QUORA: ‘How is capitalism NOT a zero-sum game?’

 QUORA {8}: ‘How is capitalism NOT a zero-sum game?’

I posted this answer:

There are two aspects of this: the political—Capitalism as a complete social system—and the narrower view of capitalism as strictly an economic system. I’ll take them in turn to show that Capitalism is the exact opposite of a “zero-sum game.”

Capitalism as it is understood today arose in the middle to late 18th Century.{3} It is the consequence of the principles of the Enlightenment, which was rooted in thinkers like Francis Bacon, Isaac Newton, John Locke, and Baron de Montesquieu. A highly essentialized statement of the Enlightenment principles that gave rise to Capitalism can be found in the American Declaration of Independence.{4} The Declaration states that all Men are created equal in their freedom to self-govern their own lives. This freedom is defined by unalienable individual rights to life, liberty, and the pursuit of happiness. Rights are understood as guarantees to freedom of action, not a “right” or automatic claim on the lives, liberties, or property of others, and define the scope of the individual’s freedom but also the limits of the individual’s freedom so as to protect every person’s liberty rights equally. “Unalienable” and “equal” means that the rights of one cannot infringe on the same rights of another. Unalienable rights include but are not limited to rights to property and free trade, religion and conscience, free speech and press, association (including protection of the sanctity of contracts); trial by jury; protections against unreasonable searches and seizures. The government, understood for the first time not as the peoples’ ruler but as the peoples’ agent, secures these rights through objective law, applied equally and at all times, punishing those who violate the rights of others, and drawing its delimited powers from the consent of the governed. Since one person’s rights cannot infringe on another person’s rights, whether privately or through government, rights can be understood as every individual’s safe space. Every individual’s “safe space” is protected from all forms of tyranny, including democratic tyranny (rights cannot be infringed or taken away by vote). {1} 

The social conditions established by these Enlightenment principles of individual rights and rights-protecting government naturally gave rise to modern Capitalism. When all people are free and their rights protected, Capitalism happens. Because Capitalism can only exist and function under the Safe Space principles of individual rights, Capitalism is clearly not zero-sum politically.

Which brings us to economics. Unalienable individual rights secured by the rule of objective law translated into a free market. A market is free when the government polices the peoples’ economic affairs against predatory force {5}, but otherwise doesn’t interfere in the voluntary economic interactions of free individuals. 

The free market, in turn, makes discovery, invention, innovation, and wealth production possible on a grand, virtually unlimited scale.{2} The idea that the free market feature of Capitalism is zero-sum is a holdover of the savages’ view of economics. Most of human history on Earth was the life of hunter-gatherers, who existed on the meager offerings of nature. Then man discovered wealth production, probably starting with someone’s discovery that you can take a seed from an existing plant, put it in the ground, and another plant grows from that one seed. When humans competed for the fixed amount of food and other values found free in the wild, economics was zero-sum. If one person picked a wild berry plant clean, there were no more berries for someone else. But when man discovered that he had the power to expand wealth exponentially, through productive work, everything changed. Now, you could cultivate an entire field of berry plants, as many as needed to feed all. No more zero-sum, because the man who plants the seeds and nurtures their growth creates wealth. The hunter-gatherer who picks berries from a wild bush does so at the expense of the next guy who comes along. But the man who grows new berry plants does not. Wealth is not created at the expense of those who didn’t create it, but to the benefit of those who previously would have had to search for another wild berry plant or go hungry. 

True, in any moment in time, only so much wealth exists, and no product can be consumed twice. If there is only one loaf of pumpernickel bread on a supermarket shelf and two consumers desire it, only one will get the loaf at that time and place. 

But labeling this zero-sum ignores reality. The zero-sum mentality fails also to consider the concept of time. Production takes time. Wealth production is not magic, springing into existence on the whim of someone’s immediate demand. But over time, human needs and wants are satisfied by productive innovation and expansion, as long as substantial elements of individual liberty, free markets, and rule of law exist. The general standard of living—a Great Enrichment—has soared in the last 250 years in any country that adopted a substantial degree of capitalistic economic freedom. If capitalism is zero-sum, then how do zero-sum mentalities explain this explosion of prosperity across the whole range of society’s members? The savage sees only the immediate moment. The enlightened mind sees reality not only in the immediate moment but over time. Capitalism protects people’s freedom over time--time for production to catch up with demand. Wealth production expands wealth, so long as the economy remains free and the laws of economics, which are rooted in the laws of nature and man’s nature, are free to operate.  

Of course, the zero-sum mentality grasps that he doesn’t actually live in a jungle. He sees all of the wealth that fills the stores and people’s homes. The modern savage merely switches the source of wealth from nature to society; i.e., the tribe. Like his hunter-gatherer ancestor, the modern savage sees only a fixed amount of wealth provided, somehow, by “society”. (This is the Marxian view.{7}) So one person’s gain is another person’s loss--zero-sum. The modern savage still hasn’t grasped and connected the concepts of production and time. Nor has he grasped that “society” is made up of individuals, and as the Enlightenment teaches, the individual, not the group, is the fundamental unit of economic, moral, and political concern. 

This brings us to the third conceptual failure of the savage--the concept of trade. The corollary of wealth production is free trade, a basic hallmark of Capitalism. Trade is by definition win-win, because it involves voluntary exchange of value for value in the absence of—free of—predatory force. Money is the tool of exchange, but money doesn’t change the nature of free trade. To make money is to produce and exchange a good for money. No zero-sum. To make a fortune is to create a lot of value for a lot of people. But each and every transaction subsumed under the fortune involves the same win-win process. No zero-sum. When I buy something from Amazon, Jeff Bezos’s $billions do me no harm. I have gained from the purchase. The same goes for employment. An Amazon worker offers his labor in exchange for money. It does the worker no harm because the company profits from his labor. Without the coordination of his labor with other Amazon workers, as well as other factors of production, like machinery and marketing, the Amazon worker’s labor would have no value, and there would be no job. Again, win-win. No zero-sum. {6}

Expanding production and trade is the activity that Capitalism promotes through the recognition of individual liberty rights and its corollaries, free markets, rule of objective law, secure property rights, and other freedoms. The more productive, the more money made. The builder of a successful business will likely make more than a janitor because he creates more wealth for more people. But under Capitalism money is never made at the expense of making others worse off, only by making others better off. The fact that at any given time two people may compete for a particular product--or job--is not evidence of zero-sum, since the one who doesn’t “win” is left no worse off than before. Over time, enough of the products or jobs is created to tend to fill all people’s needs and wants, as long as people are left free to act. (For a great history of progress and its source, see the works of Matt Ridley. The Great Enrichment of the past 220 years, sparked by the rise of modern Capitalism after The Enlightenment, is the final nail in the coffin of the zero-sum myth about Capitalism.) 

The failure to grasp production, time, and trade is the reason why some can’t grasp why capitalism is win-win, not zero-sum.

A question such as How is capitalism NOT a zero-sum game? implies someone who doesn’t understand Capitalism.{3} More fundamentally, it implies a worldview that is 12,000 years behind the times, as if production had never been discovered and the universal practice of individual rights, including the freedom of production and trade, had never been recognized. Once man, every individual man, was liberated to pursue his own happiness and prosperity free from coercive interference by his fellow man and from his government, people were enabled to flourish without loss to others. Capitalism enables man to replace zero-sum nature with win-win; the universal exercise of individual rights and thus of ever-growing abundance for all who desire and are willing to work for it. 

{1} [See Moral Rights and Political Freedom (Studies in Social and Political Philosophy)

by Tara Smith and Capitalism Unbound: The Incontestable Moral Case for Individual Rights

by Andrew Bernstein.]

{2} [See the works of Matt Ridley, including his latest book How Innovation Works: And Why It Flourishes in Freedom] 

{3} [I have used the upper case “C” for Capitalism because I am using the term as a proper noun—to wit, a specific type of social system defined by a particular political philosophy.] 

{4} [“Men” as understood by the Founders and subsequent freedom activists is a generic term, applying to all individual members of the human species “Man”. See America's Revolutionary Mind: A Moral History of the American Revolution and the Declaration That Defined It by C. Bradley Thompson]  

{5} [Predatory (or aggressive or offensive or initiatory) force includes not just overt force, such as armed robbery , but covert force such as extortion, fraud, breach-of-contract, and the like.]  

{6} [See The Money-Making Personality by Ayn Rand, In this talk, Rand distinguishes between Money-Makers (innovators and entrepreneurs who take calculated risks and succeed on free markets) and Money-Appropriators (those who become rich illegitimately, by “cutting corners” or political favoritism). Also available in print form in Why Businessmen Need Philosophy, Page 65.]

{7} [ “(Since) useful labour is only possible in society and through society . . ., only so much therefrom accrues to the individual as is not required to maintain the ‘condition’ of labour, society.” Page 4]

{8} [Quora is a social media website founded by two former Facebook employees. According to Wikipedia:

Quora is a question-and-answer website where questions are created, answered, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.[3]Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users' answers.[4]

You can also reply to other users’ answers.]

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