Capitalism-Wealth and Poverty
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Giving
Through Wealth and Poverty Chapter 3, one can understand the importance of giving and its contribution to capitalism. Before a time with currency and money as a service of exchange, the world exchanged through giving and receiving. It is from giving and receiving that capitalism was founded. According to Gilder, it is risking, creating, and most importantly giving that addresses the role of the capitalist. Adam Smith attributes capitalism similarly, but with emphasis on self interest. When individuals give with their own self interest in mind, the invisible hand will direct the market and the economy in positive ways. This is all in the best interest for the economy as a whole. When people work in their own self interest, their actions become more predictable, this allows for the invisible hand to create a more predictable economic system. Individuals must give before receiving, while it is important to work with your best interest in mind, I believe it allows for the possibility of greed. Therefore, I agree that the attribution of capitalism is to giving.
“In explaining the extraordinary production of capitalism, however, the anthropology of the potlatch impels us to focus not on the exchange mechanism(the market) but on the prior gifts and its creation”( Gilder, pg 31, 1981).
The idea of the sympathetic giver helps further understand rewards pertaining to receiving gifts. Frank Knight presents the idea that Capitalism rewards those who are sympathetic givers, and punishes those who are not. What I believe he is explaining here is that people who give large amounts, also receive large amounts, and vice versa. Through this I was able to see the relation to the market and our economy. People who contribute little to the community and their work typically do not attain wealth, but instead face losses. On the contrary, sympathetic entrepreneurs, who contribute large amounts to their economy, usually receive large amounts of rewards for their giving. One explanation for this difference in contribution is greed.
Greed
Greed is a defining issue that prevents individuals from taking risk, and receiving profit. It is my understanding that people who expect rewards but do not give demonstrate greed. While everyone is somewhat driven by greed, it can not be the primary driver in a capitalist society. This I believe is a common issue in today's society. Only after giving a gift, can someone expect something in return. Entrepreneurs are successful because of their genuine self sacrifice.Greed in different ways, contributes to capitalism and is constantly seen through exchange. However, Capitalism does not stem from greed.
Risk
Through Gilder's discussion on risk we can see his view of capitalism and its vital importance in the system of the economy. His basic argument I believe is that capitalism is set up to handle risk, as the future is unpredictable. He attributes this to giving. Socialism, on the contrary, is based on the idea that we know enough to predict the future of the economy. By focusing on individual wants and needs, the economy balances itself out. This essence is the work of the invisible hand.
Through this understanding of capitalism and risk, I began to understand his attribution to entrepreneurs. Entrepreneurs are willing to take risks to achieve what they want to attain. They know that the future is uncertain, yet develop something new, with no promise that it will succeed. Entrepreneurs are successful through their giving. They willingly make sacrifices that in return, gift products, employment, and services to the economy.
“A young man proves himself capable of becoming a mumi by working harder than everyone else and by carefully restricting his own consumption of meat and coconuts” (Gilder, pg. 29, 1981).
Self Sacrifice
Capitalism does not work to be fair, it works to be just. Because the U.S economy was built on capitalism, it rewards those who work hard and make sacrifices. In today's society, there are many options that reward people for attributing little to the economy, this has led to an imbalance of the rich and poor. I believe Gilder's warning through this section of his writing is that once people receive compensation that was not worked for, the compensation loses its value and relation to hard work. Why would the unemployed want to become employed if they are receiving compensation through no work?
As changes in the economy continue to unfold, it is important to remember that it started with giving. Entrepreneurs are successful because they give to the economy through services and goods. I believe the world has become more filled with greed. One can see this through the increase in taking, and decrease in giving. Capitalism assumes that people act on greed, self sacrifice, and self interest. Through both Adam Smiths and Gilders works, one can understand the problem of pushing for an economy that does not reward those who give or act in best self interest. Individuals who lack self interest and avoid self sacrifice ultimately receive less gifts, as they contribute less to the economy.
References
Gilder, G. F. (2012). Chapter Three: The Returns of Giving. In Wealth and poverty (pp. 27–49). essay, Regnery Publishing, Inc.
Sowell, T. (2015). Wealth, poverty and politics: an international perspective. New York, Basic Books.
Hi @hansonmarie, I enjoyed reading your insight and thoughts on capitalism and the other readings for this week. The thing that stood out to me most was the fact that you and I both agreed with the idea that our economy is running on the idea of giving and receiving of products. I really felt more aligned with Gilder’s theory than Smith’s because he focused on how entrepreneurs have good intentions of giving when they start their business. You used the quote,
I thought that this was a great quote to use when expressing that capitalism is based on giving a product to other individuals in our community who will value the products and be willing to receive them. Additionally, I also agree with you on the fact that many individuals in our society have some amount of greed in them and that they do exist in our community, but it does not affect how capitalism functions as a whole. And some greed is necessary because it pushes the world and market to keep running as well as it does. However, as you said, capitalism is not based entirely on greed. Thinking about it again, the definition Smith described that capitalism is, based only on self-interest and self-love, does sound more like greed. So, you are right, greed is what Smith believes capitalism to be. Hearing you say it like that makes me lean even more towards Gilder’s definition. I do not believe that capitalism is run based solely on the benefit and interest of specific individuals, because people would get smart to their intentions and decide not to buy from them. Lastly, you talked about risk and self-sacrifice, which play a major role in capitalism and our society today. Without entrepreneurs taking a risk and having some self-sacrifice, our world would still be functioning as it did in the 1800s. We would not have any new products or innovations without someone taking a risk to create them. Overall, I agree with your writings and opinions on capitalism. Your writing helped me to expand my knowledge on this topic, along with strengthening my opinion on Gilder’s definition.
I really enjoyed reading your writing. There were things I found interesting and had me wanting to discuss. I have placed my responses and thoughts after the quotes that get me pondering.
I agree with what you said. I do think the attribution of capitalism is rooted in giving because risking the initial investment whether financial, labor or otherwise is a form of giving. It may not be one that we like, the idea of capitalist pursuits paving the way for societal giving, but the big business providing benefits to socies is very much a true thing. It is this giving that helps certain companies stand the test of time.
Yet, I still think it allows the possibility of greed, as it can create a self-fulfilling process, where acting more with self-interest allows for more giving. I think it can lead to a conflating of “being good” vs simply ”giving good”, one is a personal character trait the other is largely subjective in personal qualities and weight. That is to say, if capitalism and the invisible hand allow greed to proliferate due to one’s success in such a system and this proliferation can feed the self-belief that one is “good”, then where is the line between being good as a capitalist or being good as human being?
I am not so sure that I agree. I believe that one can contribute very little and while they may not attain wealth they will not face losses. Well, I guess we would have to define little. I would consider little contribution to the community the bare minimum, i.e. self-autonomy. Meaning in the 21st century western capitalist society perspective, all bills always payable, and some tangibly feeling extra money for random pursuits. In other words, money for your bills, and some for freedom.
I would call that little contribution to a society as one does not need to do much other than be a part of the market and economy machine enough to have that capital. They do not need to care, shelter, pursue higher education, chase a higher job, climb the market or economy, because what they ask of it is not much.
If what you want out of the market is not much then why should one be required to put in much? One could say that is a positive a capitalist society that the everyman is not inherently forced into higher pursuits in the name of basic living. Will they have to work a 9 to 5 or 40-hour week, your typical full-time rate, most likely but how different would that have been for hard labor of self-sustainment. One makes it your choice on some level and lets you decide the amount of juice you get from it, the other is life simply demanding sustenance in the name of seeing another day. Granted we are speaking idealistically here, but it is worth the mention. This speaks to the self-sacrifice involved in capitalism.
This is the benefit I spoke on my last point. I ideally agree but as the world has shown that is not always the case.
We can look at East Palestine where Norfolk is being awarded with media portrayal that only shows the positives and minimal payments and derailment costs due to using a loophole to avoid having to actually deal with its contaminated waste. In releasing its chemicals into the air, they were able to avoid labelling the containers as hazardous waste, thus reducing the cost to handle them. A perfect example where the contribution of society from a company this massive to help change train railyard structure and company guidelines from her on out cut corners in the name of greed. Instead, taking from the people, the consumers that invested in them, and giving back the mess. Where was the invisible hand then, Adam Smith? I digress, the point is nothing is fair and just in capitalism, and in my belief it is just a process with no moral alignment.
I had fun engaging with your essay Hanson, thank you.