How (Real) Capitalism Works

English: (Photo credit: Wikipedia)

A couple of interesting things here, relating to capitalism, and just how very far we’ve come in the last few hundred years.

First off Deidre McClosky is in the process of explaining how we got so rich. From the Spectator, UK.

Deirdre McCloskey has been at work for many years on a huge project: to explain why the world has become so much richer in the past two centuries, and at an accelerating rate since 1945. This is the third and final volume in the series. In it she argues that ‘our riches were not made by piling brick on brick, bank balance on bank balance, but by piling idea on idea’. The Great Enrichment, which she dates from 1800 to the present, depends on the spread of ideas of liberty, seeded in a series of ‘egalitarian accidents’ in European politics between 1517 and 1789.

The liberalism she describes operates in a very narrow free zone, hemmed in by what she calls the ‘clerisy’ — critics on left and right alike who do not accept a full version of liberalism — and roughly a third of the text sees McCloskey, vorpal sword in hand, slaying the dragons of the state. But she’s fighting enemies from the past: her side has won the battle. Globalisation, neo-liberalism, the expansion of monetary assets and instant internet communication have spawned a new world order without any state powerful enough to contain it.

A couple of notes here, unless I’m mistaken, she’s referring here to classical liberalism, not the socialistic nonsense we hear now on both sides of the Atlantic. And she has much right, although I find the adjective European, misleading at best because it has little to do with Europe, it is the classical form of the British and American ‘rule of law’ that has made it so. There’s a reason why the industrial revolution happened first in that ‘nation of shopkeepers’ and then why they financed it here. More later on that.

[…] The world today produces 70 times more goods and services worldwide than in 1800. McCloskey gives imaginative examples of the improved standard of living by looking at the products in one’s room, starting with ‘the 20 ballpoint pens stuffed into a mass-produced coffee cup, pens and cups greatly cheapened after the second world war’. I have just that on my desk. Citizens of the most prosperous half of the world are hundreds of times better off than they were even in 1900 or 1945, and that standard of living is spreading quickly to the poorer places on the planet. A small refrigerator at Home Depot today costs 15 hours of work: at Sears in 1956 it cost 116 hours.

The history of western capitalism does owe a great deal to the onward march of ideas of liberty. But it’s not the whole story. The greatest expansion of capitalism, the Chinese economic miracle, has taken place under a very restrictive communist regime.

Except the Chinese form of capitalism bears about as much resemblance to real capitalism as does that of Mussolini. I wonder what the Chinese could do if the government got out of their way. And finally:

Unbridled liberalism on a global scale today has little in common with its portrait in this book. It has exploded its limiting conditions to make the whole world economy a giant speculative game. It looks, to this member of the clerisy, to be a threat to the society that spawned it.

All from: How capitalism really works

And that’s one problem with the British, and increasingly, with us as well. We’ve forgotten how we got rich, and now we’re getting poorer because we aren’t doing those things anymore. Instead, we’re copying the Chinese, God help us!

You’ve likely heard that Beyoncé’s clothing line is produced in Sri Lankan sweatshops. Well, that’s a shame, It’s also what happens in every single industrializing country, not excluding the UK and the US. When labor is plentiful and jobs are few labor gets paid less, always. And by the way, if Trump gets his tariffs, those jobs won’t be coming back, but the prices will be going up probably far more than the tariff rate, and a good many of those sweated seamstresses (who in actuality make far more than most of their neighbors) will revert to the real minimum wage, which is $0. And there is this.

In 2001, Nobel Prize winning economist Milton Friedman Paul Krugman, whose written some of the most effective defenses of so-called sweatshops — “bad jobs at bad wages are better than no jobs at all” — explained why these efforts were insanity:

In 1993, child workers in Bangladesh were found to be producing clothing for Wal-Mart, and Senator Tom Harkin proposed legislation banning imports from countries employing underage workers. The direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets — and that a significant number were forced into prostitution.

When VICE reached out to a Sri Lanka labor expert, no doubt expecting him to describe some soul-crushing hellhole, it got a pretty tepid response. “MAS [the factory] are essentially top of the range in terms of labour conditions in Sri Lanka,” Dr. Kanchana Ruwanpura of the University of Edinburgh told VICE. “They’re brilliant factories in terms of the build space and the attention they usually pay to the codes they work with. However, I would say that when it comes to wages and freedom of association, MAS don’t do a very good job.”

So, after having to grapple with two inconvenient facts — 1) that salaries at MAS are better than prevailing wages in Sri Lanka, and 2) that the factory is probably a relatively modern and safe place to work[…]