Individual Rights and the Essential Nature of Capitalism

by | Dec 22, 1999

Part 3 of 6 in a Series of articles on Capitalism, Free-competition, Antitrust, and Microsoft The following article is an adaptation of a lecture Mr. Salsman gave at Harvard University, in May of 1999. The print version has been edited lightly in order to retain it’s spontaneous quality. Mr. Salsman has not reviewed the edited […]

Part 3 of 6 in a Series of articles on Capitalism, Free-competition, Antitrust, and Microsoft

The following article is an adaptation of a lecture Mr. Salsman gave at Harvard University, in May of 1999. The print version has been edited lightly in order to retain it’s spontaneous quality. Mr. Salsman has not reviewed the edited version.

The essential feature of a capitalist system is not that it has capital, nor even competition–these are corollaries, or manifestations, of capitalism. Capitalism, as Ayn Rand properly defines it in her book, Capitalism: The Unknown Ideal, is “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”

It is true that such a system, protecting freedom as it does so well, will also be the most productive system–that it will generate huge sums of wealth–that a small minority of productive geniuses and giants who generate the wealth will be the rightful owners of it–that these creators will also be the rightful administrators of the companies that help create it–that ever higher living standards will be achieved by an ever-widening middle class–that the system will serve as an open invitation to any and all to participate and compete, with a better idea or mousetrap–that its capital markets will be open and deep enough to fund new ideas and products–if they’re commercially viable. But capitalism is not a system that permits the violation of individual rights should any of these specific, derivative features fail to emerge–or if they emerge, but not exactly in the way an envious competitor or bureaucrat subjectively “feels” is preferable.

Like a perpetual Olympics of the productive spirit, capitalism is replete with active competitions which companies actually win. The winners strike gold, in effect, while others earn merely bronze, or a ribbon, or something less. But unlike the Olympics, capitalism has no fixed program of events, or industries, within which to compete. It burdens no participants with a static quantity of opportunities or a single pot of treasures or an inelastic market from which all must grab their market “share.”

Capitalism competition is not some “zero-sum game” in which one man’s gain is another’s loss; nor is it some “dog-eat-dog” battle to the death; nor is it “cut-throat.” Capitalist competition entails not the brutality of animals fighting over a fixed hunk of meat but the vigorous and peaceful exchanges of rational, productive creators of wealth. The freedom and economic “power” inherent in the Olympics of capitalism encourage the creation of new events and expanded programs–of new material creations, new products and new industries.

Capitalism is not a system of anarchy, as libertarians claim. It’s a system of objective laws, laws that are just, clearly defined and known in advance, laws that protect individual rights–the only kind of rights that exist–including rights to private property. That means the right to your property, to the property you’ve earned–not some alleged “right” to the property of others, involuntarily surrendered. There are no rights that entail the obliteration of the rights of others. Objective laws are just laws, laws that punish evil and protect the good. They do not presume that wealth–even vast wealth–is evil. Indeed they presume innocence, not guilt. Justice applies to and protects individuals and the associations they form, including economic associations called corporations or trusts.

I’ve said economic power is the power to produce–and without question, this power can be enhanced by joining with other producers and investors. Sometimes, two heads are better than one–but that shouldn’t make such combinations illegal. Nor should combining or segregating one’s assets. A “trust,” after all, is nothing more or less than a means of holding assets, be they stocks, bonds, patents or copyrights. Today they’re called holding companies. A trust is an efficient vehicle for holding and organizing one’s property, especially if it’s massive and complex. This form of ownership permits persons and businesses to expand beyond self-financed proprietorships to corporate forms, so as to attract the capital investment of others typically required to finance large-scale enterprise.

Under the U.S. Constitution–and in any capitalist system–property is private-held and protected by law against assaults from the initiation of force or fraud. Under this system, you don’t lose your right to your property simply because you elect to hold it in a more complex or efficient form. Nor do you lose the right to your property simply because you create more property. That right is violated by a system of graduated income taxes–and most certainly by antitrust laws. Because trusts are what they are, the antitrust laws are, in essence, anti-property, anti-large-scale enterprise, anti-corporate, anti-wealth and anti-American. What’s more, the antitrust laws are blatantly unconstitutional. And a “trustbuster,” in essence, is a state bureaucrat devoted to busting up property, wealth, large corporations, American values and constitutional protections. He is a lawless wielder of political power, not with the aim of protecting private property, but of destroying it.

Here is the height of injustice: when the U.S. Justice Department attacks Window, a product delivering expanded applications and integrated functions at an ever-cheaper price to millions of satisfied users, at a satisfactory rate of profit to Microsoft–and when the so-called Justice Department assumes PC makers are subjected to “force,” when in fact it was Netscape, the maker of the inferior browser–not Microsoft or its customers, Dell or Compaq–who used force. This is injustice: an attack on freedom of contract for the sake of sheer political power. Proper laws protect voluntary trades–or contracts–from force or fraud. Unjust laws sabotage voluntary agreements at the expense of a wealthier party, because he’s wealthier. Unjust laws penalize, not broken contracts, but earned wealth. They penalize success–not success achieved by force, but by production and trade. Unjust laws penalize success for the sole sake of penalizing success. They codify envy.

In her 1957 novel, Atlas Shrugged, Ayn Rand dramatizes, often humorously, the utter absurdity and illogic of “preserving” capitalism by means of antitrust laws. The novel tells of the passage of various antitrust style laws–“the “Anti-Dog-Eat-Dog Rule,” the “Equalization of Opportunity Law” and the Preservation of Livelihood Law.” Supporters of the laws are overheard pontificating at a cocktail party. One argues that “Competition is essential to society and it is society’s duty to see that no competitor ever rises beyond the range of anybody who wanted to compete with him.” (page 130). A second insists that “There’s nothing more destructive than a monopoly,” “except,” adds a third, “except the blight of unbridled competition. The proper course is always the middle. It is the duty of society to snip the extremes.” A fourth advocate offers the following peculiar logic, a logic not unlike the kind one might see being used in Congress today: “A free economy cannot exist without competition. Therefore men must be forced to compete. Therefore, we must control men in order to force them to be free.” Isn’t that just it, Senator Hatch?

— Made available through The Center for the Moral Defense of Capitalism.

Dr. Salsman is president of InterMarket Forecasting, Inc., an assistant professor of political economy at Duke University and a senior fellow at the American Institute for Economic Research. Previously he was an economist at Wainwright Economics, Inc. and a banker at the Bank of New York and Citibank. Dr. Salsman has authored three books: Breaking the Banks: Central Banking Problems and Free Banking Solutions (AIER, 1990), Gold and Liberty (AIER, 1995), and The Political Economy of Public Debt: Three Centuries of Theory and Evidence (Edward Elgar Publishing, 2017). In 2021 his fourth book – Where Have all the Capitalist Gone? – will be published by the American Institute for Economic Research. He is also author of a dozen chapters and scores of articles. His work has appeared in the Georgetown Journal of Law and Public Policy, Reason Papers, the Wall Street Journal, the New York Times, Forbes, the Economist, the Financial Post, the Intellectual Activist, and The Objective Standard. Dr. Salsman earned his B.A. in economics from Bowdoin College (1981), his M.A. in economics from New York University (1988), and his Ph.D. in political economy from Duke University (2012). His personal website is richardsalsman.com.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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