Das Kapital (Updated)

(Based on the Real World Facts)

History has proved Karl Marx wrong. His ideals failed everywhere they have been tried, but they continue to linger on in the minds of people who believe themselves harmed by capitalism. It's something like blaming the tires on the car for a hit&run fatality: it's something you can see, and if the tires weren't there the guy would not have died (nor the perp escaped), but capitalism is not the problem. Nor is technology, but without capitalism there could be no technology, and without technology there could be no increase in wealth (above a zero-sum game). Technology cannot operate without the division of labor, and it builds on existing technology. In other words, you can't start up technology from nothing. You need tools and toolmakers and they also need tools. And somebody must feed the toolmakers, but the farms can't produce enough crops to feed more than the farmer's own family without... more tools.

Let's start at the baseline and see how we got where we are. The baseline is every person working his own farm (with his bare hands) for all the food and clothing and housing his family needs, or else a nomadic hunter/herdsman working a much larger (possibly shared) area, at lower efficiency. The farmer needs a mild-to-hot climate, the others just need lots of animals and the forage to feed them, and the time to follow the animals. There are isolated tribal cultures -- perhaps a few million in the whole world -- living near this baseline level, but nobody (perhaps a few thousand people total) do it without knives (tools made by professional toolmakers). But that's where everybody was in the Stone Age.

People are greedy and lazy, and it doesn't take much thinking to realize that stealing food and clothing from the farmer is easier than growing it yourself. So now we need a police force, and they (the police) also need food and clothing, and they cannot grow their own while doing their police work.

Nobody ever bothers to mention this, but escaping single-family untooled farms to a division of labor that can afford to support technologists (toolmakers at first) and police requires strong cultural religious values to prevent most people from acting on their greed. Otherwise everybody subsists in poverty (including the robbers), or else just dies.

If several farmers operating on Golden Rule ethics happen to have adjacent farms, they can choose to share the duty of protecting their village (which is easier to defend than isolated homesteads) and some of the farm duties which benefit from economy of scale, those jobs can be given to one or two people who do it for the whole community, so the rest of the village can feed and clothe those workers and guards, which then frees up another couple people to make farm tools, so the farms become more productive, and thus support more technologists. If they can think of tools to invent. In case you didn't notice, inventing stuff is anti-entropic. But that's a different line of reasoning, for a different time and place.

So what convinces these low-grade technologists to invent more complicated stuff that requires more and better-trained people to put it together? He needs to sell his products to more farmers so he can feed the extra workers, but why bother? Beating up people (either as guard or as robber) is much more fun -- it feels good, because it gets the adrenaline going -- than sweating alone over a hot forge. The only way to tip the scales toward more technology is for the tech people to earn more and nicer food and clothing. In other words, their labor must produce for themselves more wealth than the easier farming (or robbing) jobs.

And that, ladies and gentlemen, is why the technologists are richer than the common folk. But it builds on that. Suppose somebody thinks up a new and better (more complicated, because all the simple ideas are already being done) tool that will produce food or clothing faster with less manual effort. Who is going to pay for all that development time and effort? The farmers have no money to spare. The robbers take wealth, they don't contribute to creating it. The only people who can afford to expand technology are the technologists themselves -- and even they wouldn't consider it unless it promises to increase their wealth by more than the risk of losing their investment.

Math is pretty intense, it takes several generations of mathematicians building on each other's work before somebody comes up with the mathematical basis for accurately projecting the risks and rewards of an investment, so they can confidently invest in new technology. Who is going to pay for these mathematicians? Nobody! Unlike technologists, mathematicians do not create wealth. They don't even know whether there is any value to what they are doing (other people, usually the techies, figure that out). So maybe a rich techie might support a mathematician as a hobby. What if the rich techie's kids don't want to do the hard work that technology requires? He just waits for Dad to die, and then he has all this wealth to spend for free. And mostly that is what happens, and technology grows slower than it might otherwise.

But not all the lazy technologist's kids are also stupid. One in twenty, or one out of a hundred, might figure out that he does not need to do the tech sweat work himself, he can pay other technologists to do the work, and he collects the profits. He makes the decisions, he pays out the money, and it's his money at risk, so he has a right to whatever is left over after the sales exceed the cost of production, and the development costs have been repaid. Most often that's negative, and he just lost a bundle. If it weren't for the chance of making vastly more than he lost on all the other investments, he wouldn't -- he couldn't -- do it at all. You never hear about the people who lose it and never win. You only hear about the rich capitalists who get richer from their investments. If it weren't for them, nobody would pay for those risky developments, and technology would stall in the Iron Age (three thousand years ago).

So now we come to an important economic principle that I never heard from any economist, except one ancient guy not known for his economic theories, but he did use the (Greek) word "economy" a few times, and he did explain some important economic principles, specifically this one:

  If you don't work, you don't eat.

Or in the terminology of our discussion today,

  Everybody must create at least as much wealth as they consume.

Nobody can eat food that doesn't exist, somebody must grow the crops. And that somebody must grow enough crops to feed not only his own family, but also all the people who make the tools he needs to grow them plus whatever else he wants to consume. If he grows more than that, he has extra wealth to trade for other nice things for his family to consume. And the people who do not contribute to the production of that wealth, they have no right to any of that food. It's that simple. Mostly.

When technology reaches the levels it has in the USA, there is more total wealth than people need to subsist on. We can afford to give it away or just plain waste it. And we do that. But the "we" who do the giving or wasting are necessarily the producers. You cannot morally tell somebody else what to do with the wealth they worked hard to earn. Or if you try, they will simply stop producing it. But there are special cases.

When there is enough extra wealth to pay for them to eat and wear clothing, we can have some people who do not create wealth, but they work instead at making (other) people happy. The people thus made happy appreciate it so much, they are willing to give up some of their hard-earned wealth to get that benefit. We call them entertainers and preachers.

When the community sharing the wealth grown by the farmers or created by the technologists gets too big to carry the wealth (food or tools or whatever) by walking from here to there in a few minutes, and if the wealth grown and created is enough to support this larger community, then it is also enough to designate some people to carry that wealth from here to there. Originally they used oxcarts, but additional technology can facilitate the transport using trucks and trains and airplanes and computers. And the people using these high-tech tools (and the people making them) can do so much more with their efforts than the people who do not, they have earned the right to eat better and live in nicer houses. You get there by thinking, and thinking is hard work. Most people don't want to do it.

Money is an invention that erases the distinction between work that creates wealth and work that only moves it around or only makes people happy. Wealth is still the food and clothing that the farmer takes out of the ground, and that the technologist adds value to by carrying it to where it is consumed, or by making the farmer or trucker happy and therefore better able and/or inclined to work, but the toolmaker adds value to that wealth by enabling the farmer to grow more and sell to a larger community, and money equalizes all that work. It also enables the capitalist to pay for more work that creates wealth, than might otherwise happen if he didn't pay for it, or if he didn't get a reasonable "Return On Investment" (ROI).

So money enables the average person to translate hours of their life into food and clothing and (in a wealthy capitalist economy like the USA) entertainment. They still must work. More importantly, they must do something that somebody else is willing to pay for. And nobody is going to pay for something that does not make their own life better (less hungry, warmer in cold weather, happier, etc.) than they would be without it. Figure out what people are willing to pay for, and do it. There's lots of opportunity in this country, more things to do that people are willing to pay for, than there are people to do them. There are also stupid people -- mostly in government -- willing to pay for no work at all. That destoys wealth and makes everybody poorer, mostly by driving up the cost of living.

Ah, but money is also easier to steal than the wealth it represents, so the robbers have a heyday, and the community needs to give some of that wealth to people (police and guards) whose job it is to make those robbers very unhappy, or at least unable to Do Bad Things to the rest of us. What prevents the police from becoming robbers themselves? You collect them into a well-defined organization called "government." It doesn't work very well, and it consumes a lot of wealth, but it works better than no government.

Once you have a well-defined entity using up wealth to do things for the public good, it's an easy step to get them to do more things presumed to be for the public good. The emphasis is on the "presumed" part, because the government controls the police, and the police are indistinguishable from the robbers except that they are not supposed to harm people. But they still destroy wealth, not create it. The government doesn't know how to create wealth. Neither do the capitalists at first, but the ones who succeed get wealthier and the ones who fail find something else to do. You could have capitalists controlling the police too, but then only the rich would be protected. Because this country is built on Golden Rule ethics, we do not consider that a good result. There are other things the government is doing or considering doing, which they also don't know how to do, but we (the People) don't agree yet whether the government should be destroying wealth by doing those things. Maybe we will get that wrong, and the USA will stop being the wealthiest country in all history. Not My Problem, I'm a zero (nobody listens to me) and I will be long gone by the time third-world status happens here.

Karl Marx had the idea that the government should also replace the capitalists in creating wealth. It wasn't a new idea with Marx, the idea was some 1800 years older than Marx, and it failed back then. It also failed everywhere it was tried after Marx made it popular. The problem is, people are selfish and greedy. If you do not enforce the "no work, no eat" principle -- or rather if you stop rewarding people in proportion to the wealth they create -- then people stop creating wealth and the whole economy gets very poor. The richest country in Africa a century ago, in one generation, is now one of the poorest in the world. Nothing changed except the government. They stopped rewarding the creation of wealth. Some Marxist countries a century or so ago, they are now back to trying to make capitalism work. "Trying" is the operative word, because you still need pervasive Golden Rule ethics for it to work. But that's a problem for a different time and place.

So why is it that people are still enamored with Marxian economics? Just who is it thinking that? Certainly not the producers of wealth, they like the system that works. The most vocal of these critics are academics at tenure-based colleges and universities where there is no reward for producing anything of value. They incite crowds of people who prefer to consume more wealth than they personally can create, and they point to all these capitalists who actually create wealth -- and in this country are rewarded for making everybody more wealthy (and we are!) -- and those producers have more of that reward to spend on good food and other nice things, so these crowds of people want the reward without earning it.

Make no mistake: the people whining about the capitalists are themselves wealthier than most of the people in the rest of the world. The vast majority of people in North Korea and Zimbabwe and other parts of Africa and Asia are so poor, all they can do is scramble around trying to find their next meal; they don't have time or resources to "Occupy Wall Street." The protesters are rich by comparison. Just not as rich at the people who made them richer than the rest of the world. The protesters could have more, if they wanted to put the effort into it. But they want the reward without earning it. That's Marxism, and it makes everybody poor. Just look at history. Look at Venezuela before and after they elected a Marxist government. Coming soon to a country near you, hopefully not the USA.

It's not the color of their faces (nor the number of X-chromosomes) that did it, it's the economics. Capitalism rewards the producers of wealth, and Marxism rewards its destruction. Living in a country where creating wealth is rewarded is much nicer than the alternative. That won't change this side of Armageddon.

Tom Pittman
2023 September 1a