Monday, March 24, 2014

Distinguishing Features of a Capitalist Society

The advent of the free market has resulted to population growth and has increased the average standard of living. The reduction in the standard of living is not the result of free enterprise, but due to anti-capitalistic ideas and policies advanced by the state. Majority of people are unaware about the economic condition prior to the appearance of the free market. To believe intellectuals that life before the Industrial Revolution was happy and prosperous, and that capitalism brought nothing but misery is a proof that most people these days do not know the past. 

The message that capitalists do nothing but exploit workers in the name of profit is popular in our time. Everything hateful has its origin in capitalism from products that poison the body to lascivious books and films that corrupt the mind and soul. This type of messages did not just arise in a vacuum. Mises' task in his book, "The Anti-Capitalistic Mentality" is to analyze the roots and results of ideas that hate the free enterprise. But before we present Mises' analysis, let us first set forth the basic social features of a capitalist society. 

The first three sections of the book under chapter 1 show us the distinguishing features of capitalism. They include mass production, mass consumption, consumer sovereignty, freedom, economic democracy, and social mobility. 

The outcome of mass production aimed at mass consumption is the "improvement in the average standard of living" (p. 1) of the majority. Contrary to Marxist analysis, "Capitalism deproletarianizes the 'common man' and elevates him to the rank of a 'bourgeois' " (ibid.). Through this process, an entreprise will have a chance to "attain the size of big business" (p. 2). 

The way to achieve prosperity is open in a capitalist society. It is acquired by those who satisfy the masses by providing products that are either cheaper or better. It is in this context that we must understand the concept of "consumer sovereignty." Mises compared it to a "daily plebiscite in which every penny gives a right to vote" (p. 2). 

Freedom is closely associated to consumer sovereignty where every man is free to choose the life that he wants and not "according to the plan of a planning authority enforcing its unique plan" (p. 3) on the people. 

Another idea correlated to consumer sovereignty is economic democracy where a person's prosperity is determined by the "evaluation on the part of his fellow men who exclusively apply the yardstick of their own personal wants, desires and ends" (p. 9). In other words, those who serve the majority will receive greater income or greater profit than those who satisfy the wants of the minority. It is in this situation that a movie actor surpasses the income of a philosopher or a composer of symphonies (p. 10). 

And finally about social mobilitiy. This is best appreciated if we compare the condition of society between capitalism and the period prior to its advent. For Mises, comparing the aristocrats to both entrepreneurs and capitalists fails to see the primary distinction between the sources of wealth of the two classes. In the case of the aristocrats, the public did not have a role in the accumulation of their wealth. Their wealth did not originate from the market, but from war or gifts from a conqueror. As such, the decision of the public could not shrink their wealth; it may be lost "through revocation on the part of the donor or through violent eviction on the part of another conqueror or it may be dissipated by extravagance" (p. 6). In such a society, the economic situation of common man is fixed. It cannot be changed except through extra-ordinary situations, but as a general condition, nothing will change unless the entire social class is also changed. 

This is the major difference under capitalism. An individual can change his status even without a change in the entire class where he belongs to. As to the source of wealth, ordinary people play a significant role in the increase of wealth of the entrepreneurs and the capitalists; their wealth is a market phenomenon. Likewise, the decision of ordinary people can also reduce the wealth of businessmen once they fail to serve the interest of the consumers. 

Based on the foregoing observation, if ever at present the decision of the consumers no longer affect the wealth of those at the top of the social ladder, it only shows that something strange is happening to the market. Moreover, if a common man finds it difficult to change his social status despite possessing all the necessary qualities to economically succeed, this proves further that something abnormal is introduced into the market. Furthermore, if we find the situation today closer to the society of aristocracy than the free society described by Mises, it is proper to inquire what brought us into this kind of situation? 

Mises himself gave us a hint about what's wrong in our time. He said that to desire for the advancement of economic well-being is normal and appropriate. What is inappropriate is the means used to acquire this, and this is due to "spurious ideologies" (pp. 4-5). There are people who "favor policies which are contrary to their own rightly understood vital interests" (p. 5). This reminds me of Henry Hazlitt's book, "Economics in One Lesson," where he summarized economics in one sentence: the test of the soundness of economic policy is not just to see its short-term result for merely one group in the society, but its long-term consequences to the entire society. Mises explained the slowness of the people to understand the difference between their desired end and their chosen means: 
"What is wrong with most of our contemporaries is not that they are passionately longing for a richer supply of various goods, but that they choose inappropriate means for the attainment of this end. They are misled by spurious ideologies. They favor policies which are contrary to their own rightly understood vital interests. Too dull to see the inevitable long-run consequences of their conduct, they find delight in its passing short-run effects. They advocate measures which are bound to result finally in general impoverishment, in the disintegration of social cooperation under the principle of the division of labor and in a return to barbarism" (pp. 4-5). 
The closeness of similarity between most nations' societies to aristocrat society is an outcome of anti-capitalistic mentality. It is exactly this kind of mindset that prevents the realization of the basic features, which characterized a free society. Most states and political parties, which include both conservative and "progressive" foes of capitalism are determined to destroy this economic system. After explaining the only way to improve the economic condition of humanity, Mises precisely identified the goal of most states and political parties:
"There is but one means available to improve the material conditions of mankind: to accelerate the growth of capital accumulated as against the growth in population. The greater the amount of capital invested per head of the worker, the more and the better goods can be produced and consumed. This is what capitalism, the much abused profit system, has brought about and brings about daily anew. Yet, most present-day governments and political parties are eager to destroy this system" (p. 5).