Samizdata

All libertarians need to remember that capitalism eventually leads to liberty but Capitalism is not a synonym for Libertarianism. Once a society introduces a degree of capitalism, it starts to produce more wealth and more knowledge than it previously did. As this society trades amongst itself, competition occurs and comparative advantages start to emerge between businesses. This produces an imperative for the owners of these businesses to change the way they function in order to minimise competitive disadvantages and exploit comparative advantages…and to do that they must be free to make decisions.

It is this that is the truly subversive thing about capitalism: in order to make it work, people with the knowledge of running the business (the ‘owners’) must be allowed to actually use that knowledge to directly implement changes in a dynamic manner and people must be allowed the choice to purchase what they produce. This of course means that the owners of the business/knowledge and the people who decide to acquire what they produce, are the ones who cause things to happen, rather than the force based state… but states like more wealth they can tax and so allow the wealth creators to create yet more wealth by their own efforts. The paradox is then that for the state to accumulate more resources and grow in size, it must allow power to pass from its hands. The economy gets larger and wealthier, the state gets larger and less relevant. If the state tries to rein in the capitalists, once the economy has become globalized, their ability to do so decays rapidly as capital itself is no longer captive.

Hence even a totalitarian state like China can introduce a tiny sliver of capitalism and, in the short term, the Communist power structure is seen to benefit from increased wealth and knowledge. Yet this early capitalism is a distorted creature, as much of the entrepreneurial talent being freed is still being largely diverted from wealth creation by the time required to navigate the endless maze of regulations and state imposed obstacles.

Similarly, many of the ‘new capitalists’ will be creating wealth not by filling dynamically derived market needs but by finessing obscure and often contradictory state regulations.

However the new capitalists will inevitably start exerting pressure for a relaxation of a regulation here, a redrafting of a law there, and thus the virus of liberty is spread. Capitalism is nothing less than the impersonal and unintentional carrier wave of liberty.

But it does show that capitalism can coexist with profoundly unfree states for a considerable amount of time… and in the meantime, capitalists in that state will try to profit from the state’s apparatus of repression as well as free themselves from its effects.

So every time you see the leering face of Larry Ellison on television pushing for the national ID cards that will make him millions of dollars, remember that just because a person is a capitalist, that does not automatically make him a friend to the broader liberty of society. Next time you see Larry Ellison or an Oracle product, just change the channel: he has plenty of competitors.