The Social Characteristics of Capitalism
The Sovereign Consumer
One of the most significant features of capitalism is in the sovereignty of the consumer. The "common man" who decides for himself what he will consume and undertakes the effort necessary to produce or obtain it voluntarily. Capitalism recognizes that "the masses" are not a collective, but an observer's perspective of many individuals, each of whom is in possession of himself.
The "market" in capitalistic society is likewise and observer's perspective upon the ways in which individuals produce, consume, and trade with one another - each by their own volition, though often voluntarily imitating the behavior of others. Each man decides what he wishes to consume, what he wishes to produce, and with whom he will engage in exchanges of his product for the product of others.
Institutions such as corporations are merely a method by which men organize their productive activity in response to the demands of other mend for things to consume. The demand of consumers creates the market for goods, and suppliers attempt to satisfy that demand. In that sense, the corporation serves the consumer, never the other way around.
It is in this sense that capitalism was the liberation of the worker: he took charge of himself, gaining authority of his own choices rather than being subject, serf, or slave to an authority who made all of his productive and consumptive decisions for him. In his consumption, he is master to command those who must produce for him if they wish to gain the price he is willing to pay. In his production, he is servant to others and must produce that which they desire in order to gain what they wish to pay him for producing it. If someone obtains wealth in a free market, it was given to him by those whom he has served.
The capitalist, who uses his wealth to generate more wealth, is a servant to the market: he can only increase his wealth by delivering what others demand at a price they are willing to pay. Granted, there is opportunity for the cheapskate ad swindler to take advantage by means of deception - but this cannot be done consistently and sustainably. The producer who fails to satisfy the desire of his customers will exhaust the supply of gullible customers.
This is where capitalism is consistent with the concepts of freedom and liberty: it is the ability of each man to choose for himself what he will produce and consume. He is not forced to live according to the whim of a central authority that demands he perform a specific service and accept that which the central authority believes he should have. But with this freedom comes the responsibility to decide wisely: just as he is not compelled to serve others, no-one else is compelled to serve him. He can only buy and sell at the prices to which others will voluntarily agree.
To accept capitalism requires a basic respect for one's fellow man. Those who believe that "the masses are too stupid and ignorant" to know what they ought to consume, what they ought to produce, what wage they should accept, and what price they ought to pay cannot accept capitalism. Such people are often narcissistic, considering themselves to be more intelligent than other men and fit to tell others such things. They believe, as did the nobles of the dark ages, that they are ordained supermen who have a divine right to rule over the many whom they hold in contempt.
The Urge for Improvement
It is also believed that the desire of man is inexhaustible. His first wants are for his survival needs - but as soon as he has enough food to eat and clothing to wear, he wants better food and a nicer coat, to adorn himself with jewelry and amuse himself with luxuries and distractions. As soon as his wish is satisfied, he discovers something else to wish for.
Few Americans seem to be aware of the fact that they enjoy the highest standard of living, and that their way of life is regarded with awe and envy by the majority of people inhabiting non-capitalistic countries. Most Americans seem ungrateful for, or at least unsatisfied by, the wealth that they possess and the things that they enjoy as a matter of course. Instead they are focused on their unfulfilled desire for even more and even better.
This constant desire is often criticized, but it is also a defining characteristic of human beings. To be content with what one has already got is the characteristic of lesser species, a kept animal that is content to have enough food to eat at the moment and cares for nothing more. Man's activity is driven by his ambition - if ever he is fully content, he stops producing, stops striving, stops inventing, stops advancing, and stops evolving. He loses his ambition, his dignity, his sense of his purpose in life, and ultimately his reason for living.
However, this desire can be perverted where the cause and the effect become divorced. There are some who become obsessed with producing without a thought to the reason they are being productive. Others become obsessed with consuming without a though of whether the means they use to obtain what they consume are proper. Still others may be focused on the immediate effects without a thought to the long-term consequences. There are spurious ideologies that support any of these perversions.
Social Status and Capitalism
Traditionally, people who are in possession of wealth are given social status, and for that reason the modern capitalist is often compared to the feudal lords of the previous age. But this metaphor represents the failure to consider the fundamental difference between aristocratic riches and capitalistic ones.
The aristocrat has gained his wealth by plunder and exploitation, taking that which has been produced by others while offering nothing in return. Historically, the highest status was granted to those who dominated others by violence and who held their subjects in contempt, treating them as property.
The capitalist has gained his wealth by service, by making things that others desire. His wealth is granted to him by the voluntary actions of those whose benefit is served by his product. In the free economy, the highest status is granted to those who provide the greatest service to others, and to provide service is to respect and value others.
Where the capitalist fails to serve the needs of his customers, he inevitably loses those customers to another man who serves them better or cheaper. The aristocrat can only be supplanted by force.
The Social Characteristics of Capitalism
Capitalism can only exist in a society that respects the rights of the individual. Such a society does not interfere with him when he chooses what to do with himself, nor interfere with the product that is created by his actions. Where there is a conflict between two men whose choices are at odds with one another, it must peaceably resolve this conflict - but otherwise it must not interfere in the private lives of its citizens.
Such a society also cannot establish an artificial system of rank, status, or caste. It cannot prevent an individual from profiting from his own actions, and it cannot provide profit to those who have failed to perform the actions necessary to earn it. A wealthy man may fall to poverty by choosing the wrong course of action and a poor man may rise to wealthy by choosing the right course. And except in cases of exceptionally good or bad "luck" that prevents an individual from reaping what he sows, his destiny is the result of his own choices, not the choices of others.
Capitalism does not recognize ranks or castes as an end in themselves, but as the result of an individual's choices and behavior. One's social "class" is simply the consequence of one's actions, which may improve or deteriorate at any time. In this sense, class is a way of describing a person's present condition, not his permanent station in life.
It can also be observed that the notion of "equality under the law" has been misinterpreted as equality of material possessions regardless of effort. This is a perversion that insists that the state intervene in the natural consequence of mens' choices. The idler who has not tended his field will not enjoy a harvest that is equal to that of an industrious farmer who has undertaken the effort to work his field. Liberty does not grant a man anything he has not produced, but merely promises that no-one will interfere with his production.
It is often suggested that in a free market, money is king and many worthless people gain riches while worthy people live in poverty. One wonders what behavior such critics think is worthy of being rewarded. The decision to produce what is wanted by others and the industriousness to undertake its production are what are rewarded in the free market. Except in unusual situations, one does not gain or lose wealth by any other means. Most of the "grumblers" who complain about the unfairness of the market system are those who lack intelligence to recognize what society wants or the industriousness to produce it.
There is brief mention of those who gain wealth by pandering to perverse desires. There are millions of people who enjoy drinking whiskey, smoking cigarettes, devouring pastries, or watching the brutality of a boxing match. While we regard with some disgust those whose labor supports behavior of which we disapprove, it must be recognized that liberty maintains the right of other people to do things of which we disapprove. But morality is subjective, and if there are a sufficient number of people who will pay a sufficient amount of money to have something, one cannot say that things is denounced by all of society. (EN: I don't think he quite develops this into a point, but he also suggests that millions of people vote for governments that are eager to wage war and practice genocide, that torture and execute citizens, and engage in other abominable behaviors - so it cannot be claimed that capitalism is the cause of perversion or the sole means by which it is supported.) Those who complain that the market does not produce what they wish are actually in the minority and do not represent mainstream society - as if many people wanted these things, they would certainly be produced if it were at all possible.
Again, a free market society requires and ensures that each person may choose for himself what he wishes to consume and what he wishes to do with his time. It is objective reality that requires a man to produce that which he wants to consume, and it is a fair system that refrains from interfering with this arrangement.
Resentment Born of Frustrated Ambitions
It is only in a society that is based on barbarism that one individual can impose his will upon others by means of force and to prevent a man from enjoying (or suffering) the consequences of his own actions. Under capitalism, every person's station in life depends on their service to others, not their dominion over them.
One of the most common objections to capitalism is in its support of this individualism - that each person is rewarded or punished by the consequences of his own actions. The critics believe that everyone should receive the benefit of making good choices, even if they have made poor choices. They do not seem to recognize that they are not objecting to capitalism, but to the natural relationship between behavior and outcomes.
Another common objection to capitalism is that an individual receives the benefit or penalty of his own choices. If a man undertakes a significant risk and succeeds, he alone becomes wealthy. If he undertakes a significant risk and fails, he alone is bankrupted. It is their suggestion that an individual should be insured against risk by society, and that society should enjoy a portion of his proceeds if he profits. However, this very arrangement is possible in capitalism, as there are investors who share the risk of an entrepreneur - the difference being that these investors voluntarily participate in the adventure whereas the "members of society" are not afforded that choice.
He also mentions that jealousy is human nature, though it is not among our better qualities. Where we see another person enjoy success, we must accept our own inferiority because we failed to achieve equal success. The beggar is jealous of the laborer, the laborer jealous of his foreman, the foreman jealous of his boss. Each man covets anything his neighbor has that he has not. In a healthy mind, this jealousy fuels our ambition - to work harder, become smarter, and in other ways to emulate the behavior of those who have succeeded. In an unhealthy mind, this jealousy ferments into bitterness and hatred, while creating no noble impulse to grow or mature.
Essentially, it is an inability to recognize the connection between cause and effect - that is, to fail to see how certain behaviors produce certain rewards - or simply a kind of laziness that prevents a man who wishes to have something from undertaking the effort to obtain it, and who wishes to feel pride and be granted esteem even though he has done nothing to deserve either. It is a delusional narcissism for a person to believe he "deserves" wealth or social recognition that he has done nothing to earn.
Separation of Social Groups
Historically, there were artificial boundaries between social classes - the nobility simply did not associate with the peasantry and kept themselves at a social distance by refusing to associate with them. These boundaries exist under capitalism as well, though their source is more a matter of consequence.
In general, people who have enjoyed different levels of success do not travel in the same social circles. The rich man and the poor man live in different neighborhoods, participate in different social events, shop in different stores, and generally do not see much of one another in the course of their daily life. The same can be said of men whose "class" is not so far removed: the worker and his foreman are not so distant in terms of their wealth, but still move in separate circles.
But this is also true of men of the same wealth who work in different professions: the carpenter, the mason, the farmer, and the shoemaker will seldom meet by chance. Nor will the attorney and the physician. And most significantly, the academic and the capitalist are unlikely to meet by chance: they live in different circles of the same society.
Social distance makes people strangers, and it is far easier to feel resentment and even hatred toward people with whom one does not interact regularly. The members of the lower classes see the wealthier people as being different to themselves - as alien as residents of a distant nation, though they live in the same city. And the fact that the rich have many things that the poor covet fills them with jealousy, unmitigated by familiarity, which are the perfect ingredients for concocting hatred.
(EN: This seems to me a slippery-slope argument that poverty will invariably beget hatred. I think he quite overshoots the mark, as this can happen and at times it seems to be the prevailing attitude, but I don't believe it is invariably so.)
Anti-Capitalistic Bias in America
Given the relationship between capitalism and individual freedom, it seems curious to the author that the bias against capitalism is "more general and more bitter" in America than it is in Europe. However, this is because capitalism is not practiced in Europe: the feudal nobility has merely shifted from lordship of the fiefdom to lordship of the factory and there is little resistance on the part of the peasant/proletariat classes who still accept their exploitation by the upper classes. There is simply no expectation of individual rights or equality under the law, hence there is no reason to complain.
In America, where the culture does not retain the vestiges of feudalism, the desire for equality is more pronounced and the citizens are more likely to complain when the capitalist profits from their labor. There is also great bitterness of anyone who seems to be earning more, particularly when a person considers the work of the higher-paid individual to be less important than their own. College professors are therefore resentful of the success of industrialists, in the same way they are resentful of the college's coaching staff who are more lavishly rewarded for managing the sports team than the professors are for teaching their students and doing their research.
Naturally this ignores that in a capitalist system, reward is granted by the customer rather than by a central authority. It is the willingness of the customer to pay more for a product that makes its producer wealthier than the producer of a product that fewer people desire and are not willing to pay as much to have. The judgment of American society, in terms of granting wealth, represents the independent judgment of individuals - and by their spending behavior it is clear that they value the work of the industrialist and the football coach much more than they value the work of the professor. And yet, the professor thinks himself more important. So long as he maintains his arrogant and unreasonable perspective, no other attitude can be expected of him.
The same attitude can be expected of any individual or group who sets himself apart of the rest of the nation and feels himself to be intellectually superior to others. He will be constantly bitter and contemptuous of those who are more successful than himself, and critical of the system through which rewards are given to those he feels to be less important than himself. Ultimately, the source of this bias is simple vanity and a desire to have more esteem and power than others will freely give.
The Resentment Among the Ranks
There has traditionally been prejudice and resentment against the "non-productive" class of labor on the part of those who do not recognize the value of their role in the production process. The salt-miner feels that he should receive the lion's share of profit from his toil and does not recognize that the salesman who arranges for its sale, the driver who transports the salt to market, the clerks who manage the correspondence and payments, or any other person has value.
However, there is an equal share of arrogance and ignorance on the part of the white-collar worker himself, who is full of conceit and imagines himself to be superior to the common laborer because his collar is clean and the work he does requires more intellectual than physical effort. He is quick to point out that the simple act of swinging a pick does not turn salt into money, he seems to ignore that if it weren't for the men swinging the picks, there would be no money either, nor any need for a salesman, a clerk, or an accountant to perform his tasks.
Both blue- and white-collar workers are meanwhile resentful of managements, whose profession seems to be merely standing about and observing others who do the real work, and whose control is merely an intrusion. This likewise ignores the necessity of coordination and control of a large and complex organization in order to facilitate the productive activity. For that matter, there is resentment of anyone who seems to get more esteem and reward: when two employees are hired at the same time and one makes a promotion to a higher rank, the man who was not promoted experiences a sense of envy.
This envy and resentment are fertile ground for those who wish to seize control. The promise of equality made by Lenin and Marx is an appeal to these emotions - and as it has been seen, this has been a false promise that did not end the misery of workers but merely increased it, placing them under the yoke of the party, from their voluntary service to their corporate bosses to the involuntary service to their party bosses. From being rewarded for the value of their work to being rewarded for their loyalty to the party. (EN: This goes on a while, and becomes repetitious. It was a problem of serious concern in the author's time, but of less concern in the present day when communism has failed in practice.)
The Problem of Inheritance
Even when it is recognized that the capitalistic system enables those who provide value to be rewarded by those who benefit from the work of those who provide it, there remains the problem of inheritance: a man who builds a firm by his own effort is generally respected as the owner of that firm, but when the control of the company passes to his heirs, it has then fallen into the hands of men who did nothing to build it and often have no competence in maintaining it. And in very many instances the heirs of fortune fritter away their inheritance and bankrupt the companies built by previous generations.
There are instances in which the sons and grandsons maintain the family business with competence and make good use of their ancestor's wealth, but such cases are not very dramatic. Where the firm continues to operate smoothly, providing goods to the market and livelihoods to the workers, it goes entirely unnoticed. The attention of the market, the media, and all of society is focused only on those instances where failure occurs.
He also mentions the problem of "the cousins," which are the members of a family excluded from an inheritance. Generally speaking, the successful entrepreneur divides his possessions among members of his family but is selective in the disposal of his capital resources: the factory is left to one or two individuals whom he feels is most capable of perpetuating it. These few inherit a ongoing stream of income from the business operations whereas the others inherit a sum that is gone as soon as they can squander it. Or in some instances the cousins are given shares in the ongoing income of a firm but no authority to manage the operations.
Most of the cousins are "idle and useless people." From the perspective of society the cousins are dilettantes, "gentlemen of no occupation," and play-boys who enjoy lives of leisure funded by the labor of their relatives. Their money gives them great power as consumers to command goods and services, but they otherwise contribute nothing to society. This position of privilege causes much resentment among the working classes.
The cousins themselves are often covetous and resentful of the fewer number who are heirs to the family business, who continue to generate wealth and have positions of importance and esteem - the rewards of their own efforts, but seeded by the capital assets they inherited. Unfamiliar with the world of business, the cousins are often personally incapable of creating profit - though they could well have invested their inheritance in establishing a company of their own rather than squandering it. They do not understand what causes a productive man to profit, and press their "right" to have profit without being productive. It is far worse when such people are given sinecure positions within productive operations, as they have the ability to do significant harm.
While it would seem that this is simply a "family feud" between the heirs of capital and the heirs of money, it becomes a concern to society because the workers of the firm find their future in question when the cousins gain control - worse when the cousins use their wealth to purchase political influence and thereby interfere in the operations of the firm, to loot it and render it uncompetitive and ultimately unsustainable. But it is this tactic, and this reason, that many wealthy individuals become staunch supporters of socialism, spreading their family feud to all of society.
Communism and the Entertainment Industry
It is with some irony that the author notes that the entertainment industry in America has experienced significant growth due to the amount of discretionary income and leisure time that has been provided by industrialism and capitalism, yet at the same time this industry holds capitalism in contempt. Entertainers enjoy a tremendous personal income and live in palatial homes, largely thanks to this discretionary income of their fans and supporters - but at the same time they are "the most bigoted supporters" of communism.
Entertainment and the arts are themselves the luxuries of a wealthy society - the basic necessities of the people must be met before they have disposable income for entertainment. And it is only in a society in which a producer is paid by his customers that entertainers become wealthy - in most societies actors and musicians are among the poorest, and in communist societies they are considered non-productive workers and allocated very little in terms of compensation, status, and privilege.
He also notes that capitalism is often blamed for the "stupidity and crudeness" of the products of the entertainment industry, and he cannot argue that point. Capitalism gives the people what they want, and if the people demand vulgarity they will pay someone to provide it to them. But if the people demand something smart, sophisticated, and edifying the free market will provide it to them as well. This is a cultural problem rather than an economic one.