Tuesday, November 25, 2008

Capitalism in Political Space

Why is Capitalism "Natural"?

"You can't have capitalism without a PROPER government," wrote someone in a comment to Gus Van Horn's blog.

"That is a crucial point," continued the writer. "I like to make that point by explaining to people that free market capitalism is not a 'system', it is a space -- a legal space established and maintained by a government in a given geographical area.

"The defining attribute of this particular space (as distinguished from those found in the various non-free societies) is the ban on the initiation of physical force. All the things that we normally mean by 'capitalism', from stock markets and corporations to competition, were freely created by people within this space -- not imposed from the top down by government, as with all other political ideologies which ARE systems in that sense of the word." [italics added] http://gusvanhorn.blogspot.com/2008/11/wisdom-of-crowd.html

Now, I must be honest here: I never thought of capitalism existing in a space, yet it clearly is a political space. First, it is located within politically geographical boundaries. Second, it is a metaphoric "space" because we can put it anywhere--in a brick-front store; on the internet; in our pockets; in a briefcase, or in a box of Girl Scout cookies carried door to door throughout neighborhoods.

Admittedly, capitalism is more than a simple and literal space. But without that economic space, created by political means and ends, the other elements of capitalism could not exist.

The political means are not what is important, so long as they are not coercive means. Every so-called capitalist nation has its own rules governing the space. The important element is the ends, the purpose, the motive, the desire--for an economy that offers the freedom of individual sovereignty over the property rights of money.

"Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned," wrote Ayn Rand. http://www.aynrandlexicon.com/lexicon/capitalism.html

To say the same thing differently: "The legal conception of property is that of a bundle of rights over resources that the owner is free to exercise and whose exercise is protected from interference from others." Cooter and Ulen [1986, p.91]. " The listed control rights are exclusively considered from the owners' point of view. The listing of rights is by no means exhaustive. It is only meant to be illustrative." http://www.encycogov.com/A1DecisionSystems/Table1OwnerRights.asp

How is capital created? By labor upon things. John Locke posited the idea that land and other natural resources are there for the taking, until taken by someone else first. Let us say a man takes newly fallen tree branches. He removes the bark and places it in the sun, in pieces, to dry. He then takes the branches and tying them together at one end, he stands them up, covers them with animal pelts, and in the process has created a portable home.

But it is summer and he prefers sleeping under the sun. Along comes a man with a small flock of sheep. Originally he had only two, but he mated them several times and now has more than two. He does not like sleeping under the moon. He has capital in the form of property--the sheep he raised with his labor.

The first man has capital in the form of a home he created with his labor. He wants sheep to mate with the one he already owns, so he trades his home for two from the shepherd.

The trade is equitable; in other words, each man has agreed that what he has gotten in return for his capital is equal in value to the capital itself.

Along comes another man who is a fisherman. He trades several preserved catches for the dried bark because that species of tree makes a flavorful smoke in his smokehouse.

Capital, therefore, is the valuation of a thing after labor has been applied to it. This is natural.

What is not natural is the power of another human used in force against the three men, in an effort to extract from them their capital, to be used in acts of charity deemed by the tyrant to be worthy of othe men's property.
What is natural is the three men forming a government to protect themselves from coercion and tyrany, by providing the political space in which to work with wood, to herd sheep, and to catch and smoke fish.

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