collectivisation was bulldozed, including millions of kulaks, the freedom of
expression and the Aral Sea. Nowadays it is generally accepted that some
version of free-market capitalism is a much more efficient way of ensuring long-
term growth, hence rich farmers and freedom of expression are protected, but
ecological habitats, social structures and traditional values that stand in the way
of free-market capitalism are destroyed and dismantled.
Take, for example, a software engineer making $250
per hour working for
some hi-tech start-up. One day her elderly father has a stroke. He now needs
help with shopping, cooking and even showering. She could move her father to
her own house, leave home later in the morning, come back earlier in the
evening and take care of her father personally. Both her income and the start-
up’s productivity would suffer, but her father would enjoy the care of a respectful
and loving daughter. Alternatively, the engineer could hire a Mexican carer who,
for $25
per hour, would live with the father and provide for all his needs. That
would mean business as usual for the engineer and her start-up, and even the
carer and the Mexican economy would benefit. What should the engineer do?
Free-market capitalism has a firm answer. If economic growth demands that
we loosen family bonds, encourage people to live away from their parents, and
import carers from the other side of the world – so be it. This answer, however,
involves an ethical judgement rather than a factual statement. No doubt, when
some people specialise in software engineering while others spend their time
taking care of the elderly, we can produce more software and give old people
more professional care. Yet is economic growth more important than family
bonds? By daring to
make such ethical judgements, free-market capitalism has
crossed the border from the land of science to that of religion.
Most capitalists would probably dislike the title of religion, but as religions go,
capitalism can at least hold its head high. Unlike other religions that promise us
a pie in the sky, capitalism promises miracles here on earth – and sometimes
even provides them. Much of the credit for overcoming famine and plague
belongs to the ardent capitalist faith in growth. Capitalism even deserves some
kudos for reducing human violence and increasing tolerance and cooperation.
As the next chapter explains, there are additional factors at play here, but
capitalism did make an important contribution to global harmony by encouraging
people to stop viewing
the economy as a zero-sum game, in which your profit is
my loss, and instead see it as a win–win situation, in which your profit is also my
profit. This has probably helped global harmony far more than centuries of
Christian preaching about loving your neighbour and turning the other cheek.
From its belief in the supreme value of growth, capitalism deduces its number
one commandment: thou shalt invest thy profits in increasing growth. For most
of history princes and priests wasted their profits on flamboyant carnivals,
sumptuous palaces and unnecessary wars. Alternatively, they put gold coins in
an iron chest, sealed it and buried it in a dungeon. Today,
devout capitalists use
their profits to hire new employees, enlarge the factory or develop a new
product.
If they don’t know how to do it themselves, they give their money to somebody
who does, such as bankers and venture capitalists. The latter lend the money to
various entrepreneurs. Farmers take loans to plant new wheat fields, contractors
build new houses, energy corporations explore new oil fields, and arms factories
develop new weapons. The profits from all these activities enable the
entrepreneurs to repay the loans with interest. We now have not only more
wheat, houses, oil and weapons –
but also more money, which the banks and
funds can again lend. This wheel will never stop, at least not according to
capitalism. We will never reach a moment when capitalism says: ‘That’s it. You
have grown enough. You can now take it easy.’ If you want to know why the
capitalist wheel is unlikely ever to stop, talk for an hour with a friend who has just
earned $100,000 and wonders what to do with it.
‘The banks offer such low interest rates,’ he would complain. ‘I don’t want to
put my money in a savings account that pays hardly 0.5 per cent a year. You
can make perhaps 2 per cent in government bonds. My cousin Richie bought a
flat in Seattle last year, and he has already made 20 per cent on his investment!
Maybe I should go into real estate too; but everybody is saying there’s a new
real-estate bubble. So what do you think about the stock exchange?
A friend
told me the best deal these days is to buy an ETF that follows emerging
economies, like Brazil or China.’ As he stops for a moment to breathe, you ask,
‘Well, why not just be satisfied with your $100,000?’ He will explain to you better
than I can why capitalism will never stop.
This lesson is hammered home even to children and teenagers through
ubiquitous capitalist games. Premodern games such as chess assumed a
stagnant economy. You begin a game of chess with sixteen pieces, and you
never finish a game with more. In rare cases a pawn may be transformed into a
queen, but you cannot produce new pawns, nor can you upgrade your knights
into tanks. So chess players never have to think about investment. In contrast,
many modern board games and computer games
revolve around investment
and growth.
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