Wednesday, March 10, 2010

Capitalism Happens

While there are advocates of Socialism in its many guises, nobody ever advocated capitalism or a free market economy. The advocacy was for Liberty.

Nobody examined feudalism or mercantilism and proposed something new they called “Capitalism”, a system they thought up and designed. Nobody dreamed up private property and individualism as a replacement for primitive socialism.

Adam Smith didn’t dream up Capitalism; instead he was examining how wealth was created in the absence of an imposed system.

Nobody creates Capitalism: it just happens whenever people are given liberty. It works best in an environment with a stable currency, protection of persons and their property, enforcement of contracts, and security from invasion. In fact, as long as the State isn’t too effective at whole-sale violation of these rights, people have always spontaneously created economies that increase their wealth (and make it possible for the society to support more people) based on trade, free markets, and application of capital to increase productivity.

Fredrick Hayek calls this “the extended order” and Adam Smith explained how it worked: selfish people discover that the only ways to improve their situation (increase their wealth) are either take up thievery (and risk the punishment) or do something to improve the lives of others.

I suppose, if you don't like the extended order people spontaneously create - that which is called "free market capitalism" - you just don't like the way people behave when free. Maybe you think that enlightened and educated people, even though they don't understand the spontaneous self-ordering of human interactions (nobody can, it's too complex, perhaps the most complex thing in the Universe according to Hayek), can devise a better way.

Most tyrants have thought the same thing.

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