Does capitalism destroy jobs?

If by capitalism one means “free market exchanges and production through the use of privately owned capital”, then indeed capitalism destroys jobs — those jobs that are made redundant by increasing the productivity of labor.

Imagine an economy which only produces food, and the only input to food is labor. Further imagine that the productivity of labor is such that on average, one persons’s labor produces only one’s person’s demand for food. In that economy, all the jobs will be in food production.

Now imagine someone invents a machine (that’s capital — a produced means of production) that doubles the productivity of labor. Let’s call it the Great Invention. Now only half the workers are required to produce food for everybody. That’s destroyed half the existing jobs in our economy,

After the Great Invention, half the labor of the entire economy can now make clothes. Clothes were not available to anyone before the Great Invention. Now the clothes makers can trade some of their clothes for food. There are jobs for people making clothes, and on average the consumption bundles includes both food and clothes.

More great inventions follow that make both food and clothes production more efficient. Further loss of jobs from food and clothes production. But now some labor can be devoted to making shelters. Fewer jobs in food and clothes production but more jobs in shelter construction. You get the picture.

The main point is that it is not jobs that we are primarily interested in. What matters is production. And production matters because we are interested in consumption. Were the world so that everything we need fell like manna from the heavens. In that world, we wouldn’t need to work at jobs. We’d spend our time like the lotus eaters of Greek mythology.

The Industrial Revolution released the power of human ingenuity and created wealth (stuff that we value) unimaginable to our ancestors. Untold number of old jobs were lost, and in exchange we gained leisure, and all manner of stuff what we enjoy — from smartphones to air travel to medical services and comfortable homes. That’s capitalism working its magic.

Here’s how rich we have become:

That per capita GDP growth becomes all the more astonishing when you consider that the world population has exploded around 20 times what it was in the 14th century CE.

That, ladies and gentlemen, friends and colleagues, boys and girls, is the amazing truth about the world we live in. Three cheers for capitalism.

Capitalism is based on Selfishness and Greed

Bringing you lower quality and fewer choices since the 16th Century, reads the caption to the image of capitalism. The grim image of the evils of capitalism is captured in William Blake’s evocative phrase “the dark satanic mills.” Is it true that because capitalism rests on selfishness and greed that we don’t have a heaven on earth?

In human society in all ages the number of angels devoid of any greed and selfishness is astonishingly low. Most people are self-interested at least, if not outright selfish; and most people want more of the good stuff for themselves and their loved ones, if not outright greedy. That’s the truth about the human condition. That’s what we have to work with, and bemoaning that fact, or worse ignoring that fact, is not going to help at all. Continue reading “Capitalism is based on Selfishness and Greed”

Ludwig von Mises on Socialism

lvm-human-action“A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings. To stress this point is the task of economics as it is the task of biology and chemistry to teach that potassium cyanide is not a nutriment but a deadly poison.”

Source: Human Action. Ludwig von Mises. Yale University Press. 1949, 1998, 2010