were at a point where we really wanted a steady-state economy, we would only need replacement investments to maintain the economy’s productive capacity. To actually increase the production of wealth, we will need total investments to be larger than replacement investments. I will explain my judgements in all this when I discuss wealth distribution and utilization in our semi-capitalist economy. For the present, even in the United States we need to continue increasing our capacity for producing wealth.

It is even more necessary for countries in the underdeveloped and emerging countries to increase their wealth production. For them it is necessary for more than the reason of relieving grinding poverty. This question was explored in Meanings of the Word Capitalism when I explained the reasons for why Malthus’ Iron Law of Wages was incorrect. According to his famous demographic theory, population increases when wages are above a subsistence level. However, history has proved very different. As I wrote in that post:

… workers will not always breed like rabbits if given a wage above the subsistence level. In economically underdeveloped countries this premise of high fertility is in fact true, since in a poor country with high infant mortality, having a lot of children is the poor man’s social security; with high fertility at least some of the children will survive to support the parents in their old age. As countries become wealthier, modern health care and birth control together with retirement plans (government social security, equivalents to 401Ks and IRAs, etc,) greatly reduce the motivation to have large numbers of children.

Therefore, just like the West did in the past, the underdeveloped and emerging economies will have to increase their productive capacity faster than the cost of a growing population until they are rich enough not to depend on their children as the “poor man’s social security”.

This post has grown rather long and I have much more to write on this subject. Therefore, I will finish this essay in my next post. There I will consider the distribution and utilization of wealth in the United States. I will also explore how U.S. capitalism should change to aid society’s evolution.

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