What Can Be Said for the Free Market?


Capitalism; Sources of Hostility, edited by Ernest van den Haag, New Rochelle, N.Y.: Epoch Books, 1979, 206 pp., $9.95.

In Defense of Prosperity: A Common-Sense Case for Capitalism, by George J. McManus, Radnor, Penna.: Chilton Book Co., 1979, 217 pp., $10.95.

"While capitalist countries live in the greatest prosperity the world has ever seen, the supporters of the market system are an embattled minority, certainly among the intellectuals, but also among other groups," writes Ernest van den Haag in the introduction to Capitalism: Sources of Hostility. Why this is so is the subject of this book.

Though the market system produces inequalities of distribution, says van den Haag in the opening essay, it leads to superior economic results for everyone: the market is so efficient that even if only a small percentage of the national income is redistributed, more is available for redistribution to those disadvantaged by nature or misfortune than in any alternative system. The technology it has produced (including medical technology) is so enormous that even those who did nothing to earn its rewards obtain them as if they had been gifts from above. But the recipients are not aware of this difference between the fruits of capitalism and the poverty of all precapitalist times. What they do see is that they have less than others around them, and for this they curse the market system that is in fact their chief benefactor.

Compared with all previous ages, capitalism has eliminated poverty. Yet we hear more about the "war on poverty" than ever before. Why is this? "Poverty has come to mean inequality, not plain misery," and anything but a completely equal distribution of income would fail to satisfy the claimants' demands. The result is resentment by anyone who has less against anyone who has more; yet the complete egalitarianism that alone would squelch that resentment would make economic risks not worth taking and, by bringing production to a halt, would culminate in having nothing to distribute.

The young are hostile to the market system that enabled their parents to become affluent. But for the young this affluence is a "given" that does not have to be earned but only redistributed: "production has been taken care of," and distribution is the only problem. Moreover, their background of affluence has gotten them in the habit of immediate gratification of their desires—something that the market, with its inevitable risks and initiative and patience, cannot supply.

Roger Starr, in an ensuing essay, discusses the groups hostile to the market: the Third World (it must preserve its socialist dictatorships), international organizations (concerned with distribution, not production), and intellectuals (they do better for themselves when tied to political rulers than they would in the marketplace). To compound all this is guilt about being affluent when others are not, and a failure to see that others could have become affluent by adopting the same policies as those who are.

In the most psychologically probing essay, Prof. Louis Feuer discusses why such men as Bernard Shaw, Eric Fromm, and Herbert Marcuse came to be enemies of the market. Unlike physical scientists, the humanistic intellectual "lacks the ballast of empirical verification for his hypotheses [and] empathizes with the sufferings of men under the yoke of the market system. He forthwith visualizes a social system in which these sufferings will be removed." The universities, meanwhile, spew out thousands of people "psychically unemployable in lower occupations," nourishing discontent. "Today's younger generation has enjoyed more maternal care than any previous one" and dislikes the harsh winds of competition, preferring instead a paternalistic socialistic government. The more radical students, writes Stanley Rothman, have "strong power drives, little concern for people as people, high levels of generalized hostility, and a considerable narcissism"—hardly a combination of qualities that renders their conversion to the market system a likely prospect.

There are essays by Nathan Glazer and Dale Vree partly critical of the above conclusions. In summarizing all the data, Rothman concludes that "liberal capitalism has indeed been an historical oddity that, like an earlier experiment in democracy (Athens at the height of its glory), always carried within it the seeds of its own decay." None of the symposiasts disagrees with this, though not all are equally convinced.

This is not the kind of reading to console you after a hard day's work. But it is full of unexpected insights and well worth reading whether or not one agrees with its central thesis. The arguments leading to the conclusion, however, are much less systematically arrayed than they are by Benjamin Rogge in his recent book Can Capitalism Survive? (Liberty Press, 1979).

Those who are not hostile to capitalism could use a book like McManus's to hand to any acquaintances who believe that socialism is the best method for the production and distribution of goods. The needed book, however, would have to be unlike McManus's, also, for it adds up to 200 rather uninspiring pages of prose, complete with charts.

The book does live up to its title. It not only defends prosperity but tells us how to achieve it as a nation. There is a chapter on how wealth is created (by production in the private sector). There is an account of how economic growth is achieved (laissez-faire). There is a chapter on the distribution of wealth in the free market (everyone is better off) and how poverty has been largely created (through the actions of government). There is a chapter on how to obtain and sustain economic rewards (don't stifle incentive).

There is a chapter on capital formation and why it is lagging in the United States (the government absorbs too much through taxation), and why cheap mass production is faltering (the current market value of capital goods, not their replacement value, is tax-deductible). There is a discussion of what happens when the national budget is in deficit (the government competes for loan money with private borrowers, sending the rates up) and why it is necessary to have profits (it enables producers to put the profits back into production, thus expanding employment).

We are instructed, too, about regulation: it places too much power in the hands of government (government operates inefficiently, and "too much regulation is counter-productive"). Government "social spending" is discussed at length (transfer payments increase, but poverty continues and the middle class is squeezed) and how to stop this (lower taxes; don't expand the money supply). What should government do in the future? Tax less, spend less.

All this is true and important. But the tale has been told many times—and much better. Henry Hazlitt's Economics in One Lesson (2nd ed., Arlington House, 1979) is a much better book to put into the hands of a dogmatic liberal-socialist: it presents basic economic facts with exemplary clarity and order while riveting the reader's attention. Carl Snyder's 1940 volume Capitalism the Creator does a much more thorough and systematic job than McManus does, and so does Laurence Fertig in Prosperity through Freedom. On special topics, such as the present deterioration of American capital formation—which is indeed cause for high alarm, yet not one American in a thousand knows anything about it—there are pieces in recent issues of the Freeman that do this much better.

To carry conviction to those unacquainted with the economic facts of life, this kind of material must be presented with a certain elan that is quite lacking in the sluggish pages of this book. A needed infectiousness of style is primarily what is missing. Nor is there any overall philosophical viewpoint to organize the facts and make them come alive. Hostility to the market will not be countered with the facts alone; the praises of capitalism must be sung.

John Hospers's forthcoming books are: The Prospects for Capitalism (Arlington House). Understanding the Arts (Prentice-Hall), and Human Conduct (new ed., Harcourt Brace Jovanovich).