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Capitalism, Competition, Collaboration, and Kindness

November 28, 2009

This post is one in a series entitled Posthumous Refutations.

Back in 2005, Rainbough Phillips at Distributed Republic had the splendid idea of a Capitalism Appreciation Day. She walked the reader through her day expressing her appreciation for every for-profit entity that made her life more pleasant. It inspired me to do the same back then, when, at the time, I was working at a law office in Los Angeles.

I was awakened exactly when I wanted to be this morning, thanks to a GE alarm clock that has never failed me. I ate a satisfying breakfast courtesy of Post, which is owned by Kraft. I drove to work in an aging Toyota Corolla that is 10 times more dependable than a car from the government perk-laden American auto industry. I was able to work for a full day's earnings, thanks to the lawyers who hired me, and the companies big and small who hire them to protect them against largely frivolous lawsuits. My job was incredibly more pleasant than it would have been mere decades ago, thanks to the innovations of companies like Dell, Microsoft, Brother, and Pitney Bowes. And now I'm typing this on a marvel of minituarization, that would have been invented sooner by monkeys with pliers than some government agency: an Apple Ibook.

GE, Microsoft, Toyota: these companies are lambasted by either anti-corporate zealots, paranoid protectionists, or both. But not one of these companies have taken my money without me offering it. None of these companies have threatened to imprison or shoot me if I don't support their idea of a "good product" or a "good outcome." Our relationship is entirely based on free consent. In most interpersonal relationships, that would be the bare minimum: freedom from physical coercion. And it would hardly be worth thanking. But in this world we live in, that freedom is all too rare. So to all those companies and individuals out there working for your money, and not trying to steal mine, thank you.

(I should note that now, I would reconsider my thankfulness to GE, since they've so completely rolled over to the international attempt to progressively commandeer the global energy sector, which should be referred to as the Global Warming Scam.)

This Thanksgiving, most Americans were more likely to thank President Obama and his Santa Claus state than any "evil" businesses, much less capitalism (which Michael Moore is trying to make a dirty word) itself.

Neither was a particular Briton thankful at all for capitalism. Rather, psychoanalyst Adam Phillips was quite concerned about the alleged social deleteriousness of it. Phillips has recently co-written a book On Kindness with historian Barbara Taylor, and he was on the San Francisco Bay Area radio show Forum to discuss it. The show was broadcast on Thanksgiving Day.

Host Michael Krasny commented that these days, "Kindness is hard to come by." He went on to provisionally blame Calvinism for this malady. Phillips concurred to a degree but insisted that:

"it's also to do with the rise of capitalism. It's to do with a political ethos based on competition and rivalry. And it seems to me once you begin to live in a society which is essentially rivalrous and competitive, then kindness is going to be a very difficult virtue to sustain, because it's going to look very much like a kind of weakness."

Krasny continued, "'Capitalism is no system for the kind-hearted', you say in your book. In other words, the competitive nature of capitalism works against kindness." And Phillips responded:

"Yes, or it makes it more difficult for us to be as kind as we want to be, because, one of the risks, I suppose, is that if you live in culture that sanctions competitiveness over everything else, over collaboration, then it's as though a lot of the more tender virtues are going to be regarded as forms of weakness. They're going to actually diminish your capacity to compete. It'd be like saying to you, "what would it be to be a kind boxer?"

Now first of all, the fallacious conflation implied in his boxer analogy is so simple-minded, that we don't even need an economist to refute it. Even the ancient Greek poet Hesiod was able to make the distinction that is apparently beyond Dr. Phillips. In the following passage of his Works and Days, Hesiod distinguishes between the deleterious "strife" involved in violent conflicts and the beneficent "strife" involved in economic rivalry:

So, after all, there was not one kind of Strife alone, but all over the earth there are two. As for the one, a man would praise her when he came to understand her; but the other is blameworthy: and they are wholly different in nature. For one fosters evil war and battle, being cruel: her no man loves(...) But the other (...) is far kinder to men. She stirs up even the shiftless to toil; for a man grows eager to work when he considers his neighbour, a rich man who hastens to plough and plant and put his house in good order; and neighbour vies with is neighbour as he hurries after wealth. This Strife is wholesome for men. And potter is angry with potter, and craftsman with craftsman, and beggar is jealous of beggar, and minstrel of minstrel.

Two and a half millennia later, Ludwig von Mises characterized the two kinds of "strife" as "biological competition" and "catallactic competition". In chapter 15, section 5 of Human Action, Mises wrote:

In nature there prevail irreconcilable conflicts of interests. The means of subsistence are scarce. Proliferation tends to outrun subsistence. Only the fittest plants and animals survive. The antagonism between an animal starving to death and another that snatches the food away from it is implacable.

Social cooperation under the division of labor removes such antagonisms. It substitutes partnership and mutuality for hostility. The members of society are united in a common venture.

The term competition as applied to the conditions of animal life signifies the rivalry between animals which manifests itself in their search for food. We may call this phenomenon biological competition. Biological competition must not be confused with social competition, i.e., the striving of individuals to attain the most favorable position in the system of social cooperation. As there will always be positions which men value more highly than others, people will strive for them and try to outdo rivals. Social competition is consequently present in every conceivable mode of social organization. If we want to think of a state of affairs in which there is no social competition, we must construct the image of a socialist system in which the chief in his endeavors to assign to everybody his place and task in society is not aided by any ambition on the part of his subjects. The individuals are entirely indifferent and do not apply for special appointments. They behave like the stud horses which do not try to put themselves in a favorable light when the owner picks out the stallion to impregnate his best brood mare. But such people would no longer be acting men.

Catallactic competition is emulation between people who want to surpass one another. It is not a fight, although it is usual to apply to it in a metaphorical sense the terminology of war and internecine conflict, of attack and defense, of strategy and tactics. Those who fail are not annihilated; they are removed to a place in the social system that is more modest, but more adequate to their achievements than that which they had planned to attain.

In a totalitarian system, social competition manifests itself in the endeavors of people to court the favor of those in power. In the market economy, competition manifests itself in the fact that the sellers must outdo one another by offering better or cheaper goods and services, and that the buyers must outdo one another by offering higher prices. In dealing with this variety of social competition which may be called catallactic competition, we must guard ourselves against various popular fallacies.

And later in the chapter, Mises more directly explodes Phillips' boxer analogy:

Catallactic competition must not be confused with prize fights and beauty contests. The purpose of such fights and contests is to discover who is the best boxer or the prettiest girl. The social function of catallactic competition is, to be sure, not to establish who is the smartest boy and to reward the winner by a title and medals. Its function is to safeguard the best satisfaction of the consumers attainable under the given state of the economic data.

Just as specious as Phillips' artificial conflation of biological and catallactic competition, is the artificial opposition he sets up between competition and collaboration. In chaper 24, section 3 of Human Action, Mises explains how competition enables effective society-wide collaboration.

What makes friendly relations between human beings possible is the higher productivity of the division of labor. It removes the natural conflict of interests. For where there is division of labor, there is no longer question of the distribution of a supply not capable of enlargement. Thanks to the higher productivity of labor performed under the division of tasks, the supply of goods multiplies. A pre-eminent common interest, the preservation and further intensification of social cooperation, becomes paramount and obliterates all essential collisions. Catallactic competition is substituted for biological competition. It makes for harmony of the interests of all members of society. The very condition from which the irreconcilable conflicts of biological competition arise--viz., the fact that all people by and large strive after the same things--is transformed into a factor making for harmony of interests. Because many people or even all people want bread, clothes, shoes, and cars, large-scale production of these goods becomes feasible and reduces the costs of production to such an extent that they are accessible at low prices. The fact that my fellow man wants to acquire shoes as I do, does not make it harder for me to get shoes, but easier. What enhances the price of shoes is the fact that nature does not provide a more ample supply of leather and other raw material required, and that one must submit to the disutility of labor in order to transform these raw materials into shoes. The catallactic competition of those who, like me, are eager to have shoes makes shoes cheaper, not more expensive.

And Phillips' contention that capitalism gets in the way of kindness should not be taken seriously either. Rather, as Mises explains in chapter 35, section 2 of Human Action, the fruits of capitalism widen the sphere for acts of kindness.

...the more capitalism progresses and increases wealth, the more sufficient become the charity funds. On the one hand, people are more ready to donate in proportion to the improvement in their own well-being. On the other hand, the number of the needy drops concomitantly. Even for those with moderate incomes the opportunity is offered, by saving and insurance policies, to provide for accidents, sickness, old age, the education of their children, and the support of widows and orphans. It is highly probable that the funds of the charitable institutions would be sufficient in the capitalist countries if interventionism were not to sabotage the essential institutions of the market economy.

If one were not prepared, it might be easy to fall prey to the misconstructions of scholars like Adam Phillips, couched as they are in charming erudition and eloquence. But underneath his mellifluous Queen's English, his anti-capitalist arguments are nothing but the banal handwringing so common among intellectuals, as so thoroughly exposed by Mises in The Anti-Capitalist Mentality. As I was listening in the car to Dr. Phillips decry capitalism on my way to see my family for Thanksgiving dinner, I found myself supremely thankful that I was not among the legions of bleeding-heart economic illiterates in the Bay Area that day, nodding vigorously at specious reasoning. Such people profess to be "socially conscious", but they couldn't be more socially unconscious, as they have no inkling of the workings of society.

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