The Power of Capitalism

Rainer Zitelmann describes his new book, “The Power of Capitalism,” as “a journey through recent history across five continents.” It’s a very timely contribution, considering the bad rap that capitalism receives these days, especially in academe, together with the flirtation with socialism by those who have no experience of what it has brought about in practice.

That is the point. Capitalism in practice has led to wealth creation and prosperity. It has lifted people out of starvation and subsistence, achieving more for humanity in the past few decades than anything in history before it. Zitelman looks at the practice, with chapters on its record in specific places. He looks at Asia, with China’s new prosperity since it allowed capitalism to flourish. He makes the point that it was allowed to develop from the bottom up, not imposed from the top down. He looks at Africa, at South America, and at Europe and the US. Its record is consistent.

He documents, by contrast, the utter failure of socialism wherever it has been tried, explaining why its failure leads its supporters to claim that it never has been tried. Ah yes, it’s that old theory-versus-practice debate. The facts that emerge point in one way: capitalism works, socialism doesn’t. He has a fascinating chapter on “Why Intellectuals Don’t Like Capitalism,” which does more than revisit Hayek’s earlier insights. Zitelmann points out that intellectuals usually deal in ‘explicit’ knowledge, the sort that can be acquired from books and lectures. Many of them fail to realize that ‘implicit’ knowledge, the kind absorbed often unconsciously from surroundings, can be powerful. A child learns the grammar of language implicitly, working out its rules without being taught them. Zitelmann suggests that because entrepreneurs draw largely on implicit knowledge, intellectuals look down on them.

Although many cry for “more state intervention,” Zitelmann documents how this has failed time after time, whereas “more markets,” “more economic freedom,” has worked to create wealth time after time. It’s a fascinating book and a much-needed one.