The source of technology and prosperity—the free human mind—is unshackled only under capitalism
Would you give up the Internet for a million dollars? This was the question posed in a recent YouTube video distributed by The Fund for American Studies. Not surprisingly, many who were interviewed in the video said “no.” How much would they take to give it up? “In excess of fifteen to twenty million dollars,” said one. “In the billions,” said another. “You couldn’t pay me enough.” The last answer may be the most plausible.
We might expect people to pay a high price for a technology as valuable as the Internet. But in the United States and even more in the developing world, the cost of access has been steadily dropping. Indeed, many popular Internet services like Google and Facebook are free. Many other forms of technology have become inexpensive and widely available. Advanced multifunctional smart phones—computers we carry in our pockets—are now barely even a novelty. But just a few decades ago personal computers were large, slow and expensive. We treat as permanent necessities of civilized life conveniences like air conditioning, refrigeration, cars, air travel, and electricity. But all of these goods, affordable today to people with only modest incomes, were either luxurious or non-existent for the wealthiest just a century ago.
Why then don’t more of us consider ourselves rich? To be sure, especially in this uncertain economy, not everyone is financially secure. But there is little that the wealthiest can buy today with their extra millions that is not available in some form to those of modest means. More money will always buy greater quality food, more sophisticated technology and more elaborate vacations, but these luxuries are relatively incremental improvements in quality of life. Consider the broader historical perspective: compared to the average life in medieval Europe or modern-day Somalia, even the poorest Americans’ standard of living is far closer to “luxury” than to the real poverty experienced in those distant times and places.
Yet many take our relative wealth for granted, as if prosperity were a law of nature. If the economy is gloomy, they assume that the storm clouds will always blow over and economic sunshine will always return. It’s true that a nation’s economy is a complex system with some degree of natural fluctuation. But in the context of history, our current level of material comfort is anything but “natural.” It is historically unprecedented: for thousands of years there was essentially zero economic growth and little if any technological progress. What made it possible, and what sustains it? The cause of prosperity and progress is conditional, even delicate. It is not an impersonal, practically inexhaustible force of nature like the sun.
Consider the inexpensive cell phones that even the poorest of Americans have now owned for years, and which are now empowering millions in developing countries to start and run businesses. What made such widespread access to technology possible? Did charities concerned about “inequality” organize a petition to urge phone companies to lower their prices? Did governments subsidize the cell phone industry, or force them to sell more phones at a loss?
No. One well-understood factor is described by basic economics, and is credited to the same individuals whose indulgence in luxury is sometimes attacked by critics of “inequality.” As economist Michael Cox reminds us in the video, those who can afford to be early adopters of technology pay a premium for new products. With profits in hand, innovators recoup their development costs and learn how to produce and market the product at a price the broader public can afford. Moreover, those with accumulated wealth have the means to invest in the businesses that undertake such innovation in the first place.
So one important cause of the spread of technology and the opportunities it creates is simply the desire to make a profit. But personal spending and investment are not automatic—and neither is the desire to make a profit. The first casualty of the higher taxes championed by the critics of wealth inequality is the purchase of luxury technologies and the investment of surplus capital. Taxes and regulations on industry have a similar effect. Even if we presumptuously judge what other people can afford and assume that some can “afford” to pay more taxes, can the rest of us afford to lose their investment? And what happens if those who are taxed decide that working harder and harder for diminishing financial returns makes less and less sense?
Fortunately, the economic importance of incentives is well-understood, but there is an even more important factor accounting for the enormous improvement in quality of life over the last 200 years. To understand the deeper cause of this historical anomaly, we have to look beyond economics. Economics is concerned with a distinctively human practice: the production and trade of goods in a division of labor society. For this reason, our understanding of what is distinctive about human nature can affect whether or not we appreciate the facts of economics.
The relationship between our attitude about economic progress and our view of human nature is prominent both in economic theory and in conventional wisdom—particularly in commentary on the subject of capitalism. Critics of capitalism portray it in “social Darwinist” terms, claiming that it permits only “the survival of the fittest.” In their view, wealthy capitalists can prosper only “on the backs of the poor,” by exploiting workers and “gouging” customers.
To think that a capitalist’s success comes at the expense of the rest of society, that life in a free market is merely “dog eat dog,” reflects the assumption that human survival is no different than animal survival. An animal lives with limited resources in an environment to which it can only adapt using its limited instincts. A sheep grazing for too much grass deprives deer of their supper. Wolves in one pack are a threat to those in another: they can only fight over the same sheep. Etc.
But human beings are neither wolves nor sheep, neither predator nor prey. We don’t flourish merely by adjusting to limited resources: we do so by altering our environment to expand the pool of available resources. Our “weapon” of survival is not brute strength, but the “strength” of our minds. Animals live in the moment, learn only repeated patterns driven by stimulus and response, and engage in behavior conditioned for a limited, comfortable niche. But we use our minds to conceptualize cause-and-effect relationships, allowing us to plant seeds to be harvested months in the future, to build shelters we will live in for years. We make factories and medicines and superhighways and more. We plan for and live in the future, not the present.
The first men lived without a single wheel, club, or bearskin to call their own. Poverty is not some “plague” that afflicts a given society; it is the natural human condition. It is not poverty but wealth that is the novelty requiring explanation. The first wealth was not stolen from other cave men: they had none to be stolen. The first wealth—whether it was a cutting tool or a makeshift shelter—had to be created. Thus, our species did not rise from caves to skyscrapers through plunder. At times in history some men fed off the products of others; feudal serfdom and plantation slavery come to mind. But the skyscrapers and the Internet and everything on which they depend were the products of free individuals grasping logical connections through the effort of thought.
Far from capitalism involving a “survival of the fittest” in which the wealthiest trample upon the poor, those of modest abilities actually benefit the most (compared to what they otherwise could do on their own) because of what they receive from the highly productive. When one human being lives successfully—whether as a scientist, an inventor, or a businessman—the result is not just “survival of the fittest,” but also the flourishing and prosperity of the rest of society in turn.
The man who does no more than physical labor, consumes the material value-equivalent of his own contribution to the process of production, and leaves no further value, neither for himself nor others. But the man who produces an idea in any field of rational endeavor—the man who discovers new knowledge—is the permanent benefactor of humanity. Material products can’t be shared, they belong to some ultimate consumer; it is only the value of an idea that can be shared with unlimited numbers of men, making all sharers richer at no one’s sacrifice or loss, raising the productive capacity of whatever labor they perform.
(Ayn Rand, Atlas Shrugged)
The development of new ideas doesn’t benefit only those who learn these ideas. More impressively, new ideas benefit even those who do not understand them, by way of their implementation in new products and services. Consider the simple T-shirt. In the days before inexpensive mass-produced textiles, one would be lucky to own more than a single set of clothes. Wearing the same clothes all year, one would be vulnerable to the spread of diseases we now safely avoid. A worker in an early cotton mill might not have been paid much by today’s standards. But with the money he took home from the factory (which he could not have built on his own), he could buy cheap, replaceable and even fashionable clothing and many other life-enhancing goods. He did not understand the Newtonian mechanics or the steam engines that went into the new mills of the day, but he and the rest of us are permanently indebted to Newton, Watt and all of the scientists and industrialists—the thinkers—who turned these ideas into a life-giving cornucopia for humanity.
The technology and prosperity that so many take for granted—all the way down to their T-shirts—depend even more fundamentally on the exercise of precious human intelligence. And the exercise of human intelligence, unlike the constant energy production of the sun, depends on delicate social conditions. In particular, and more important than financial incentive, wealth creators need freedom. The human mind—the ultimate source of wealth—does not and cannot discover subtle causal connections, formulate mathematical equations, or hit upon bold entrepreneurial innovations out of fear of punishment. The innovator is motivated by love for his work and the truth, and by his vision of the value of his creation. He works only by his voluntary choice, not by coercion.
And yet critics of capitalism advocate regulating productive endeavors and restricting not only the economic but the intellectual freedom of innovators. Pharmaceutical companies are subjected to years of scrutiny and enormous cost by the FDA before they can bring new drugs to market (if at all). Petroleum companies are encumbered by costly review procedures, often preventing them from developing new ways of unlocking plentiful sources of energy from deep below the earth. Financiers are inhibited from creating new financial instruments capable of providing crucial capital to young entrepreneurs. And companies like Google and Microsoft are threatened with antitrust legislation, causing them to divert resources that could be helping to create Web 3.0 or some other undreamt-of innovation, for what amounts to the crime of being too successful.
If Americans expect to have a regular supply of life-saving drugs, cheap and plentiful energy, easy capital and widely-available information, but simultaneously advocate shackling the innovators, they are not only taking progress for granted—they are complicit in preventing it.
We must rethink our complacency about technology and prosperity. The creators and innovators of the world on whom our comfort and lives depend are not an unlimited natural resource. Their energy does not flow indefinitely like that of water, wind or sun; rather, they require specific conditions to continue to provide their intellectual and material surplus. They need freedom to experiment and to produce. They need financial rewards. And more than anything else, they need the recognition that these rewards are deserved, the recognition of their right to live and therefore, to achieve.
Would you give up the Internet for a million dollars? Would you give up life in civilization for a billion dollars? The answer should be obvious, but all too often the implications are not. When so many of us receive so much value for comparatively little in return, we should realize our most pressing debt is not the national debt, but our moral debt to centuries of creative innovators. It is a debt we can never repay—except by living up to their example, acknowledging that imitation is the sincerest form of flattery, and becoming productive achievers ourselves.
Valery Publius is a teacher living in the American South.