The long-standing argument of the Left is that the rich are getting richer and the poor poorer, presumably because the former “exploit” the latter. A lot of convincing-sounding statistics are marshalled in support of that claim, such as lower median incomes or hourly wages today versus in the past. These statistics can be manipulated in various ways (such as reporting short, outlier time periods versus trends over time), depending on what message one wants to convey. (An objective look at the long-term statistical trends confirms that median incomes today are actually higher than they were in the past. Please see the numbers here).

But even if we do not have income statistics on hand, mere observation confirms that people are economically better off than they were, say, 40 years ago. This is partly due to higher incomes today and partly due to the lower relative prices of many goods and services, thanks to freer markets in many parts of the world and a more global trade today. No, poverty has not been eliminated because we don’t have capitalism—which is the only system to eliminate poverty—but economic well-being has increased proportionally with economic freedom. Observe many of the Asian countries as examples. Even the Chinese have prospered, as the communist government there has increased economic, if not political, freedom. Closer to home, we can observe low-income families being able to afford many of the technology and other products that previously were within the reach of only the wealthy: TVs, cell phones, laptop computers, cars, better quality and/or quantity of clothes and food.

But even such concrete observations fail to persuade those leftists not open to reason; they cannot be reached, no matter how clear the argument. However, for those open to reason, the best way to show that everyone will prosper under a system of trade (the freer the better), is to explain how the principle of trade leads to improved human flourishing for all.

The rich cannot get richer by exploiting the poor; the rich can only get richer only if the poor also prosper. Wealth cannot be created by exploiting others—only by creating and trading values, for mutual benefit, by mutual consent. When the 99% (as per the claim of the Occupy movement that the richest 1% exploits the rest), shop at Wal-Mart or Costco, they aren’t being exploited. When we buy an iPhone, a Samsung Galaxy, or another smartphone, or a Sony or a Panasonic flat screen TV, we are not being exploited. When we negotiate a deal on a Hyundai or a Dodge, or any other car, we are not being exploited. When we buy goods or services, we do it to benefit ourselves, not because we are being forced to do so by ruthless producers who extort money from us.

And if the producers of the goods and services wanted to “exploit” us by charging “exorbitant” prices, there simply would not be enough buyers. If the 1% (or even the top 10%) traded just among themselves, their market would get saturated pretty quickly. It is trading with the mass consumer market that has enabled the Walton family, the owners of Costco, Apple, Samsung, Sony, Panasonic, Hyundai, Chrysler—and many others among the one per cent become wealthy. They have become wealthy, not by exploitation, but by producing and trading values that we want, to make our lives better.

To achieve the full benefits of trade, however, we need not just a little more economic freedom the typical mixed economy offers us today; we need a system of full political and economic freedom: laissez-faire capitalism. In such as system, individual rights, including property rights, are recognized and protected, all property is privately owned, and the government does not play any role in the economy (by regulating it, attempting to “stimulate” it, or “re-distributing” wealth from those who have produced it to those who have not).

It is time to reject the myth perpetuated by the Left that the wealthy are exploiting the rest of us for their own benefit. While criminals (scammers, pyramid schemers, and the like) temporarily looting others’ money are possible and must be punished, long-term wealth can only be created by earning it: by trading value for value for win-win outcomes. So instead of demonizing the wealth creators—the producers of values, let’s be grateful for their production and advocate a social system that makes increased prosperity possible for everybody: full capitalism.

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad.

Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.

5 COMMENTS

  1. Thankyou Jaana for highlighting the trader principle.

    I recommend two books that include related discussion:
    How to Be Profitable and Moral, by Jaana Woiceshyn
    Negotiation for Life and Business, by Robert G. Flitton
    😉

    Beware that statistics on poverty can be very misleading.

    Students are poor by choice but most will leave that state when they graduate and work full time, they are investing their time in a Spartan life style for future gain.

    Income statistics should recognize include working for oneself (e.g. growing own vegetables and meat – a common omission from farm income statistics, which also don’t include the effect of a day job in a mill or town – IOW the farm income is not their total income supporting the family).

    Income threshold for poverty should include need (single person versus parent with child).
    Median values are meaningless if the high end is unlimited, because a few high values pull it way up but the bottom is limited by zero. (Median is the middle value, whereas average is calculated on all values. I presume negative values are not used, but a student going into debt to pay for an education might be considered to have negative income level.)

  2. The Left you say live in denial (my word) do so because they are psychologically tied to Karl Marx’ version of the negative view of humans coming from Plato’s error about the mind and warped further by Immanuel Kant. They view humans as incapable and untrustworthy, thus they conclude fixed-pie economics and drive-to-the-bottom ethics – the basis of their exploitation theory. (See http://www.moralindividualism.com/newleft.htm for some identification of their beliefs and motivations.)

    The world is full of examples of poor people producing, even in the face of the government interference chronicled by Hernando de Soto in The Third Path and the lack of property rights he covers in recent books. But of course they’d do far better in a system of individual freedom protected by justice and defence systems, which is what we mostly have here. The documentary Globalization is Good has examples of people in Africa working hard but limited by lack of property rights.

    • Thanks, Keith, for the added evidence about the Left’s delusions, the productivity of the poor, and the crucial importance of property rights.

      You are starting off the year well, as the most frequent commenter of this blog–thank you!

  3. Averages are fundamentally inappropriate for this subject, what matters is having enough food and shelter – that’s far better with a social system of individual freedom supported by defense and justice.

    (There has never been a famine in a society with a relatively free news media.)

    Andrew Bernstein’s narrowly-named but broadly written book The Capitalist Manifesto chronicles the dismal nature of life before the great rise in creativity and entrepreneurial activity of the Industrial Revolution, including the frequency of famines. Availability of economical cotton clothing due to weaving advances was alone a huge advance in health.

    An amazing phenomenon is the number of anti-industrial anti-freedom activists who are female, as the usual caretakers of babies they especially benefit from the hygiene provided by the industrial revolution’s advances for clothing and sanitation.

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