This is a misinterpretation. Capitalism is based not on greed but on the legitimate aspiration of people to better their lives. Adam Smith spoke of “The uniform, constant, and uninterrupted effort of every man to better his condition,” and of course it applies equally to women. It is this desire to better their circumstances that leads people to forego present consumption in order to achieve greater returns in the future. They invest in order to increase their wealth. That investment supplies funds to companies and provides the capital which they turn to advantage for the benefit of their investors.
This is not greed; it is one of the most benign things that people have done. Far from showing greed to the detriment of others, it gains its returns by providing the goods and services that people want and need at prices they are prepared to pay. It is based not on selfish greed but on co-operation to mutual advantage. The investors make it possible for consumers to satisfy their wants, and they themselves make gains in the process.
Capitalism is benign because it is based on trade, and every act of trade is an exercise in co-operation in which people exchange what they have for what they prefer. Capitalism has to be social; that is how it works. Greed is selfish, not social.
The desire of people to better their lives is part of what it means to be human. We do not adapt to the environment as other animals do; we adapt the environment, and we do it in ways that are calculated to improve our lot. We seek greater security, greater command of the essentials of a decent and acceptable life. Capitalism is the most efficacious way we have yet found of achieving these objectives.
Life for poor people, which meant most people, was pretty miserable before the Industrial Revolution. It was short, full of toil and deprivation. Most worked on the land, rose at dawn, retired at dusk, and did hard physical labour. Starvation was an ever-present threat, and subsistence depended on adequate harvests. A bad year could be fatal. Life expectancy was low, diets were poor and disease was rampant.
Movement into the towns and factories spurred by the Industrial Revolution was a step up for the overwhelming majority. They earned wages. They lived in housing that is today thought squalid, but was in fact an improvement on the pitiful country hovels they had lived in previously. Their food was better and life expectancy began to rise. They began to be able to afford luxuries such as pottery, metal utensils and tea.
The myth that the Industrial Revolution brought squalor and deprivation was propagated by Friedrich Engels amongst others, who failed to compare conditions in industrial towns with the conditions they replaced. It was a commonplace error until T S Ashton published “The Industrial Revolution” in 1949, showing how it brought social and economic progress, and lifted the living standards and life chances of millions.
It was the Industrial Revolution that generated the wealth that paid for advances in public health and sanitation. It led to the conquest not only of extreme poverty, but of curable and preventable diseases. Far from bringing poverty and misery to the masses, it did the opposite, lifting their material conditions at a rate and to a level never before witnessed in human history. It was one of the most benign events that people have brought about, and it set the world on an upward course which still benefits millions of people today.
The Adam Smith Institute’s President, Dr. Madsen Pirie, recently spoke at the “Stop the Nonsense” evening by Forest, Parliament Street & Liberal Vision. You can watch his speech below.