Johnathan Pearce regularly mentions here the Rational Optimist himself, Matt Ridley, very admiringly, most recently in this posting. For those who share JP’s admiration, there’s a video of his recent Hayek Lecture, which everyone who wins the Manhattan Institute’s Hayek Prize, for the year’s best book promoting the ideas of individual liberty, gets to give.
Videos are also very handy for people like me, who only learn things half decently if told them several times, in different media, in different voices, so to speak.
I’m now watching this video at Bishop Hill, to whom thanks because this is where I learned of it.
Here’s a quote from the lecture (of the SQotD sort that we like here) that has already stood out, as I concoct this little posting:
Self-sufficiency is another word for poverty.
Maybe that’s two words. But: indeed.
As the man introducing him said, one of the things that makes Ridley particularly special as a writer is the enormous range of evidence that he brings to bear on the matter of why trade and trade networks work so fabulously well, compared to isolated individuals or isolated local communities.
The lecture lasts nearly an hour, but shows every sign so far of being very well worth it.
Which yet again reiterates the point made here recently about putting the lie to the notion of libertarians as “atomized individuals”.
Yes, just what I was thinking, and just what I very nearly said. But, having called the posting “little”, I wanted to keep it so.
He is correct – the distinctive contribution of capitalists to an economy is not the provision of profits but the provision of wages – if wage earners seek higher real wages then they should ensure they live in a country fit for capitalists.
The “distinctive contribution of capitalists to an economy” is neither profits nor wages: rather, it is the production of wealth, the creation of value where none previously existed, which ultimately raises living standards and benefits all of society.
That said, your point about those seeking higher real wages is well taken.
“The “distinctive contribution of capitalists to an economy” is neither profits nor wages…”
Profits existed long before the emergence of capitalists.
“Wages,” on the other hand, are money paid in exchange for the performance of labour – not for the products of labour.
“No capitalists” means no wages.
Really? No one ever paid wages before capitalism was invented? No noble ever paid his servants; no hereditary landowner ever had hired hands? A foolish comment that doesn’t bear even cursory scrutiny.
But in any event I never said that capitalism and capitalists didn’t greatly increase the total amount of wages paid; I merely said that the payment of wages is not its “distinctive contribution” to society. That’s merely a byproduct.
The observation of the relation between self-sufficiency and poverty is actually very, very interesting because it provides a telling insight to one of capitalism’s most fundamental and benevolent principles – that wages are not “merely a byproduct” as you contend, but are, on the contrary, distinctive and primary feature of capitalism – and only capitalism.
And to answer your question, no, their income was not wages, nobles are not capitalists, and neither are hereditary landowners, and the income they pay their hired hands is not wages – it is only the emergence of capitalists which brings into existence the phenomena of wages.
Well, I suppose if you don’t consider income from work to be “wages” if it is paid by someone other than a capitalist, then you’ve sufficiently limited the definition of “wages” such that they can only appear in a capitalist society. And you’ve also created a tautology. Not the most useful of definitions.
John:
What is it, then?
“Capitalism” is a silly term invented by the enemies of private property and free enterprise. I think it is a mistake to use it. It is used some often (due to the influence of certain movements on education and so on) that I am sure that we all (including me) slip up and use the term – but that does not alter the fact that there was no new “stage” called “capitalism”. There was new technolgy (producing massively more output) with the developments of the late 18th and early 19th centuries – but this was not a new “relations of production” system, it was new tech (period).
As both Alan Macfarlane (a conservative) and M. M. Poston (a social democrat in his politics) pointed out long ago…..
Even in the Middle Ages the typical village was part of a market economy and (after the 14th century) serfdom was not important in England – indeed in some areas of England serfdom never had been important.
In case people think the comment is too centered on England – let us take the example of social democratic Norway.
When was the “primitive communist stage” in Norway? Grave goods suggest that (like most other places) some people were always better off than other people.
And when was the “slave based” economic stage?
There were certainly slaves in Norway – but to suggest the economy was ever based on a “slave mode of production” is B.S.
And when was the “feudal” stage of production?
When were most people serfs?
The idea that such things as slavery and serfdom are ECONOMIC concepts (determined by technology – the “forces of production”) rather than LEGAL concepts (created by force – in terms of swords, not production tools) is just false.
People with exactly the same technolgy (“forces of production”) can have widly different societies – both in terms of the legal relationships (the “relations of production”) and in terms of culture (the “cultural superstructure”).
In short the basis of Marxism is flat wrong.
It is OBJECTIVELY wrong – one does not need to (indeed MUST NOT) accept the folly of William James (and the other “Pramatists”) – the idea that truth is subjective (so one can believe whatever one likes).
@Alisa
Their income was a share in the receipts from the sale of products – and I would guess that is how practically everyone got paid.
The point is this – contrary to Aam Smith and Marx, profits are not deductions from wages, wages are deductions from profits.
So, for example, Red China didn’t get rich from the income of their workers because their workers did not receive wages. As I emphasized – “wages” are money paid in exchange for the performance of labour – not for the products of labour, but for the performance of labour itself.
It was only when capitalists entered their market that the Chinese began to receive wages. And that is because again, contrary to Smith and Max, wages are not the primary form of income in production. Profits are.
I quote from Reisman(Link):
Thus, capitalists do not impoverish wage earners, but make it possible for people to be wage earners. For they are responsible not for the phenomenon of profits, but for the phenomenon of wages. They are responsible for the very existence of wages in the production of products for sale. Without capitalists, the only way in which one could survive would be by means of producing and selling one’s own products, namely, as a profit earner. But to produce and sell one’s own products, one would have to own one’s own land, and produce or have inherited one’s own tools and materials. Relatively few people could survive in this way. The existence of capitalists makes it possible for people to live by selling their labor rather than attempting to sell the products of their labor. Thus, between wage earners and capitalists there is in fact the closest possible harmony of interests, for capitalists create wages and the ability of people to survive and prosper as wage earners. And if wage earners want a larger relative share for wages and a smaller relative share for profits, they should want a higher economic degree of capitalism—they should want more and bigger capitalists.
I suspect that the term “wage slave” though irrational and unjustified is in part a recognition by leftists that wages are a distinctive feature of capitalism – and only capitalism- a point often missed by most capitalists.
John, I think that we are largely in agreement here; our difference is over the (relatively minor) point of what is “the distinctive contribution” of capitalists. And we continue to differ on this, although frankly I don’t think it’s important enough for an extended debate. We certainly agree that Marx was wrong, and that wages are deductions from profits (or, as I put it, a cost of production). I’m content to leave it there.
Laird, I should probably have said “a” rather than “the,” because I did not mean “the”[strong] as if wages were the only thing that capitalism creates – I only meant “the” with respect to the self-sufficiency=poverty issue.
The fact that wages come into existence as a result of the activities of capitalists is a revolutionary improvement not a gradual improvement on already existing economic conditions. When wages come into existence it marks a transformation as great and as radical as the discovery of electricity, and that – contrary to the smears of flat-Earthers and exploitation theorists – is a good thing.
I think that I see John’s point, and it is an important one:
I never actually thought about it quite like that.
@Alisa,
It is important because time and time again I hear Austrians declare that profits are deductions from an economic value that is ultimately created by labour – and that is emphatically NOT the case.
Indeed, the whole Welfare State rests upon the notion that businessmen are ultimately reliant for their profits on economic values created by workers, hence seizing and redistributing those profits is not theft but a merely a rightful action of returning a “fair share” of wealth to wealth’s original creators.
Nothing could be further from the truth.
Thanks John, very helpful.