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Saturday, March 11, 2006

Review: Bernstein’s The Capitalist Manifesto

Do you get worn out with all the crap coming at you from newspapers, radio, and television news? Want a breath of free air? In the interest of accentuating the positive, we offer you the opportunity to read about a very uplifting book, one that will doubtless open your eyes to uncritically absorbed errors, ones stuffed into your head from cultural and school sources. This is the best book we have read in 2006, thus far.


Why do America and the West have so much wealth (“the goods and services necessary for human survival and prosperity,” p. 334, The Capitalist Manifesto)? The answer may as well be a state secret, given how few people know it, but the answer is: capitalism. Even though the “capitalism” we have today is merely a degraded remnant of the original, but look how powerful its influence is--despite being degraded by the influx of socialism into our commerce and freedom. That is not all.

Capitalism is not just an economic system. It is a full social system, as we will explain. Prior to capitalism, famine, disease, and abysmal poverty, with short, miserable lives characterized the West. Nowadays, in the countries influenced by capitalism, famine and slavery have been wiped out, and people live three to four times longer in extraordinary luxury when compared to all human history prior to the Industrial Revolution. Capitalism, coming to us from the Enlightenment and the Industrial Revolution beginning in the mid-18th century, caused the change. Capitalism may be the greatest of all human achievements.

However, nothing has gotten a worse press or more bashing for more than a century and a half than has capitalism. Anti-capitalism has dominated the “intelligentsia” through all of the 20th century, as the ungrateful capitalism-bashers, along with the rest of us, grew steadily wealthier and healthier, because of capitalism.

Clearly, capitalism needs a fair hearing. People need to learn about it, and to learn the truth, free from unremitting anti-capitalist propaganda passing itself off as the truth. The history, economics, and the philosophical ideas that make capitalism what it is need to be brought to the court of public knowledge.

Andrew Bernstein has done just that with his new book, The Capitalist Manifesto [University Press of America, Inc., Maryland; 2005; ISBN 0-7618-3221-1]. The full title of the book is The Capitalist Manifesto: The Historic, Economic, and Philosophic Case for Laissez-Faire. We will abbreviate the title to “TCM,” for convenience, but the full title identifies the scope of the book. As for calling it The Capitalist Manifesto, the author clearly sticks his finger in the eye of Karl Marx, who wrote capitalism’s antithesis entitled The Communist Manifesto.

Dr. Bernstein is a professor of philosophy and a profound advocate of reason. He wrote in TCM a book that was hard to put down until the last page. TCM sustains high interest and good readability because it reflects very clear thinking.

“The book is written for the rational mind anywhere and anytime, whether the reader is a professional intellectual or an intelligent nonprofessional. It seeks to make the case for individual rights and freedom in terms intelligible for all rational men.”

Did he succeed? To answer that, we will take the long way around, so to speak, by first examining the structure and content of TCM.

The book presents the case for capitalism in four parts, with an important historical appendix (“Robber Barons or Productive Geniuses”). Part one tells the authentic history of capitalism. Part two covers the philosophy, part three the polemics, and finally, in part four, the economics. It also presents an extensive “Annotated Bibliography of Liberty.” The importance of the philosophy sections cannot be stressed enough; it is precisely this kind of information that is lacking, resulting in so much harm to humanity.

Part one gives the real history of capitalism. It serves as a welcome antidote to the myriad lies spread from its beginnings in the 18th century, as a product of the Enlightenment, to the present. The details of this rich history will surprise many people because so many know so little about the nature and history of capitalism. What they think they “know” is really a sordid collection of lies told repeatedly as though they were established truths--for example, capitalism causes poverty, wars, racism, and slavery.

One of the most egregious of the anti-capitalist lies is that capitalism, in the early days of the Industrial Revolution, forced extensive abusive child labor in factories. Ignorant and usually hostile teachers and pupils alike repeat these lies endlessly; thus, they persist in the culture as though they are axioms beyond challenge. Not a one, however, is true and never has been. Dr. Bernstein presents the facts, along with extensive references and notes, along with faulty thinking that have permitted anti-capitalists to perpetuate their lies.

The lie about the child labor is as widespread as it is wrong. The truth is that prior to the factories in England, where the Industrial Revolution began, children lived in a grinding poverty, disease, and starvation completely unknown to us in the West any longer. Capitalism inherited these conditions—and in time, it ended them. Factories hired children, along with adult family members, giving them incomes never before possible. Yes, kids worked long hours, and, by today’s standards, they had it hard, but they survived, whereas before, many would have died. One thinking fallacy made repetitively by anti-capitalists is their ripping history from its context. To judge early factory days, one must judge by the context of that period, when capitalism was just beginning, not by that of today, after almost two hundred years of capitalist growth. However, as wealth increased because of the Industrial Revolution, children worked less and less; in a few decades, hiring children was neither necessary nor desirable. Capitalism progressively liberated children from starvation and abysmal poverty. In an amazingly short time, even clothes were made so inexpensively that children, as well as adults, could experience new, clean clothes along with much more food and concomitant decrease of disease.

The second section deals with the philosophy underlying capitalism. Dr. Bernstein acknowledges his debt to the philosophical genius of Ayn Rand for providing the first complete epistemological, moral, and political philosophical foundations of capitalism. Capitalism was never defended properly until the mid-20th century. That is when Ayn Rand took the ideas of the Enlightenment, which gave birth to the Industrial Revolution, corrected the contradictions imposed onto capitalism, and provided the full rationale for capitalism. She defined capitalism as “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned” [From title essay, “What is capitalism?” in Capitalism: The Unknown Ideal; Signet Books, New York; 1967; ISBN 0-451-14795-2]. Dr. Bernstein walks the reader down a well-presented intellectual pathway, presenting the moral and political philosophical system of capitalism. For those unfamiliar with Objectivist ethics, Dr. Bernstein provides a particularly good introduction to it.

Capitalism is the only system of, by, and for free human beings. While most people think of it as just an economic system, it is much more. The social and economic aspects of capitalism derive from its political principles defining how free people should live together: They should live free from the initiation of force against each other, and delegate to government the sole, legal use of force, for the protection of the individual rights of its citizens but nothing else. These principles derive from the concept of rights, surely one of the least understood of all ideas, particularly today in our schools, the Supreme Court, law schools, and U. S. Senate. The fundamental rights to life, liberty, and the pursuit of happiness define the freedoms of actions necessary for people to pursue their happiness, through producing their own basic support and sustenance, and beyond.

Social and economic factors flow from these principles. Politics is the application of ethics to social behavior; political principles come from moral principles, specifically from human nature’s requirement for each person to pursue values on behalf of himself. Human nature requires egoism, which, like rights, is a widely misunderstood moral concept. Egoism describes the morality needed for a person to take fundamental responsibility for his own welfare, without forcing others to provide for him. In no way is egoism some rapacious narcissism, as alleged by egoism’s detractors. Egoism derives from the epistemological principle of reason, the faculty that identifies and integrates the material provided the human mind by its senses. The ultimate (metaphysical) requirement for reason is complete freedom for each human, to be free from force applied to the body and the mind by others, to live by means of his unique and sole means of survival—his rational faculty.

We cannot give the subject just due here, but TCM provides it.

Part three covers polemics. In this section, Dr. Bernstein addresses anti-capitalist arguments that include the lies that capitalism causes war, imperialism, and slavery. History and logic destroy these “arguments.” No one can read this section with an open mind and come away still accepting these old anti-capitalist bromides as “truths.”

Part four, as the author states, “is devoted to explaining the essential reason that capitalism is economically superior to any form of socialism or statism more broadly.” Additional history of capitalism enriches this section. Part four stresses one fundamental point, namely the specific economic forms in which only capitalism fully liberates creativity. Most importantly, part four integrates the material from foregoing sections and shows that “capitalism is the economic system of the mind.”

Among other valuable contributions in this section, Dr. Bernstein correctly presents the proper relationship between production and consumption. Far too many of capitalism’s apologists have focused solely on the values of consumption, which are many, but minimize the requirements and proper justification for production. Production requires full egoism, and apologists have usually feared bucking the prevailing morality in the anti-capitalist culture of self-sacrifice and selfless service to others. As a result, capitalism has too often been justified as a system groveling slavishly to provide service to consumers only, while the needs and conditions of producers and production have gone unaddressed. Production is clearly the antecedent to consumption, and is thus the more important component, although both production and consumption exist in obvious relationship to each other. Producers need the fullest expression of freedom, reason, rights, and full separation of economics and state, just as we have separation of church and state.

Finally, the author refutes the economic charges against capitalism of creating deleterious monopolies, unemployment, inflation, and depressions. Once again, all of these charges are nothing more but entrenched lies perpetrated by anti-capitalists.

For example, monopolies are one of the least understood phenomena by ordinary citizens and anti-capitalists alike. There are two types of monopolies, and the key to understanding those lies in knowing how and why each can dominate markets.

One type of monopoly exists when one or a few producers forcibly keep others from entering “their” market because of the protection and permission of government. When government establishes and controls who can compete, when, and where, then producers can call on that force to exclude competitors. This situation is the meaning most people give to the term “monopoly.” However, the proper name is “coercive monopoly.” This is the bad kind of monopoly because only force from government can stifle competition. Laws and regulations interfere with the free operations of the market. Vast numbers of people have been taught that the coercive monopoly originates from “business,” particularly “big business.” Yet, no one in business--it seems to escape the anti-capitalists--has the legal concentration of power to keep out competition; the point people miss is that it is only when a law restraining some businesses and favoring others that they can legally walk all over people. Cable television and power companies as well as the U. S. Post Office are among many illustrations of coercive monopolies because laws keep competitors from competing, and more laws then throttle the rates of the cable and telephone companies. Nothing, however, can make them provide the good service provided by free competition. Public schools are particularly pernicious, since citizens cannot avoid having their personal wealth taken under threat of force in the form of taxes to support government schools, even though they provide the most inferior education available today. In today’s mixed economy, mixing freedom and controls, coercive monopolies spawned by governmental intervention dominate the culture.

The only way that competitors can be kept out of a market in a free society is when the producer keeps customer satisfaction so high that no one can match it. This is the benign “productive monopoly,” which contrasts markedly with coercive monopolies, and this is the good kind of “monopoly.” Under laissez-faire capitalism, force cannot be initiated by businesses or anyone else to exclude competitors without drawing the proper retaliatory response by a proper government; crime may exist, but it does not pay. A very good example of a productive monopoly is provided by Microsoft, which has some 90% of the operating system market for computers. Microsoft got that market dominance by providing value to buyers. Microsoft has been accused of being a coercive monopoly. However, Microsoft does not and cannot use the force of government to control its market. Microsoft is an example of a productive monopoly. Even Microsoft—it must be stressed—cannot and does not, in fact, keep others from competing. It simply out-competes most of them.

TCM presents numerous key concepts and principles that make the arguments for capitalism clear. No review can possibly provide the proper exposition of all of these key concepts and principles. Therefore, we will select just two for illustration.

1. Every reader needs to be very clear about three political-social-economic systems: capitalism, statism, and mixed economies.

Pure capitalism, also known as “laissez-faire capitalism” has never existed, although America came close. In a system of laissez-faire capitalism, government is servant to the individual citizen. The period spanning from the end of the Civil War to the turn of the 20th century in America was the period of nearly pure capitalism, and this era has taken much abuse by anti-capitalists. Anti-capitalists call it the “Gilded Age,” and have tried to characterize the period as full of “robber baron” predators gouging the citizenry while living in a state of embarrassing ostentation. Dr. Bernstein deals with these lies completely, and he gives the era a proper name: the “Inventive Age.” Coercive monopolies, such as the Central Pacific Railroad, became notorious, but they resulted from improper governmental intervention into the economy. The government of California gave legal exclusivity to this railroad, thus enabling the abuses that were mis-ascribed to capitalism per se. The Central Pacific Railroad was a typical coercive monopoly. By contrast, government-free railroads (some of which were productive monopolies), always out-competed the coercive monopolistic railroads with ease; all users of the free railroads benefited greatly. The owners of the free railroads got very wealthy the old-fashioned way: by earning it. To repeat the definition of true capitalism, that is, laissez-faire capitalism, it is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

The opposite of capitalism is “statism.” Statism is a political-social-economic system as well, but one that does not recognize or protect individual rights, including property rights. The state is supreme over citizens, who have value only in their capacity to serve the state. Statism is a broad term that includes many manifestations, from monarchies, the ancien regime, and socialism in all its variants (including fascism and communism), dictatorships, tribes, theocracies, and so on. The state regards its citizens as its servants. Most of human history has been the history of statism and people striving to free themselves from those who force them against their will to serve whatever represents the supreme concentration of physical power or force. Not surprisingly, the term “command economies” applies here.
“Mixed economies” are modern phenomena and literally mix elements of capitalism with statism. Even the freest countries today are mixed economies, mixing freedom with controls. Mixed economies are in motion, moving either toward greater freedoms and fewer controls, or toward greater controls and fewer freedoms. Most tend to end up as statist regimes. To the extent that producers can utilize capitalist principles, citizens enjoy some consumer benefits.

America of today is a typical mixed economy, drifting by default toward statism. Mixed economies can be reversed by the efforts of individual citizens who adopt pro-freedom principles and begin eliminating the principles that promote the growth of anti-freedom controls. This becomes very difficult where the state controls the schools, along with the content of the curriculum. What America is not today is a capitalist country. Calling America “capitalistic” seriously misapplies the term “capitalism” and whitewashes the forces and processes at war with capitalist principles.

A word of caution is in order here about assuming that today’s business people are capitalists. Some are. Most are not. Business people of today are not a uniform lot anywhere in the world. Most are abysmally ignorant about the history, philosophy, and economics of capitalism, as ignorant as the general population. Many are mixed economy business people. As such, they seek and accept government favors, grants, and protections, which they consider“normal” business practices. Collusions, bribes, and a host of criminal activities become part of “normal business” practices for some. “Enron’s” thrive in the mixed economy, but cannot under laissez-faire capitalism. Such mixed economy businesspersons oppose any freeing of markets from governmental interference because their businesses are dependent on these “politics of pull” and influence. They are terribly threatened by free and open competitiveness. Do not call most of them “capitalists,” but rejoice in and encourage the real capitalists you find.

2. One of the greatest glories resulting from capitalism is philosophical. An intensely practical philosophy affects every citizen. Lenin, noting the chronic, recurring failures of his statist communist system, said (page 298), “Our program was right in theory, but impractible.” This statement has been echoed in various forms in the popular culture. For example, actor Ed Asner said on a conservative talk radio show a year or so ago that communism is right in theory but has failed because it has not been “practiced correctly.”

This split, the moral versus the practical, has ancient origins. Its greatest exponent was Plato, who popularized all sorts of adversarial forms, which include: theory versus practice, mind versus body, material versus spiritual, and so on.
However, the split is just another lie. It does not exist in reality—but only in the faulty thinking of people. A theory that is greatly valued but actually bears no relation to the facts defies reality. Yet, many people say, “great in theory, but it just doesn’t work in practice.” The truth is that if something is “good in theory” but impractical, then it is not good in theory. The theory is all wrong. Good in theory is good in practice.

Lenin’s “theory” was not “right.” It worked out poorly because it had to; it could have no other result. Reality always wins in the end, and the theories of socialism-communism-fascism produce the same dismal results every time they are tried, never meeting the allegedly “high” goals of advocates’ flawed expectations. “Command economies” always produce poverty, scarcity, even famine, slavery, and so on, quite the opposite of the expectations, but always consonant with their theory. Reality will out.

Capitalism is right in theory and in practice gives the abundance promised by its theory.” Capitalism is morally valid, and, as a result, it is fully practical. That is the best-kept secret about capitalism: Capitalism abolishes any split between the moral and the practical; it is the full integration of the moral and the practical.

Now to return to the question we asked at the beginning of this review: Does Dr. Bernstein succeed in making “the case for individual rights and freedom in terms intelligible for all rational men”? The answer very clearly is YES! TCM belongs in your library, and it ought to be a textbook for schools.

In 1967, Ayn Rand published her seminal collection Capitalism: The Unknown Ideal, so named because of how little so many of capitalism’s beneficiaries understood or appreciated its nature and life force. The Capitalist Manifesto powerfully contributes to the New Enlightenment coming, one in which capitalism will be the known ideal.


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