The Returns of Giving
Gilder starts off the essay by explaining that capitalism is not based on self-mindedness, but yet a mindset of “giving, risking, and creating” (Gilder, 2012, p.28). Although there is a level of selflessness to this model, Levi-Strauss explains that it is not unconditional. Typically this giving attitude is coupled with an expectation of return.
Aborting the drive to give and create was the impulse to steal and destroy. (Gilder, 2012, p.28)
This quote really stuck out to me. I think it is talking about modern capitalism and how capitalism used to be based on the exact ideals that I outlined above, but how capitalism has been modernized to be “psychologically shallow” (Gilder, 2012, p.29). Gilder uses Harris’s description of the feasting process. Harris simply describes the process of the rise of a “mumi”. This is an ideal born in the Solomon Islands and studied among anthropologists. Several Indian groups in Northern North America and Canada comprised a routine similar to that of the routine discussed by Harris. This routine centered around developing arts and crafts on an individual scale and then developed all the way up to public distribution of property.
Gilder then asks the valuable question:
[what is] the source of capital gain, or increase in the total value of the society’s goods. In other words, how do societies become rich? (Gilder, 2012, p.30)
The first thing to consider is that the idea of free trading should be part of the answer. In theory, both parties that are a part of a trade should benefit from what they received more than they suffer from what they gave up, or else why would they have made the trade? This can go all the way back to our reading weeks ago in regards to the apple orchard. If the owner of the apple orchard values a loaf of bread more than 3 apples, then she will make the trade. On the other side of the coin, the bread baker also has to value the 3 apples more than his loaf of bread in order to make the exchange. If this valuation was not present, there would be no exchange. This is specialization. And specialization expands the market.
Gilder then talks about the nature of gift giving applying these ideals. He explains that the best kinds of gifts are those that the recipient did not even know that they needed and are so grateful that they are eager to repay the gesture. This gift giving and parallel repayment can only happen with a deep understanding of the other person and their routines. After all, you cannot give someone a meaningful gift if you do not know them. Therefore this whole system can and does lead to deeper human connection.
Gilder then talks about the creation of money and how it changed this system. Money changed the game so much because it was an exchange that provided much more freedom than other forms of exchange. When you exchange one good for another good, then your gain was the good you received. However, if you exchange goods for money, you can use that money to get whatever you want.
Capitalism consists of providing first and getting later. The demand is implicit in the supply. (Gilder, 2012, p.33)
Gilder writes this following a statement about potlatching. I am having a hard time understanding exactly what potlatching is, but I think it is just a fancy way to explain an exchange of goods. Getting back on track, I think this quote is intriguing because of its blunt honesty. This makes capitalism sound so fast paced and gritty.
A useful definition of inflation is the dissociation of demand from supply – the rise of the belief that one's buying power can long exceed one’s supplying power, that one can get something for nothing, that one can continually take from others without giving. (Gilder, 2012, p.34)
This was an extremely helpful definition of inflation. Gilder then talks about how giving is not really giving without expectation of a return, but it is giving without a specific return in mind. I don't know if I completely agree with this point. I think that generally, this is true. People give a gift to someone on their birthday with the expectation to receive a gift from that person on their own birthday. However, I think that there are cases in which giving is selfless and does not expect a return.
I like that Gilder made the point that capitalists not only want to consume wealth, but they also want the satisfaction of accomplishing their entrepreneurial goals. However I did not like that Gilder followed this with “they are men who…” (Gilder, 2012, p.36). We are talking about men and women as equal participants in this system, right? I hope so. He also talks about the idea that capitalists have a different purpose in society than most other people. They are very interested in the world around them and the effect that different things have on different systems of life. Capitalists also play the important role of placing wealth, energy, and time into certain areas to keep the economy not only functioning but thriving.
In a system without capitalism, which would mean it is a system of low profit, there is just exponentially less room for growth, development, specialization, or innovation. Then Gilder goes on to talk more about the nature and heart of giving. In summation, he basically determines that giving with an attachment to the outcome is not good. He also determines that the picture of capitalism might be skewed. A capitalist does not have a white-knuckled grip on his massive chunk of change, but they should rather be more of a wise investor.
The Law of Reciprocation talks about supply and demand on a little bit deeper of a level than what we have seen up to this point. This talks more on a level of how giving actually works in a society and how important it is that wealth gets in the right hands. Gilder talks a little bit about how wealth almost naturally gets to the people who are going to steward it well. The Law of Reciprocation is about being able to want what is best for others in order to receive what you desire. It is almost like the law of attraction. The law of attraction simply says that if you are focused on the positive, then you will see more of it, and if you are focused on the negative, then you will see more of it.
True generosity is not soft or sentimental. It consists not of giveaways but of responsible giving. (Gilder, 2012, p.39)
This quote is very significant to me because I think of the people that I know who are very wealthy. I think that this exact idea can really tell a lot about a person. I am thinking of two different people who approach this exact idea of giving in two very opposite ways and it is very telling to the responsibility or lack thereof that they hold for the money they have.
Capitalism really balances this out on its own. Gilder states that “capitalism offers nothing but frustration”(Gilder, 2012, p.41)
to people who try to get without giving and try to skirt the system. Adam Smith offered a solution to the problem of conservative thought. He explained that instead of thinking of the source of wealth in the “greedy hands of capitalists”, to instead think of the “invisible hand” of the market (Gilder, 2012, p.41). He basically says that people should benefit from capitalism even if the intentions behind these capitalist individuals are in vain.
But to intellectuals, this theory has the crucial advantage of praising capitalism without exalting capitalists. (Gilder, 2012, p.42)
The problem with Smith’s idea here is that he does not acknowledge the rule that capitalism begins with giving, not with exchange.
When it comes to spreading wealth, capitalism is such an effective method because it links knowledge and power. In other words, it gives riches to the people who have proved by example that they are able to be successful in a certain market. The riches are given back to the people who give everything to a certain market. What is trying to be said here, and what is also repeated by Jay Forrester is that most if not all of the original, innovative, niche entrepreneurial energy comes from the people and it cannot be mirrored by government organizations.
Gilder then goes on to talk about entrepreneurial motivation and how it is unique from any type of productivity skills learned in schools. It is also pointed out that input does not equal output. Factors such as willingness, motivation and spirit factor into the success of a system. These factors are so heightened in entrepreneurs because it is common that their livelihood is on the line based on the success or failure of their business.
Gilder talks about the difference between socialism and capitalism. In essence he says that socialist is shielded from risk but also shielded from opportunities, whereas capitalism is riskier but offers greater reward. Socialism addressed demand before supply. It is always looking at what is needed instead of what can be given. Capitalism addresses supply, creation, and innovation first. It also sees the world as an extremely complex and severely under-discovered phenomenon, whereas socialism assumes we have most of the knowledge we need. Capitalism is based on trust, and socialism is based on planned supply. The foundation of capitalism and also its greatest weakness is its reliance on the people: their creativity, innovation, boldness, and trust in each other.
Sources
Gilder, G. F. (2012). Chapter Three: The Returns of Giving. In Wealth and poverty (pp. 27–49). essay, Regnery Publishing, Inc.
I found your essay very interesting! I think the way you tackle the issues that Gilder presents in his writing, and add in your own ideas, is very insightful. I also found his views on specialization in order to enrich a community very interesting, as it was not a topic I had thought much about previously. I appreciate your use of the apples to loaves of bread trade analogy that was discussed a few modules back. I think specialization allows a community to improve each of their trades at the same time, rather than expecting everyone to be able to fend for themselves. If everyone has to bake bread, grow apples, create nails, process lumber, and more, no one truly has an opportunity to become proficient in these skills. If everyone focuses on one to two skills, however, and uses them to enrich each other's lives, the community grows much stronger. The bread becomes better, the fruit better cared for, houses built sturdier, and so on. Like you, I thought Gilder's views of how giving a good gift requires a personal knowledge of the receiver were very interesting. It was not something I'd thought of much, but good gift giving can only come from personal relationships, which brings a community even closer together.
On the other hand, I was also bothered by Gilder’s idea that no gift could be given without expectation of reward. Whether it is given for a special occasion, or out of the goodness of your heart, I think you could give a gift to another person without expecting something in return. I found it odd that he thought that if you gave something to someone else and did not expect anything in return, then you’re still expecting something in return, but you just don’t know what you want yet.
Additionally, I also found it interesting that Gilder shows the parallels between the risk that capitalism brings and the opportunities that it provides through competition. I do think that trying to live in a capitalistic society without providing anything back to the whole would be extremely frustrating, but I also think there should be some middle ground where the sick, young, and elderly are taken care of without expectation of repayment.
“When it comes to spreading wealth, capitalism is such an effective method because it links knowledge and power. In other words, it gives riches to the people who have proved by example that they are able to be successful in a certain market. The riches are given back to the people who give everything to a certain market.”
This is something that I do not entirely agree with, I think that many people earn money through their hard work and success, but I think that there has been enough generational accumulation of wealth that there are now thousands of individuals with unearned wealth who have never needed to work for a cent. I think that in the beginning stages of capitalism, riches would be accumulated by the most productive individuals, but at this stage of America’s economy, there is a large imbalance of who controls the wealth.