All Commentary
Sunday, September 1, 1974

Makers or Takers

Mr. Donway deals as a free lance student and writer with the social implications of certain philosophical issues.

Until quite recently, it was considered a sophisticated criticism of capitalism to dismiss it as having succeeded. From David Riesman to Daniel Bell, the prophets of abundance were most laudatory about the ability of free enterprise to meet people’s needs. The enrichment made possible by capitalism was described in terms so glowing, indeed so utopian, that most capitalists would hesitate to use them.

These theorists did not, however, draw the conclusion that capitalism is a good thing. Rather, they drew the conclusion that capitalism had been a good thing — in an age of scarcity. But since capitalism had eliminated scarcity, and given us abundance, it was no longer useful. Indeed, by a kind of economic Peter Principle, they reasoned that capitalism was incapable of dealing with the consequences of its own success.

Capitalism was an idea whose time had gone; now a new idea was needed to deal with the results. Specifically, these sociologists asserted that abundance required a “consumer’s ethic,” in which people would be free from all the constraints against consumption, including economic constraints. The policy of the future would have to be: severing the capitalist tie between production and the ability to consume.

More recently, of course, abundance has not been the social problem uppermost in the liberal mind. The New York Times warns us editorially (April 7, 1974) that we are entering “An Age of Scarcity.” The carefree days, apparently, are over; conditions like this winter’s gas and oil shortage will become more frequent, even standard. One might think, then, that we would hear a chorus from the Left demanding the return of capitalism, the magical eliminator of shortages, the system born of scarcity and limits.

But apparently not so. Mr. Allan C. Barnes, a vice-president of the Rockefeller Foundation, hastens to remind us that, after all, “An Inquiry into the Nature and Causes of the Wealth of Nations was written in a time of comparative plenty.” Daniel Bell had said that the justification for capitalism was “the Malthusian injunction for prudence in a world of scarcity,” and “the bending to niggardly nature.” But now Stephen Shepard of Business Week tells us that “the United States was a’cowboy economy,’ with a frontier ethic of limitless resources.”

Pay Attention to Need

The objection of the scarcity theorists seems to be that the free market does not recognize need as such. If a good is less plentiful than before, capitalism simply lets the price rise until it reaches a level where the quantity of the good demanded at that price is equal to the quantity of the good offered at that price. The system recognizes no intrinsic shortage or shortfall.

Paul Samuelson acknowledged that this is a logical alternative for dealing with limited resources, but the consequences of it, he said, are illustrated by the millions of deaths which occurred during the Irish potato famine. What we require for an age of scarcity, according to these critics, is a more self-conscious economic system, one which is responsive to people’s needs, rather than one which bases people’s comsumption merely on earnings. The policy of the future will have to be: severing the capitalist tie between production and the ability to consume.

The connection between production and consumption is thus the common enemy of these two attacks — and the real enemy, one suspects. It is therefore necessary, in answering these critics, to understand the source of that connection, and the error in trying to abolish it.

A Vital Connection

One may begin by observing that, outside a social context, the connection between production and consumption exists as a natural fact: production is the only means of assuring oneself the goods a man needs to live. And indeed those who believe that the world owes them a living do not generally try to collect that debt from the world of nature; they look instead to the world of men.

For within a social context, the connection between production and consumption is not nearly so clear. Other people are capable of producing the needed goods, and these goods can be acquired from them. Why does the acquirer have to engage in any sort of production?

Why is it not sufficient that someone else has produced the goods he needs?

We might begin to answer those questions by asking this more general question in return: how is it that we can acquire goods from other people at all? It is, on the face of it, an odd thing to happen. After all, if other people produce goods as a means of achieving their desires, why do we expect that they will hand those goods over to us? If they need the goods, why do they get rid of them? It sounds paradoxical.

Of course, people do get rid of things they need, and even of things they desperately need. The world is filled with hungry people who are throwing their food to the wind. Such people are called sowers. And they are not considered irrational, because by throwing away their food, they can count on getting back what they desire more.

So, too, it is reasonable to expect that a person will hand over his goods to us, if his doing so is a means for getting back what he desires more. And that is just what it is in a free trade, since both sides set the terms, and both sides can insist on the terms being lived up to.

Trade, then, is a means of acquiring goods from others, and a means that it is reasonable to expect will work. But trade is not a way of separating consumption from production. For in order to engage in trade, one must have something tradable, something either produced or acquired. Since our lives have beginnings, and since we consume goods as well as trade them, it cannot be the case that the source of the goods we trade is always an earlier trade. Ultimately, all trades must be rooted in production, on both sides of the exchange.

Is there, then, any way of “setting free” consumption? Is there any method of acquisition which does not involve production on the side of the acquirer? Trade involves it, as we saw, because of our need to obtain the consent of the possessor of the goods. A method which obtained goods without the consent of the possessor would not have this problem. And indeed, coercive acquisition is a way of separating consumption from production: takers need not be makers.

But it is important to ask whether this way can be counted on? Can the person who tries to obtain goods by coercion reasonably expect that his actions will be the means to consumption?

A Faulty Method

I think that he cannot. Ludwig von Mises pointed out that men act only in the expectation that their action is the means of bringing about the future state they desire. Production makes sense, therefore, only if the producer can count on having disposal of the goods he produced. If he does not have disposal, whatever else may happen, the goods are not, for him, a means of accomplishing his desires. Thus to the extent that others, the takers, can count on controlling the producer’s goods without his consent, the would-be producer has no motive for production. Precisely in those circumstances where coercion can be anticipated, the coercer cannot count on there being any goods to take.

I believe this is what Ayn Rand meant by writing the following words for her character Henry Rearden:

If you choose to deal with men by means of compulsion, do so. But you will discover that you need the voluntary co-operation of your victims, in many more ways than you can see at present. And your victims should discover that it is their own volition — which you cannot force — that makes you possible.

Obviously, the point applies not only to individual thieves, but also to social systems based on coercion, to what Sir Henry Maine called “a society of status,” and what Herbert Spencer called Toryism. None of these systems can be counted on to work; they are attempts to survive on a wing and a prayer, without the wing, and without a prayer.

Socialists, of course, have long claimed that their system had a Midas touch, and would flower to unimagined heights. I have argued here that socialism, or any coercive system, has a Tantalus touch; the goods it reaches for recede before it. It is amusing in this regard that Robert Kilroy-Silk ends his book Socialism Since Marx by urging us to socialism with a quote from Robert Browning: “… a man’s reach should exceed his grasp.” For the socialist, it always will.         

  • Roger Donway is a freelance writer and editor whose work focuses on philosophy, economics, and history. In addition to heading up the Business Rights Center, Donway is assisting author Robert Bradley, Jr. with his forthcoming book Edison to Enron: Energy Markets and Political Strategies, the second volume in Bradley's trilogy, Political Capitalism (M&M Scrivener Press). Donway performed editing and research for Bradley's first book in the trilogy, Capitalism at Work: Business, Government, and Energy.