Saturday, January 12, 2008

Of pins and pencils

The oddest thing about the common, indeed almost ubiquitous, tendency for people on the right to conflate the ideas of free markets and capitalism is that there is absolutely no need to do so. It's really easy to defend capitalism, on two grounds.

The first is a simple matter of freedom and practicality. If I manage to make a bit of money beyond what I need for survival, what on earth is wrong with my investing it in a business, maybe a startup managed by a young entrepreneur with a good idea? If they make a go of it they'll provide employment and give me dividends to live on when I retire. If nobody invests in them, they'll have to start serving burgers. How anyone could object to that is beyond me.

But the theoretical justification is a simple one of division of labour. This idea was stated by Adam Smith and later by Milton Friedman. We'll leave it to Uncle Milt to explain it at the end of this post, but the basic idea is that people who have good ideas get to be inventive, people who are good at managing get to manage and because of those things people who are good at wiblicating widgets get to do that too, working for them. We have relative economic freedom and the fact that most businesses are capitalist is just a reflection of the fact that the system works really, really well. If coops worked better, there'd be more coops.

Over to Milt:

ASIDE: In the early 1980s I worked for a whole food supplier (I have many dark secrets). The successful "radical workers' cooperative" Suma foods was a customer, and every week a large truck would roll up with Suma people on board, ready to buy stuff.

[I am not making this up] The Suma people invariably had to be accompanied round the warehouse by someone from our firm. They weren't talking to each other, and so needed an intermediary to act as a go-between.

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