"Capitalism begins with Giving"?
To say "Capitalism begins with giving" captures the attention of many and calls to question the intentions behind capitalism. Which is what George Wilder explores in his book, Wealth and Poverty, published in 1981, this book explores the beginning foundations which capitalism was built upon.
In chapter three of his book, The Returns of Giving, Wilder focuses in on the act of "giving" that started in tribal groups and how this important transaction took part in the evolution of capitalism as we know it today. Wilder refers to the works of "economic anthropology" and that gift giving was a way of building a social life and building reciprocity in and outside the tribes as a way to "transcend" from the limits of their lives (Wilder 28).
How Does Capitalism Translate to Giving?
These actions of giving were the catalyst needed to begin a system of
realizing need through sympathy, recognizing risk, trading what one had as a gift that would be reciprocated in one way or another with something of equal or greater value. Wilder also calls to attention the importance of understanding the recipient and being able to give them something that fulfills a need in their life (Wilder 31).Reading through the first pages of the chapter, one may be confused to the word "giving" and what is meant by this. Wilder does explain what he means by "giving", he describes it as "The essence of giving is not the absence of all expectation in return but the lack of a predetermined return" (Wilder 35). It is these entrepreneurs that recognize an unfilled need and take their own assets, money, etc. and take a risk to fill this need that constitutes "giving".
The Motivation Behind "Giving"
Wilder believes capitalists are not motivated solely by profit or expected return but by the power and freedom that is practiced by indulging in their entrepreneurial ideas (Wilder 35). The role that a capitalist fills in society is not necessarily negative or driven by greed, however with all things there is a balance. Humans can and have been solely driven by greed and this can easily extend to capitalists, whereas other professions may be slower to turn to greed than others. Wilder does emphasize the importance of the wealth accumulated staying with the entrepreneur, as they know the best way for the wealth to be used/distributed. The government whether through subsidies or welfare is not calculated in their actions and takes away, what I would describe as "freedom" in these actions. In giving subsidies or welfare, the government creates a cycle of dependence and reliance for the recipients. The capitalist is calculated and offers a product that offers a long-term value unknown by those who rely on "charity".
In the last pages of the chapter, Wilder goes over the many problems seen with a planned market, or a market with government control. The government cannot calculate the demand ("output"), so why should they be able to control the supply ("input")(Wilder 46)? "Progressive tax rates" destroy incentives and destroy knowledge (Wilder 44).If one has heard of Burt Folsom or ready my previous blog post, they may know of how a government subsidy had the same reaction on the transcontinental railroads. The two businesses receiving subsidies for building the railroad, resorted to building curvy tracks to receive more money for more mileage and did not take the incentive to learn how to cross through the mountains. However, the entrepreneur, James H. Hill, build his own transcontinental railroad that was shorter and completed connected each side of the nation. Studying Lewis's and Clark's journey, he was able to find a path through the mountains that he build his railroad through.
Lastly, Wilder goes over what it takes to have a capitalistic society that is prosperous. The gifts provided by capitalists must spring from a truly understanding point of what consumers need and the capitalists in return must rely on "fair and responsive humanity" (Wilder 48). Capitalism is not build upon a foundation of greed or profits but a will to give and individuality and freedom. Wilder proclaims that when this faith in the market, entrepreneur, etc dies, so will our enterprise. So one must keep this faith alive to foster a prosperous market.
How Does this Translate to Today?
While I see and understand the importance of capitalism that is highlighted in this text, I find that modern capitalism is less personal than the small feasts enjoyed by tribes. Hosting these feasts weren't in hopes of monetary riches but rather for a societal gain and hopes of building a stronger community. I think today's society has lost that sense of personal and rather partakes in the consumerism that is peddled by the large corporations. While it is important for global and even inter-state economics that we have these businesses, I wish we had more meaningful transactions.
I also thought that the idea that capitalists are not driven by profit or wealth, to be somewhat inaccurate. Capitalists would not invest in ventures that are not equitable. I think wealth to be the main driver for entrepreneurs. However, there is nothing inherently wrong for doing so. It becomes wrong when an entrepreneur knowingly cuts corners or lobbies for their own wealth interests at the cost of a better society. For example, lobbying for nicotine or less regulated safety precautions. For example, before the Ohio train derailment the Northfolk company spent considerable money against safety regulations. Perhaps the accident could have been avoided if there was better regulation in place, but Northfolk was more focused on less regulation for more profit. However, it can not be denied how important capitalism is for a free society where anyone can achieve the wealth they seek. Wilder is correct in the importance of an entrepreneur and the risk they take to give consumers something they need.