Capitalism is for Givers
Gilder, George
THE AMERICAN SPECTATOR VOL. 15, NO. 2 / FEBRUARY 1982 George Gilder CAPITALISM IS FOR GIVERS Blessed be the altruist. The New Republic, that thoroughly secular voice of American...
...The unending offerings of entrepreneurs, often over a period of profitless years, investing capital, creating products, building businesses, inventing jobs, accumulating inventories--all without any assurance that the enterprise will not fail--constitute a pattern of giving ttmt dwarfs in extent and in essential generosity any primitive rite of exchange...
...I n investments, capitalists relinquish resources *o others in the hope of surprising transformations, new goods and services, new value to be reinvested...
...Without a monetary economy, such gifts could be seen as a necessary way to escape the constraints.of barter, to obviate the exact coincidence of wants and values required by simple trading...
...Value lies always essentially in the eyes of the beholder...
...As socialists, they maintain that modern capitalism, with its impersonal marketplace, leads to alienation and conflict, to a psychologically shallow and paltry existence, contrasting with all the magic, moral, and sentimental resonance of life among savages...
...Capitalists collectively save far more over their lifetime than they ever consume, as is shown by an increasing body of economic research...
...Capitalism, in their view, is fundamentally amoral and materialist...
...But the crucial fact about them is their deep interest and engagement in the world beyond themselves, impelled by their imagination, optimism, and faith...
...The idea that our economic system finds its roots in the religious order--and will wither in the world of secular self-interest to which its advocates consign it--arouses bitter hostility among "conservatives...
...As an example for others, it may foster an outgoing and generous spirit in the community...
...Although the desire t6 consume is ubiquitous and plays a significant role in motivating all men, far more important in capitalism is the purposeful drive to understand the world and to create things: to generate wealth (value defined by others) and reinvest it in the continuing drama of human invention and progress...
...Reciprocity," as Levi-Strauss writes, is the "very essence of social life...
...The progress of economies can indeed be measured by the extent of the system of exchange...
...endorsement from Saduhl River, Nu Jersi...
...Capitalism---:the system of private property with freedom to give, explore, and create--partakes of the very essence of all good and productive human activit T. Feasting and potlatching illustrate a capitalist tendency to assemble and distribute wealth...
...Or even that Chiang Ch 'ing had become Jiang Qing (even though there were some who rejoiced that Iraqi was no longer the only word with a q in it that was not followed by a u...
...Adam Smith was at once an intellectual who shared all the typical prejudices against the business class and a libertarian conservative who knew the value of freedom and enterprise...
...Smith believed that capitalism worked not because of the virtues of capitalists but because of the " g r e a t machine" of exchange that converted their apparent greeds and vices into economic value...
...A gift will only elicit a greater response if it is based on an understanding of the needs of the recipient...
...Although many capitalists fail to fulfill the essential values of the system, the problem of free economies is not the n a t u r e of their economics, but its corruption by a secular humanist and amoral culture...
...It is not the exchange that elicits the goods and generates the increase in their value...
...But to intellectuals this theory had the cruciai advantage of praising capitalism without exalting capitalists...
...It seems preposterous to most people to say that the way to create a good and bountiful society is to give maximum freedom to a group of predatory philistines...
...Similarly, a society without welfare of any kind--a system like the Soviet Union or China that forces people to work on pain of starvation-is as hostile to the spirit of giving as a society that forces them to work at the point of a gun...
...Economists could find in Smith's theory of self-interest an apparently safe and orderly, even mechanically predictable, core of calculation as the source of economic growth...
...The essence of giving is not the absence of all expectation of return, but the lack of a predetermined return...
...In fact, as I have learned from the barrage of derision heaped on any references to religion or faith in a book of George Gilder is author, most recently, of Wealth and Poverty...
...It is capitalism that best combines the desire and ability to do good and create value with the resources to accomplish these goals...
...The movement spread quickly to Xikago, then to Qarlstun and, for all we know, may soon cross the Englix Qannel, though the Kwien's Englix is always resistant to change...
...Then the spirit of giving spreads, and wealth tends to gravitate toward those who are most likely to give it back, most capable of using it for the benefit of others, toward those whose gifts evoke the greatest returns...
...The investor must give his money, offer his goods, freely, depending on the voluntary willingness of others to respond with creative efforts of their own...
...The understanding of the law of reciprocity, that one must supply in order to demand, save in order to invest, consider others in order to serve oneself, is crdcial to all life in society...
...Subsequent investigative reporting has uncovered the fact that this was an inspired leak...
...Given the historical dimensions of the President's decision, public reaction has been mixed, ranging from only mild skepticism to enthusiastic support...
...It is Catholic leaders proclaiming new "limits to growth" who betray the mandate of Providence and deny the infinite resources of mind...
...In truth, English spelling was never much influenced by this ancient Chinese practice...
...Qehvi Qeis, Maryland, will really feel the pinch, but in the state of Mein, folks will probably not even notice...
...In a capitalist system, the exchange itself is indeed governed by computations of what might be termed self-interest, as the participants negotiate a price agreeable to each...
...Or that Chou En-lai should be rendered Zhou Enlai...
...The most valuable recent addition, however, is a new system for the spelling of English...
...True generosity is not soft or sentimental...
...Presumably because the compensation was not specified beforehand or paid in what we call money, anthropologists everywhere depict this activity in the idiom of givirig and gifts...
...But the Western world cannot afford to be arrogant about it...
...Indeed, it is the very genius of capitalism that it recognizes the difficulty of successful giving, understands the hard work and sacrifice entailed by the mandate to help one's fellow men, and offers a practical way of living a life of effective charity...
...Steeply "progressive" tax rates not only destroy incentives...
...parting with his goods in order to partake of a growing diversity of goods donated by his peers...
...Such a universal trait as self-interest-altogether as prevalent in any socialist backwater or deadening bureaucracy as in the realms of great enterprise--will reveal virtually nothing of the rare sources of riches in human society...
...These competitions succeed in generating new wealth largely to the extent that they are contests of altruism, defined as a regard for, or orientation toward, others (from the Latin alter, meaning other...
...But the trend toward interdependence is irreversible and, if people are to communicate with each other in an effective manner, some order has to be brought out of the chaos...
...They take from the givers and thus prevent them from giving again, from reinvesting their winnings in the light of the new information generated by the original gift...
...Presumably...
...There is far more in the human psyche than a self-interested demand for goods and services, now or later...
...Free market transactions continually improve the distribution of goods in a community by moving them from owners who value them less to owners who value them more...
...scores of thousands of them lurching forth with growth rates of between 20 and 40 percent and more, and suffering from crises of expansion and cash flow...
...The best giver is the anonymous donor of money or valuable things, while the investor is seen in the image of a Shylock extorting usurious gains from lending money, or a Scrooge exploiting workers to make sure profits...
...A common understanding of the true sounds of the vowels and consonants is necessary for the formulatio, of a common strategic doctrine...
...Such a vision, however, is unattractive to most religious or otherwise idealistic thinkers and simply unbelievable to the average man...
...In a 10w-income-low-profit THE AMERICAN SPECTATOR FEBRUARY 1982 9 system, small businesses cannot swiftly rise up to exploit new ideas, overcome their crises of growth or respond to the kaleidic changes in knowledge and opportunity that continually transpire...
...Capitalists need capital to fulfill their role in launching and financing enterprise...
...Businessmen provide a continuing challenge both to men who refuse a practical engagement in the world, on the grounds that it is too dangerous or corrupt, and to men who demand power over others in the name of ideology or expertise, without first giving and risking their wealth...
...It consists not of "giveaways" but of responsible giving...
...they take infinite pains and they strike fast...
...Subjective profits do steadily expand the real wealth of the tribe...
...The market provides only the routine climax, the perfunctory denouement, of a tempestuous drama, dominated by the incalculable creativity of entrepreneurs, making purposeful gifts without predetermined returns, launching enterprise into the always unknown future...
...According to von Hoffman, the Pope emphatically rejects the free-market ideas, founded on a concept of homo economicus and governed by the invisible hand of Adam Smith, that supposedly prevail in the Reagan Administration and the circles of supply-side theory...
...Not everyone would react to the receipt, on his front lawn, of 16,000 coconuts--or of one swaybacked but very holy cow--by working obsessively to surpass it...
...The investor cannot be fundamentally selfish...
...As any perplexed recipient of expensive but horribly inappropriate Christmas offerings can attest, giving is difficult and requires close attention to the conditions of others' lives, their tastes and preferences, their exisung possessions, their ambitions and goals...
...The crucial capital of the system is not the physical accumulation of natural re...
...Although the acknowledged champions in this field were the Kwakiut of Alaska and British Columbia (celebrated by Levi-Strauss for a "genius . . . in their expression of the fundamental themes of primitive culture"), such activities were also common in hundreds of other welldocumented societies...
...The crucial question with regard to gift-giving as a prototype of capitalism is the source of capital gains, or the increase in the total value of the society's goods...
...Wi shud hay dun it lawng agau...
...Yet, entrepreneurial activity is usually necessary to all practical compassion and charity, just as understanding and good will toward others is necessary to most entrepreneurial success...
...A further explanation comes from Adam Smith...
...This vision captures an important truth...
...By this measure, a welfare system of direct money grants financed by anonymous taxpayers through the choices of their elected representatives can be the epitome of compassion and charity...
...176176176176176176 . . . . ~ ~ 1 7 6 1 7 6 1 7 6 John Nollson AIX-EN-PEKING As everyone knows, almost everything useful--from noodles to gunpowder--was invented in China...
...Man, however, not mechanism, is at the heart of capitalist growth...
...The rewards of capitalists, however, do not simply constitute a tribute to virtue or an accohamodation for a particular style of professional life...
...As for Arkansaw, it is universally agreed that the new spelling is far more sensible...
...THE AMERICAN SPECTATOR FEBRUARY 1982 13...
...Although a marketplace may work mechanically, an economy is in no sense a great machine...
...Giving is the vital impulse and moral center of capitalism...
...The successful enterprise imparts to the entrepreneur financial resources as well as knowledge...
...If religion is true, its truth must necessarily apply to the economic sphere--to all the great ventures of enterprise and production to which all societies devote so much of their time and treasures...
...In his desire to found a Newtonian science of political economy, he inflates the instrumental mechanism of trading into a complete economic universe, in which there is little or no room for the unpredictable activities of free businessTHE AMERICAN SPECTATOR FEBRUARY 1982 11 men...
...Yes, their goals seem more mercenary...
...If the Church is truly concerned with the material problem of world hunger and poverty, it should maintain a becoming modesty about its own mostly feckless efforts at distributing food (any multinational agribusiness, after all, far excels the Church in the physical nourishment of its sheep...
...The President is surely correct, and it remains only for our leadership to be ratified by the remaining members of NATO...
...Entrepreneurs must be allowed to retain wealth for the practical reason that only they, collectively, can possibly know where it should go, to whom it should be given...
...But modern corporations, with their millions of free customers and shareholders--many of them workers with pension funds--diffuse the control and benefits of production more widely and concretely than any bureaucracy of socialism or UN agency...
...This conflict poses a genuine problem for conservative thought...
...For most, the problem is a misunderstanding of the nature and role of giving in human society The conventional wisdom, whether liberal or conservative, free market or socialist, regards charity o r generosity as essentially simple--just giving things away without calculation or continuing concern with their uses...
...Viv Duhgawl...
...In essence, Smith and his followers believe that the wealth of nations springs from a kind of Faustian pact: a deal with the devil through which humans gain wealth by giving in to greed and avarice...
...Nau that aur tu pipulz hav disidehd tu render Englix ihn thuh seim wei, t h e i r ic no limit to thuh s u t a r i z h i k kansensuc we kan riq...
...The ceremonial offerings often took place between tribes that were otherwise feuding, and some successful tribesmen made gifts chiefly to appease the jealousy of others...
...Economies run not only on light but also on heat and energy, not merely on information but also on courage and skill...
...it all depends upon the direct effect on local communities...
...Thuh Sekratehri ov Suteit cekundehd thuh Pureisiduhnt's thauts...
...Generous and creative men cannot command the resources to expand their influence and foster new projects...
...But this solution will not work for conservative~ liberal, and libertarian theorists who understand the benefits of capitalism for the production of wealth and the promotion of freedom and democracy...
...Are they self-interested...
...Only if the fisherman can trade his extra fish for other things he needs can he afford to specialize in fishing...
...Even the most indigent families will do better under a system of free enterprise and investment than under an excessively "compassionate" dole which asks no return...
...The anonymous private donation may be a good thing in itself...
...Materialist indulgence is the perennial enemy--and temptation--of capitalism, particularly when confiscatory taxes balk the crucial processes of reinvestment and growth...
...The Pope is perfectly right in denouncing materialism...
...But many primitive societies, for all their gift-giving, remained poor...
...Naht sins wi disaidid tu ahdahpt thuh mehtrik xystum hay wi bin so ihnternaxunuhl in awr autluk...
...Trading itself provides part of the answer...
...Contrary to the notions of Mauss and Levi-Strauss, the giving impulse in modern capitalism is no less prevalent and import a n t - n o less central to all creative and productive activity, no less crucial to the mutuality of culture and trust--than in a primitive tribe...
...They must save before they can give...
...They are inventors and explorers, boosters and problem solvers...
...The disdain for businessmen is scarcely less common among thinkers on the Right than on the Left...
...It assigns further power to those very...
...Most free systems now assign some 85 percent of income to labor, and comprise millions upon millions of small businesses...
...In fact, the White House has already begun to prepare legislation which will empower the Administration to issue the necessary rules and regulations...
...The effort to force work, like all attempts to predetermine returns by coercion or exploitation, is inimical to the spirit of giving on which capitalist growth depends...
...This article, attacking the religious and moral presumptions of capitalism, aroused only one letter of rebuke, a lame libertarian slur on the Pope...
...They are men with an urge to understand and act, to master something and transform it, to work out a puzzle and profit from it, to figure out a part ofnature and society and turn it to the common good...
...The circle of giving (the profits of the economy) will grow as long as the gifts are consistently valued more by the receivers than by the givers...
...In explaining the extraordinary productivity of capitalism, howeve r , the anthropology of the potlatch impels us to focus not on the exchange mechanism (the market) but on the prior gift and its creation...
...It is not Reagan, however, but the Pope's own socialist bishops seeking salvation through the redistribution of material wealth by the state who connive at the moral destruction of poor families in America in exchange for the pottage of an excessive dole...
...Such gifts are either exchanged immediately for equivalent gifts, or received by the beneficiaries on the condition that on a subsequent occasion they will return the gesture with other gifts whose value often exceeds the first,, but which bring about in their turn a right to receive later new gifts which themselves surpass the magnificence of those previously given . . . give back with proper 'interest' gifts previously received...
...Nonetheless, how ever complex and tangled in motive and historical development, these pervasive efforts to transcend selfishness, to extend human intercourse, to reach out to others with offerings to them constitute the psychological and v 8 anthropological roots of capitalist wealth...
...It is no more sensible to begrudge the entrepreneur his profits--or ascribe them to overweening avarice--than to begrudge the writer or professor his free time and access to libraries and research aides, or the scientist his laboratory and "assistants, or the doctor his power to prescribe medicines and perform surgery...
...In The Wealth of Nations Smith implies that in some possibly mystical way the market process precedes and subsumes the process of product-ion--that entrepreneurial creativity is determined in some way by "the extent of the market" and reflects the same kind of serf-interested rationality that governs the market itself...
...Libertarian authors of best-selling books on "looking out for number one" end up despairing for the future of the system, predicting depression and decline, and advocating withdrawal from productive investment...
...Many theorists have focused on voluntary exchange as the secret of the creation of wealth...
...Sensible levels of benefits are indeed generous and capitalistic since they relieve people of coercion and thus permit them freely to join the system of giving...
...Under capitalism, economic power flows not to the intellectual, who manipulates ideas and basks in their light, but to the man who gives himself to his ideas and tests them with his own wealth and work...
...Excessive welfare hurts its recipients, demoralizing them or reducing them to an addictive dependency that can ruin _9 their lives...
...It is the process" of invention and specialization-L-the production of new goods--that expands the market...
...The anthropological literature, however, does not sustain the idea that the exchanges of primitive society produced a more benevolent form of social existence than prevails in the modern world...
...The New Republic, that thoroughly secular voice of American liberalism, recently found reason to celebrate the Pope...
...Even though the conservative thinker often has little more respect for capitalists then the socialist does--variously regarding businessmen as vulgar, self-serving, stuffy, unrefined, unidealistic, amoral, and uninteresting compared with intellectuals--the conservative's ideology requires that he favor business...
...Even the failures in a sense succeed and the much remarked "waste" of the system is often redeemed by the accumulation of information and experience, a crucial form of intangible capital, held by both the entrepreneurs themselves and by the society at large...
...His solution was to locate the source of wealth not in the creative activities of businessmen but in the "invisible hand" of the market...
...It is relatively small firms in free economies that have impelled 12 THE AMERICAN SPECTATOR FEBRUARY 1982 the vast increase in human wealth, and destroyed the class society, while class war persists virulently between bureaucrats and proletarians in every socialist state...
...It gives control over resources and over the future flow of investment not to political bureaucracies of certified experts or to the most avidly serf-loving pursuers of leisure and luxury, but to the particular businessmen who manage successful experiments of enterprise...
...Flaunting the Pontiff on its cover as a friendly old coot and man of the people--suggestive perhaps of Peter Falk's "Columbo" in a terrY cloth wrap-the liberal magazine proclaimed him an ardent enemy of Reaganomics and foe of capitalism...
...It is Church leaders condoning a mood of sexual hedonism, hostile to all familial continuities, who implicitly degrade the claims and rewards of the spirit...
...The flood of protean growth can be comprehended and sustained only by millions of individuals with access to disposable savings and deep involvement in the companies themselves--that is, by investors who have money of their own and who can share in and pass on the profits as they gain new knowledge and investment skills...
...Similarly, it is not the market that expands the division of labor...
...Smith brilliantly demonstrated the marvels of such markets in optimizing the distribution of goods and reconciling the competing concepts of value in any economy...
...Nonetheless, welfare beyond a minimal level becomes deeply problematic...
...In fact, Levi-Strauss avers that " g i f t exchange and potlatch is a universal mode of culture...
...But both Mauss and LeviStrauss insist that the exchanges are not THE AMERICAN SPECTATOR FEBRUARY 1!)82 7 chiefly economic...
...The fact is that the central truths of most of the world's religions--and particularly the JudeoChristian tradition--apply luminously to capitalism...
...It is the capitalist who renounces the zero-sum imagery of socialist planning--and the disguised egotism of "revolutionary" leadership--and asserts the golden rule that the good fortune of others is also one's own, that the expansion of trade always depends on the success, the trust, and the understanding of others...
...Capitalism is suffering from the increasing betrayal of its moral, spiritual, and religious foundations by churches and schools, priests and politicians, conservatives and liberals, who believe that the paramount laws of giving and faith are irrelevant to the great dreams of human creativity and production, science and art...
...But this is only because money is their very means of production...
...even the Biblical injunction affirms that the giver wilt be given unto...
...But it was their very "self-love," their avarice, their desire for self-indulgence that impelled the growth of economies...
...they earn their money and power only at the expense of others, by pursuing the zerosum maneuvers of excessive government, financial finagling, sclerotic bureaucracy, and legal pettifoggery, or by retreating into the invisible arms of an overgrown system of public sumps and subsidies...
...The Pope is right in supporting a broad ownership of the multinational means of production, and he is right in denouncing the exploitation of the many by the few in a class society...
...Ix auk bihn ain Berliner...
...Yet the belief that economics comprises a separate realm, almost completely divorced from the religious foundations of civilized life, is preposterous on its face...
...Are they greedier than doctors or writers or professors of sociology or assistant secretaries of energy or commissars of wheat...
...The Pope, if he looked carefully, could see that the worldly society of his dreams is--in fact--capitalism...
...Qeerio...
...The two French intellectuals lament the more abstract, "purely economic" modes of exchange found in modern society, in which gift-giving is said to play a trivial or merely ceremonial role...
...To the exxent that the capitalist allies himself with the government or uses other modes of force in an effort to predetermine outcomes, he is just another kind of socialist, sometimes termed a fascist, rather than an investor who makes his contributions in the hopes that others will want them and willingly work to earn them...
...and bishops should stop teaching the poor the absurd and disabling myth that their problem is the wealth of capitalists--and that the solution is stealing it from them (i.e., socialism...
...it merely reflects a mutual transfer of information, allowing an appropriate allocation of resources...
...It offers a vast Babel of business plans and projects presented by every form of fast-shuffling charlatan, business school wro, flimflam artist, sleek financier, computer shark, shaggy boffln, statistical booster, every imaginable combination of managerial, marketing, engineering, and huckstering skills, all inscrutably mixed in a teeming marketplace of "investment opportunities": overand under-the-counter shares, Denver "penny stocks," Sub-Chapter-S corporations, limited partnerships, proprietorships, franchises, concessions, leveraged buyouts, leasebacks and carryforwards, spreads and deals of every description...
...Even among exceptionally ambitious and committed men, self-love leads not to the giving of oneself and one's wealth to the realm o f chance and fate, shaped by the decisions of 10 THE AMERICAN SPECTATOR FEBRUARY 1982 others in the market...
...How do societies become rich...
...Under a system of forced redistribution, aggressive or ambitious men gain their inevitable advantages not by giving but by taking...
...More important, it had a special appeal to many economists, attempting to reduce the productive behavior of men to a sifientific system...
...The fact is that it is extremely difficult to transfer value to people in a way that actually helps them...
...This was first appreciated by the good citizens of Zhoplin, Missouri who, in a local referendum, voted to adopt China's pinyin system for the rendering of English...
...It is these capitalists, extending the division of labor by launching new goods and services, who expand the market, not the other way round...
...Information alone, though, cannot make the system grow...
...Successful capitalism confronts the potential investor, public or private, with millions of small companies (nearly 16 million io the U.S...
...He had invented a form of capitalist investment, giving up his wealth in order to save it...
...They can feel free to denounce business and urge the dissolution of the business class...
...No matter how many coconuts or cowrie shells or cattle are ultimately exchanged, the two parties may well end up, indeed often did end up, little better off than before...
...In this voluminous literature anthropologists readily assert that these "gifts" are not offered without an expectation of return...
...Accompanying every visible profit earned by enterprise is an invisible profit of expanded knowledge...
...economics, most of America's capitalist intellectuals readily and even fervently grant the essential correctness of the von Hoffman claim...
...Not inspired and unruly entrepreneurs or rambunctiously creative businessmen govern the Smith machine, but a crude form of homo economiaus, a utility-maximizing agent, calculating gains and losses, and galvanized by incentives for selfaggrandizement...
...The fatal problem of a system without accumulations of personal income and the possibility of large profits is not the lack of incentives but the lack of dynamism and flexibility...
...It has little to do with the often lazy "good works" of the gullible, all the protests and programs of "social change" and equality urged by the Left...
...Most studies of primitive society abound with tales of gifts, offerings, "prestations," presents, tributes, and ritual exchanges, all the elaborate patterns of giving and receiving that preoccupy tribal groups when they struggle to transcend .the limits of their lives of labor and subsistence...
...The primitive entrepreneur became impatient with the tangled negotiations of exchange and THE AMERICAN SPECTATOR FEBRUARY 1982 started simply donating his product...
...The gift comes first...
...only if the baker can trade his surplus bread can he afford to build an oven and man it...
...Just as the sociologist requires books and free time and the bureaucrat needs arbitrary power, the capitalist needs capital...
...In deciding what new goods to assemble or create, the givers therefore must be willing to focus on the needs of others more than on their own...
...The greatest damage inflicted by state systems of redistribution is not the "distortion of markets," the "misallocation of resources," or the "discoordination" of producers and consumers, but the deflation of capitalist energy, the repression of entrepreneurial ideas, and the stultification of wealth...
...But as a rule of society it is best if the givers are given unto, if the givers seek Some form of voluntary reciprocation...
...In Qina itself, the man in the street is delighted, and Richard Nixon issued his own warm...
...The dilemma was resolved, however, at the very beginning of the industrial revolution by the leading philosopher of classical liberal economics...
...The evidence begins in the works of "economic anthropology," from Marcel Mauss's classic The Gift to Claude Levi-Strauss's The Savage Mind...
...This is the second time the Chinese have devised a way of doing it...
...Businessmen may be vulgar and avaricious, full of "childish vanities" and selfish indulgences, said Smith...
...Typesetters and lexicographers from kohst to kohst have now been alerted that they must begin to prepare for the changeover...
...T h i s process, however, is not well understood...
...The anthropological evidence suggests that capitalism begins with the gift and continues with competitions in giving...
...Capitalists are motivated not chiefly by their desire to consume wealth or indulge their appetites, but by the freedom and power to consummate their entrepreneurial ideas...
...The gifts of capitalism generate economic progress chiefly because they comprise an epistemological system: a way of making discoveries and exploiting them...
...All our recent history demonstrates that the so-called "me-generation" of egocentric men seek not the productive adventure of enterprise hut the comfort and security of the welfare state, even if disguised in the form of protectionist tariffs, parity systems, or other invisible handouts...
...Smith's analysis fails, however, because he subordinates a higher and more complex level of activity--the creation of value--to a lower level, its measurement and exchange...
...Capitalism is the most effective way of expanding wealth not chiefly because it offers the most powerful incentives, the most tantalizing arrangement of carrots and sticks, but because it links knowledge with power...
...This essay is adapted from a new chapter which appears in the Bantam paperback edition of the book published last month...
...9 Q _9 Capitalism begins with giving...
...Governments are entirely and inevitably unable to master the baffling specificity and elusiveness of economic opportunity...
...Capitalism begins not with exchange but with giving...
...It is startling to discover that users of the Roman alPhabet must turn to China in order to learn how to Romanize their native tongues...
...It is not surprising, therefore, that the chief source of the incomprehension of capitalism is the intelligentsia, one of the many aristocracies which preen themselves on a contempt for bourgeois or "middle class" values and which refuse to acknowledge the paramount role o r individual enterprise in the progress of the race...
...The selfish drive to better one's condition is seen as fueling what Smith describes as " a great, an immense machine" with "means adjusted with the nicest artifice to the ends which they are intended to produce": namely, the progress of human societies...
...Capitalism works, according to Smith, because it offers an effective and predictable system pf rational incentives, an invisible hand of expanding markets...
...All too many clerics have renounced the claims of the spirit in favor of inept ventures of materialism and social politics, thus depriving capitalism of its indispensable moral rules and roots, and spreading famine and poverty in the name of social justice...
...Instead, the Church should devote itself to its own spiritual and religious cause, upholding the laws of morality and faith, and thus redeem the most crucial conditions of capitalist giving and entrepreneurship...
...Capitalism transforms the gift impulse into a disciplined process of creative investment based on a continuing analysis of the needs of others...
...Smith argues that the extent of the market--the reach of the exchange system-determines the possible range for the division of labor, the process of increasing specialization that he sees as the source of economic growth...
...Much of the world's most valuable, generous work comes from the labor and sacrifice of ordinary citizens, supporting their families, building small businesses, performing useful services, continually giving back their earnings in the practical cause of human betterment...
...One does not normally make gifts without some sense, possibly unconscious, that one will be rewarded, whether in this world or the next...
...Investments are in fact purposeful experiments, and whatever the outcome the results are informative...
...The grasping or hoarding rich man is the antithesis of capitalism, not its epitome, more a feudal figure than a bourgeois one...
...Capitalism is not an artificial or transitory phase of human existence, to be replaced at will by some superior economic system shortly to be invented by the economics faculty at MIT...
...Aborting the drive, to give and create was the impulse to steal and destroy...
...It is these often self-denying explorers beyond the bounds of the existing marketplace and its prevailing goods and services who extend the frontiers of human possibility, not some impersonal mechanism of exchange...
...Whether businessmen are piling up coconuts or designing new computers, they are movers and shakers, doers and givers, obsessed with positive visions of change and opportunity...
...A truly self-centered capitalist will reject the very pattern of discipline and sacrifice, work and saving, that IS indispensable to success...
...sources and machines, but the metaphysical capital of ingenuity and faith...
...The potlatch itself was sometimes accompanied by long sieges of fighting and violence that wrecked and wasted most of the accumulated wealth and good will...
...Welfare can enhance the voluntarism at the root of free economies...
...more important, they destroy knowledge and subvert moral values...
...But this self-interest has nothing to do with avarice...
...It grants riches to those very individuals who have proven their ability to forgo immediate gratifications in pursuit of larger goals, who refuse to waste or hedonistically consume their wealth...
...people, whoever they may be, how ever unorthodox or uncredentialed, who launch successful projects and commit to them their lives and savings...
...Levi-Strauss speaks of the Law of Reciprocity...
...The tendency...
...Not from benevolence," wrote Smith in his most famous lines, "do we expect bread from the b a k e r . . , but from his self-love...
...They must be willing to forgo their own immediate gratifications in order to produce goods of value to the beneficiaries...
...For some the problem begins with a misreading of Scripture: confusing the creation" and investing of wealth with the seizing and hoarding of it...
...rather, it leads to a quest for power over others, an effort to impose the fail-safe fantasies of: radical politics...
...Not from greed, avarice, or even "self-love" can one expect the rewards of commerce, but from a spirit closely akin to altruism, a regard for the needs of others, a benevolent, outgoing, and courageous temper of mind...
...For socialists, however, this attitude poses no problem...
...The article itself, which was written by Nicholas yon Hoffman, quoted heavily from the latest encyclical Laborem Exercens...
...If there be some vague intimation that the global balance of power is changing, so be it, for the key to the survival of any species is adaptability...
...It worked...
...to romanticize primitive life is one of the less illuminating biases of anthropology...
...Not taking and consuming, but giving, risking, and creating are the characteristic roles of the capitalist, the key producer of the wealth of nations, from the least developed to the most advanced...
...The investor must appraise a vast traveling bazaar of new products, the overflow of a million garages and laboratories, hobby shops and machinery "skunkworks," companies all on the edge of" new breakthroughs," takeoff trajectories, unique product niches in the "fast-moving high-tech semioptical bioconductor floppy tacos f i e l d , " firms oft:ering fame and fortune and tax shelters, businesses providing low-cost fuel, high-margin fastfood, automatic profits in mail-order marketing, forty-seven magazines the world needs now, the Photonic Chip!, the people's airline, fourteen plausible cures for asthma, the perfect coffee cup, the new Elvis, all demanding huge infusions of instant capital, all continually bursting beyond the ken even of banks and experts, let alone government planners, regulators, and subsidizers, no matter if they bear such promising titles as Small Business Administration or National Enterprise Board...
...It is the Pontiff's own increasingly socialist flock--particularly its new contingent on the New Republic--that most needs to heed his warnings against materialism and unbelief...
...These reciprocal gifts," writes Levi-Strauss, summarizing Mauss, "have a much more important function in these societies than in ours . . . this primitive form of exchange . . . is what Mauss calls 'a total social fact,' i.e., an event which has at the same time social and religious, magic and economic, utilitarian and sentimental, legal and moral significance...
...Capitalism offers nothing but frt:.strations and rebuffs to those who wish--because of claimed superiority of intelligence or birth, credentials or ideals--to get without giving, to take without risking, to profit without sacrifice, to be exalted without humbling themselves to meet the unruly demands of others, in an always perilous and unpredictable life...
...Indeed, it mattered very little when the Chinese announced that, henceforth, the proper spelling of Teng Hsiao-p'ing was Deng Xiaoping...
...Thuh yuc of the pinyin xyctum opinc uhp nu p a h c b i l i t i z fawr koahpureixun bitwin thuh Qines and thuh Ahmeirukun p i p u l z , " thuh Pureisiduhnt's sopicmahn sehd...
...it is the gift that evokes the desire to reciprocate and thus induces exchange...
...It is not surprising that the federal government has decided to leap on board the bandwagon...
...As Smith showed, this market process, based on morally neutral computations of advantage, is indeed an indispensable instrument for the creation of wealth...
...Rebelling against the perpetual dangers and uncertainties of engagement in capitalist enterprise, they urge purchases of art and collectibles, rural real estate and foreign retreats, guns and gold, in the always futile search for security in an inevitably insecure world...
...Any such exchange presumably does improve the positions of both parties, or they would .not have agreed to make it...
...Like most analysts of this activity, Levi-Strauss describes it in economic terms: "give back with interest," a right to "reciprocation," and "conditions" for "exchanges...
...Like gifts, capitalist investments are made without a predetermined return...
...The life-cycle theory of savings--which sees the impulse of thrift as simply a desire for later consumption--is false...
...He will eschew the very initiatives--the risky but inspired ventures of innovation-that, being untested or unproven, depend most on ..an imaginative, understanding of the world beyond himself and a generous and purposeful commitment to it...
...Three months ago, the report of the White House Conference on Spelling was submitted to the President and, just three days ago, a well-connected Washington journalist filched a copy of a press release that is scheduled for release at the end of the month, its provisions to become effective on January 1, 1982: T~e Huait Hauc Pureisiduhnt Reigun ahnaunxed tudei that, az a sain ov gud feith, thuh Younaitid Suteits wud ahdahpt Q i n a h ' s pinyin xyctum fawr thuh raiting ov Englix...
...Smith's error was to found his theory on the mechanism of market exchanges themselves rather than on the business activity that makes them possible and impels their growth...
...seldom do they gather but to conspire against the public...
...As in all societies, the generous spirit warred continuously with the appeals of envy and rapine...
...Our problem, therefore, is a crisis not of economics but of religion and culture...
...In The Theory of Moral Sentiments he wrote that it is from the "luxury and caprice" of the rich man that we gain "that share of the necessaries of life" which we "would in vain have expected from his humanity . . . . In spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands they employ, be the gratification of their own vain and unsatiable d e s i r e s . . , they are led by an invisible hand . . . without intending it, without knowing it, to advance the interest of society...
...Years ago, they had, in their ingenuity and sageliness, taken to spelling .Joe as Chou and Dung as Teng although, for some strange reason, China was never pronounced Jina...
...The reciprocation must be voluntary to succeed...
Vol. 15 • February 1982 • No. 2
