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12 February 2012

Why Capitalism Is Worth Defending

The Cato Institute recently published an article by Jim Powell that is worth a read.  Here is an excerpt:

For thousands of years, there was virtually no such thing as human progress. The great French historian Fernand Braudel observed, “Peasants represented immense numbers of people, the vast majority of human beings... constant poverty... For century upon century, clothing remained unchanged... the general rule was changelessness.” In Europe, peasant possessions were generally limited to little more than a shirt, a pair of pants, perhaps a simple jacket, a bench, a table and a straw-filled sack that served as a mattress. In India, there were hardly any chairs or tables to be found. There were few chairs in Islamic lands. Multitudes perished because of famines — France alone had hundreds of famines before 1800. Famine undermined the ability of people to resist common deadly diseases like typhoid fever, purple fever, whooping cough, sweating sickness, diphtheria, smallpox, influenza, syphilis and the plague.

Capitalism, as economic freedom is often called, has changed the world for the better by harnessing individual self-interest — the most reliable motivator there is. In markets, functioning without subsidies, special favors or bailouts, entrepreneurs have had powerful incentives to provide what consumers want.

Markets, cities and civilization arose along trade routes where it was convenient for people to gather, such as on rivers or a coast. “Markets,” Braudel declared, “endlessly worked on economies, stirring them up, bringing them to life.” Historian Will Durant added that “Trade was the great disturber of the primitive world.”

In many places, local people used common property for grazing, but they didn’t have any incentive to improve common property, since somebody else would gain at least part of the benefit. Then in England during the 1700s, higher grain prices led property owners to begin enclosing common property. In many cases, local people received cash settlements. In other cases, common property was enclosed by act of Parliament, and the affected local people were often angry. But once land was enclosed, owners had incentives to improve it, because they would benefit. They drained marshes, grew more crops, built walls and erected buildings including houses for laborers who worked on their property. Agricultural output went up, helping to banish famines.

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