The richest person in the history of mankind is someone most of you have never heard of. Mansa Musa did not invent a vital piece of software, a powerful computer that sits in the palm of your hand or an online shopping empire. Musa’s was also not a capitalist. So, how did he get rich?
Musa became rich by governing (by force) vast lands on the continent of Africa, while controlling half of the known supplies of salt and gold, and controlling the very means of production of those vital resources. Musa was also not a socialist. Musa was a product of his time, when some economies were controlled by force, subjecting millions of people to serfdom.
It is estimated Musa’s combined wealth at the time of his death in 1331 was $400 billion. Richer than Bill Gates, Sam Walton, Warren Buffet, Henry Ford, the Rothschilds, Rockefellers or Muammar Gaddafi (all featured on the same “richest” list as Musa). The point? There are many paths to success and wealth, some by force, but most by ethical free enterprise.
Before today’s economic models there was some sort of an economic understanding, and the type of economy was determined by the individual cultures that developed in their respective regions. As populations grew and people started to interact with each other, economic principles began to develop. Two of the early concepts of what most people define as elements of an ethical, free enterprise were the early manifestation of the Harm Principle and self-ownership (introduced in an earlier column https://tinyurl.com/harmprinciple). These are the principles that drive the companies that I, and most of you, work for.
The characteristics of capitalism are simple. Private property (self-ownership of ideas, services and inventions), capital accumulation (the ability to gain and lose wealth), wage labor, the voluntary exchange of goods and services, a price system, and (ethical) competitive markets.
All these factors provide for the voluntary exchange of commerce, which creates defined market prices that permit for cost accounting (disciplined production) and offer a method used in the understanding of loss and profit.
This helps determine consumer demands, which leads to a synchronized production to meet demand. Provide the products and services people want and need, at a price they are willing to pay. Anyone remember the Yugo and the Zune? The Yugo was a failure rooted in socialism, the Zune was a failure confirmed by capitalism. However, you do remember the Prius and the iPod. Both delivered by capitalism.
As one of our astute readers, Christopher Barsi, pointed out in an email, it is these factors that led economist Ludwig von Mises to determine socialism cannot claim to do any of the things listed above, which in turn has historically led the misallocations of resources and a devastating disconnect from prosperity (read – Socialism: An Economic and Sociological Analysis, available at no cost online).
No system is perfect, and as I have stated before, there are bad actors in every system. But the fact is a person getting rich does not mean they did so by making someone else poor. As Bill Gates has gotten richer he has created millions of jobs that most likely never would have been created if not for capitalism; it would not have happened under socialism, and most likely not under the Scandinavian model either. Jobs directly attributed to Microsoft, and all the jobs that indirectly benefit from Microsoft’s innovations have empowered people and enriched their lives in a million different ways.
And let’s not forget the billions of dollars most “evil capitalists” have donated for the betterment of society. However, the best we can do is point to the few bad apples that aren’t in fact practicing capitalism, but are ignoring the Harm Principle and failing to respect the value of self-ownership.
Yet when we look at the laundry list of what people blame on capitalism, a better than casual examination of that list reveals that government, and/or illegal behavior are to blame, not capitalism.
Runaway college tuition costs, which has led to excessive student debt is the fault of government, not capitalism by inflating the demand, abandoning sound economic safeguards to help mitigate risk, and failing to be transparent and realistic with students. All of this was government sanctioned and supported by the greed within academia. A point I made perfectly clear in my article “Dealing with the Student Loan Crisis” on Sept. 20, 2015. Yet far too many people blame capitalism, and worse yet run into the arms of the very entities that responsible for the mess, academia and government.
Health care costs that have gone through the roof are also the government’s fault, not capitalism. Just look at two parts of the health care industry that seem to be flourishing while maintaining sound economic principles, Lasik and plastic surgery. Both of these medical services follow ethical, free market principles, are transparent, and better still, affordable. Costs have gone down in all metrics, and especially in comparison to every other medical industry, regardless of inflation. Yet, we ignore the lessons we have learned when we approach medical procedures using the characteristics of capitalism.
The financial crisis of 2008. Bad actors aided by crony government intervention and manipulation within the markets were the cause. This was made worse by the taxpayer funded bailout, which may have saved our economy (a point that is open to debate), but also rewarded the same bad behavior starting to repeat itself today. Every single principle of capitalism was abandoned and outright ignored. Disgusting still was that no prominent politician, policymaker or business executive went to jail, or were even fired for their maleficence. However, capitalism has been falsely accused, tried and convicted. Misdeeds and government interference are not capitalism, but the text book definition of cronyism.
Mansa Musa was once the richest, most powerful man in the world, and you’ve never heard of him. His wealth did not buy him immortality, and in the end his wealth was fleeting, gone. Musa’s wealth no longer exists, and the region he once lived in now exists in almost perpetual upheaval. However, most capitalists today use their wealth for good, either by maintaining stable companies that contribute to their communities, or by continued philanthropic efforts.
There are a million people I could list that played by the rules, were treated equally in the eyes of the law, and had one other characteristic that propelled them. They were fearless, and because they existed in an ethical, free market society (capitalism), they made a difference in the world. That is why we remember their names, and not Musa’s. I am not saying they were saints, and at times they tested the system, but when applied properly and without prejudice, capitalism works for all of us.
Ethical, free market capitalism has historically proven to be the most effective economic system for ensuring innovation and promoting prosperity, which has served to benefit our lives. So why are so many people running from capitalism to socialism? Cronyism, frustration and ignorance.