Capitalism, the Free Market,
and the Duties of Property and Contract

(after Ludwig von Mises, Karl Popper, & Friedrich A. Hayek)


I have not robbed...
I have not stolen.

The "Negative Confessions" or Protestations of Ani, The Egyptian Book of the Dead, The Book of Going Forth by Day, The Complete Papyrus of Ani, Featuring Integrated Text and Full-Color Images, translated by Dr. Raymond O. Faulkner [1994, 1998, Chronicle Books, San Francisco, 2008, Chapter 125, Plate 31], hieroglyphic transcription, E.A. Wallis Budge, The Egyptian Book of the Dead, The Papyrus of Ani [1895, Dover Publications, 1967, p.198] -- the second and third Confession as translated (in both references), but the 41st and 40th in the order of the manuscript; also, the manuscript does write final "w" for both verbs rather than the semi-vowel "i" that will be found in dictionary entries.


But thou shalt remember the LORD thy God: for it is he that giveth thee power to get wealth, that he may establish his covenant which he sware unto thy fathers, as it is this day.

Deuteronomy 8:18


And Judah and Israel dwelt safely, every man under his vine and under his fig tree, from Dan even to Beersheba, all the days of Solomon.

1 Kings 4:25


There is a further drawback to common ownership:  the greater the number of owners, the less the respect for the property. People are much more careful of their own possessions than of those communally owned; they exercise care over public property only in so far as they are personally affected. Other reasons apart, the thought that someone else is looking after it tends to make them careless of it.

Aristotle, Politics, Book II, Chapter 3 (T.A. Sinclair, Penguin, 1962, p. 58)


 
I want the people of America to be able to work less for the government and more for themselves. I want them to have the rewards of their own industry. That is the chief meaning of freedom. Until we can re-establish a condition under which the earnings of the people can be kept by the people, we are bound to suffer a very distinct curtailment of our liberty.

Calvin Coolidge, State of the Union message, December 3, 1924


La propriété, c'est le vol!
Property is theft!

Pierre-Joseph Proudhon, 1840


Where there is no property there is no justice.

John Locke, Essay Concerning Human Understanding, IV, iii, 18, 1691


Capitalism is the astonishing belief that the nastiest motives of the nastiest men somehow or other work for the best results in the best of all possible worlds.

Attributed to John Maynard Keynes, provenance unknown (I would say that the nastiest men with the nastiest motives would be politicians, not businessmen)


It is only through an understanding of and appreciation for the animating principles of the extended order of market interaction that an individual who is not directly self-interested may refrain from expressive political action that becomes the equivalent of efforts to walk through walls or on water (for example, support for minimum wage laws, rent controls, tariffs, quotas, restrictive licensing, price supports, or monetary inflation).

James M. Buchanan, "The Soul of Classical Liberalism," The Independent Review, Volume V, Number 1, Summer 2000, The Independent Institute, p. 114


Wohlfahrt aber hat kein Prinzip, weder für den, der sie empfängt, noch der sie austeilt (der eine setzt sie hierin, der andere darin); weil es dabei auf das Materiale des Willens ankommt, welches empirisch, und so der Allgemeinheit einer Regel unfähig ist.

But welfare has no principle, neither for him who receives it, nor for him who distributes it (one places it here, another there); because it depends on the material of the will, which is empirical, and therefore is incapable of the generality of a rule.

Immanuel Kant, "Der Streit der Fakultäten," Zweiter Abschnitt, 6, note *(2nd), A146-147, Schriften zur Anthropologie, Geschichtsphilosophie, Politik und Pädagogik 1, Werkausgabe XI, Suhrkamp Verlag, Frankfurt am Mein, 1964, 1977, p.360; translation after F.A. Hayek, The Fatal Conceit, The Errors of Socialism, University of Chicago Press, 1988, 1991, p.73


The whole process of calculating in terms of market prices was, indeed, sometimes even represented as part of a devious manoeuvre on the part of owners of capital to conceal how they exploited workers. But such retorts quite fail to address the arguments and facts already rehearsed:  some hypothetical body of objective facts is no more available to capitalists for manipulating the whole than it is to the managers that the socialists would like to replace them. Such objective facts simply do not exist and are unavailable to anyone.

F.A. Hayek, The Fatal Conceit, The Errors of Socialism, University of Chicago Press, 1988, 1991, p.78


[Bono] attended a technology conference in Tanzania. Many speakers there argued that traditional aid has failed to lift Africa out of its economic doldrums. Uganda journalist Andrew Mwenda contended that Western aid has not only failed, it helps entrench poverty. He wants more investment. He asks: "What man or nation has ever become rich by holding out a begging bowl?"

Bono was shocked! From the audience, he shouted "Bollocks!" -- plus another word I can't quote on this family channel. Bono told the group that listening to Mwenda was like listening to an African Margaret Thatcher. According to Bono, the aid simply hasn't been tweaked properly as yet.

Paul Jacob, "Common Sense," July 25, 2007

Respect for the interests of person seems very different from respect for interests of property and contract. There has also been historic dispute about the latter. Socialism and anarchism ("property is theft") advocate no respect for private property; and even when rights to private property are conceded, there is dispute about just what such rights are. Contracts, especially concerning employment, now tend to be heavily regulated by law, usually on the paternalistic principle that contractors cannot protect their own interests through free agreements, or perhaps don't even know what their true interests are. Duties of property and contract have developed historically, where at some time most things counting as property or concerning contract didn't even exist. The best approach, then, is to provide for the peculiarities of these duties in a separate polynomic domain, the morality of things, with a somewhat attenuated force of duty, the jussive. Jussive moral duties are based on respect for property and contract even as imperative moral duties are based on respect for persons. Since persons tend to get excited about people messing with their property, breaking the contracts that they agree to, or forcing them legally into deals they don't like, there is a clear connection between jussives and imperatives.

The morality of property and contract is the bridge between imperatives and hortatives and must do two things:  1) it must presuppose and protect the morality and so the autonomy of persons, and 2) it must further the general interests, i.e. the wealth and well-being, of those persons as they judge it themselves. It is arguable that only rights of property and contract can really protect the autonomy of persons. That would base jussives directly on imperatives. That would leave their moral force unproblematic. However, although it leaves the real question of justification more obscure, the more utilitarian justification of Hume, Mill, and Hayek opens the issue up in relation to hortative goods. According to F.A. Hayek, the morality of property and contract is falsifiable, i.e. its principles are not self-evidently true but must be pragmatically evaluated as to their effect on the autonomy of persons and the promotion of general wealth and well-being. Thus, Hayek says:

The institutions of property, as they exist at present, are hardly perfect; indeed, we can hardly yet say in what such perfection might consist. Cultural and moral evolution do require further steps if the institution of several property is in fact to be as beneficial as it can be. [The Fatal Conceit, The Errors of Socialism, University of Chicago Press, 1988, 1991, p.35]

The laws of property become constructed over time, but Hayek sees this process not as a grand design of lawgivers, the result of a "constructivist rationalism," but as emergent order of often unintended consequences, where deliberate decisions are made at the level closest to those with the best knowledge of economic transactions, the ones who also bear the costs of any mistakes and so have the strongest motives to get things right. This is then a form of "cultural and moral evolution" that mimics the emergent and unintentional characteristics of organic evolution, without, however, the sense of "social Darwinism" that the "unfit," i.e. actual citizens, should simply die in a sort of social law of the jungle. Critics of Capitalism never notice that what we want to fail and disappear are unproductive, inefficient, and unwanted businesses, whose elimination is a benefit to consumers. Somehow their purported defense of consumers, as in the "too big to fail" bailouts of the 2008-2009 recession, often has the curious political effect of protecting rent-seeking businesses (e.g. GM, GE, etc.) and of increasing costs and decreasing value to consumers, in violation of Adam Smith's principle that the purpose of production is consumption. This ironic result occurs because anti-Capitalist critics of corporations frequently are committed to the creation of a Corporatist State, in which monopoly business, far from being an evil, is a function and tool of the natural monopoly of the government. This was the horrific economic structure of the Soviet Union.

The trial and error process by which the laws of property and contract evolve can, of course, be seen in Socratic terms as a process through which opinion may be replaced with knowledge, and we all "learn better" and cease to do the unproductive things we have been doing previously (cf. Apology 26a). Thus, what evolves is not so much either organic or external as it is cognitive and internal. As Hayek himself asserts, the "extended order" of capitalism is a way of dealing with limited knowledge, not only knowledge of economic factors like available resources and consumer preferences, but the meta-knowledge of proper legal frameworks and economic principles. All this is an instance of the humility of Socratic Ignorance. Such humility is conspicuously lacking in socialist projects of command and control:

So, priding itself on having built its world as if it had designed it, and blaming itself for not having designed it better, humankind is now to set out to do just that. The aim of socialism is no less than to effect a complete redesigning of our traditional morals, law, and language, and on this basis to stamp out the old order and the supposedly inexorable, unjustifiable conditions that prevent the institution of reason, fulfilment, true freedom, and justice. [ibid., p.67]

The most ambitious attempts to institute a socialist heaven on earth, however, have instead displayed the dynamic of producing hells on earth instead.

An excellent example of progress over time at the boundaries of personal and property law concerns the disposition of debtors. In Roman law, the ultimate recourse for the discharge of debts was selling family members into slavery. We also see children sold into slavery for economic reasons as far away as China, where, for instance, girls often entered a career of prostitution in that way. But having first lost their children, the parents might finally be bound to sell themselves into slavery. In those terms, the later introduction of debtor's prison was a case of considerable moral advancement, except for the paradox that anyone held in prison is therefore not in any position to work towards the discharage of his debts. Inmates were even expected to be fed by their families, or to beg through the windows for support. This didn't make a whole lot of sense. It almost looks like a case of holding a debtor hostage until family or friends can pay off the debts.

The institution of bankruptcy thus represented a victory both for humanity and for rationality. Persons hopelessly in debt can settle with creditors for as much as can reasonably be paid and then will be allowed to start over, now as a much more productive member of society than a slave or a prisoner would be. This formalizes a practice that actually goes back to the Bible, of having the legal system periodically forgive debts so that all can start fresh.

And ye shall hallow the fiftieth year, and proclaim liberty [áphesis, "forgiveness"] throughout all the land unto all the inhabitants thereof: it shall be a jubilee [eniautòs aphéseôs, "cycle of forgiveness"] unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family. [Leviticus 25:10, with some terms from the Septuagint -- this is the origin of the inscription on the Liberty Bell and of countless references to the "Jubilee" during the Civil War, as in the song "Marching Through Georgia"]

Under bankruptcy laws, the debtor need not wait perhaps fifty years until the next "jubilee", or for the unpredictable magnanimity of the sovereign to similarly forgive debts. A worker may say, "I sold my soul to the company store," but the company cannot legally hold the worker in physical bondage or servitude to the debt, which seems to be forgotten in the protest song.

A similiar provision for debt is found in the device of the "limited liability" corportion -- a much older provision, as seen in the "Ltd." designation of traditional British corporations, than in the newly familiar "LLC." In this, the owners of a company are not personally liable for the debts of the company. In bankruptcy, the creditors of the company can only be expected to be paid from the actual assets of the company, which intially consist of the capital invested by the original owners and investors and later of the assets acquired in the course of business. An owner or stockholder may lose all that they have invested, but they do not need to worry about their other assets or investments. The purpose of this device is to encourage the formation of new commercial enterprises, whose burden on investors can be specified and limited. Not all corporations operate under this limitation. The owners of the venerable insurance company Lloyd's of London are personally liable for the full debts of the company. Despite the age and reputation of Lloyd's, I think this would make investing in it a frightening proposition. At the same time, the lunatic fringe Left, which doesn't like corporations at all, presently is promoting a movement to strip corporations of all rights. Presumably this would also include the right of limited liability. Since the Left doesn't actually believe in individual rights either, one might begin to wonder where rights are supposed to inhere. But the answer to that is simple:  Only in the State.

Hayek's own example of recent innovations in property law concerns what is now called "intellectual" property, even as he reflects on the irony of intellectuals who otherise disparage material property rights:

Those very intellectuals who are generally inclined to question those forms of material property which are indispensible for the efficient organisation of the material means of production have become the most enthusiastic supporters of certain immaterial property rights invented only relatively recently, having to do, for example, with literary productions and technological inventions (i.e., copyright and patents). [ibid., p.36]

As the periods for which copyright and patents hold keep being extended, the rationale of the Constitution for a "limited period" to encourage progress and development has been evolving into a sense of permanent rights. This may be considered to be getting out of hand, as not long ago an attempt was made to bill organizations like the Boy Scouts for the royalties due for songs sung around the campfire. I have noticed photographs and illustrations disappear out of the later editions of books, apparently because of the burden of following newly evolved copyright principles in obtaining permission or release for their use. These cases represent a struggle over where boundaries are going to be, with the consideration in the background that this area of law and rights was originally intended to serve certain public purposes, not just render intellectual rights into the sort of absolute use and possession rules that intellectuals tend to despise for material property.

These are questions of political economy -- a discipline now usually just called "economics" but still with an inevitable political component. The political component most concerns the autonomy of persons, i.e. do the principles of property and contract result in massacres and labor or concentration camps, or in a society where innocent people generally do as they wish? The economic component most concerns the ability of the system to produce wealth on a broad scale. This is a deontological modification of Utilitarianism (sometimes called rule or indirect utilitarianism), in which the jussive principles that evolve historically are not duties to produce the general good but do function to actually produce the general good even as they are used by persons only as moral rules of justice to protect and further their own interests.

ETHICS
MORALITYEuergetic Ethics, the good and the bad:  non-moral worth in human life, the good of teleological ethics, the worth and meaning of life -- happiness, fulfillment, etc. -- things good-for-us:  Hortatives -- exhortations
PERSONSMorality of things, right and wrong:  ethics of property, contract and public order; moral force of legislation, subject to practical falsification; liberties of the marketplace:  Jussives -- commands
Morality of persons, right and wrong:  ethics of personal duty and virtue, intention and justice; dignity of persons, respect for other persons in intention and in action:  Imperatives -- commands

right

right

good
, right, right of profit, good

Graphic Version of Table

Any kind of utilitarianism, however, always leaves us with the problem of how it can be a duty to "further the general interests" of people in society. The answer must be that it is not, for us as individuals. Instead it can only be a duty for the state, as a corporate entity, to provide for general interests. The state can do that by providing the protections, against violence, negligence, and fraud, needed by the free market. As an implied contract to provide for the general welfare, the state can have no other function beyond that and the general enforcement of justice to protect individuals, property, and contracts. On the other hand, if the state provides for general interests only indirectly by being the guarantor of justice, this does not need to be understood as any kind of contract; for no one agrees to be bound by justice. Those who do wrong certainly do not agree to be bound by justice, but those are precisely the ones against whom the state will legitimately exercise force.

It is through law, of course, that the state administers justice. The prima facie moral duty to obey law cannot be derived from the existence of law as such, but from the presumption that the laws implement the proper purpose of the state. As Thomas Jefferson says in the Declaration of Independence:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

By securing the rights of person, property, and contract, the state and the law in fact further the general welfare -- our "Safety and Happiness." Sometimes to accomplish this the law must make arbitrary decisions. Which side of the street we drive our cars on is completely arbitrary. There is no reason why the right side is preferable to the left. But it must be one or the other; and once the decision is established in the law, the lack of a natural reason to prefer right over left (or the opposite, in Britain or Japan) cannot detract from the moral force of the law. Similarly with more modern problems, like use of the electromagnetic spectrum:  Someone acquires the right, through law, of broadcasting or otherwise employing certain wavelengths of radiowaves or microwaves. The use boundaries and the means of acquiring rights to the spectrum simply would not exist outside of their legal definition [note]. The force of law in these matters is expressed through arbitrary conventions, but the conventions themselves allow the law to serve purposes that are neither arbitrary nor conventional. The law therefore must be such as to merit respect by serving its proper purposes. If it demands respect just because it is the law, this is very likely to conceal a corruption of its original and proper purposes into some other purposes that will not hold up under examination.

The principles of property and contract are the functioning morality of capitalism, which is based on private property and contract without any special obligation to advance the interests of others or abridge one's own interests for the benefit of society. Nevertheless such rules unintentionally further the general well-being and growth of wealth for all. Capitalism can produce such results because of the free market. The free market solves the problem of the self-defined character of hortative goods, where, as we see Kant say above, "welfare has no principle," i.e. the good of individual benefit and preference cannot be defined by a rule that will apply uniformly to everyone.

The free market is established by imperative and jussives goods, protections against violence, fraud, and any other coercion or dishonesty, but no one in advance ever needs to know what anyone else in particular wants when it comes to the general goods of euergetic ethics -- hortative goods. Instead one can offer goods that one thinks someone else might want and then see if there are any takers. On the other hand, if someone wants something, then they can just seek out someone else who may be offering it. All that buyer and seller need is some way of making contact. That is called advertising. Exchanges of self-defined hortative value take place without the knowledge or concern of anyone else. Thus, what someone wants or values need not be predicted or known by anyone in any kind of public authority. Indeed, what people want or value cannot be predicted, known, or calculated by anyone in public authority -- it is often difficult enough when one is buying presents for those of intimate acquaintance -- which is why capitalism produces wealth to a greater degree than any other system:  every exchange in the marketplace is a transaction, and transactions are wealth. All other things being equal, more transactions will deflate a constant supply of money, i.e. will make the money more valuable (prices will fall), or will allow for the money supply to grow while retaining the same value (prices remain the same).

That no one can say what someone else wants is the foundation of the free market. It is what enables us to solve the problem of the relativism of euergetic/hortative goods. The free market actually enables everyone to get what they want. Even democracy at its best rarely represents more than the wishes of 50 to 60% of the population. That can be called, and often is, the tyranny of the majority. In the free market, however, any taste can be catered to; and no one in political power need ever even ask what people want. The wants and the products seek each other out without the help of anyone outside of advertising. That is deeply shocking to many. Whether it is called "permissiveness" by the Right or "consumerism" by the Left, the exuberance of popular culture, especially its vulgarity, garishness, frivolity, and eroticism, is a profound challenge to the anaesthetic moralism that characterizes the mentality of those who would like to be, or are accustomed to be, telling others what kinds of worthy things they ought to be doing. This kind of popular culture is often not even given credit for being "true" popular culture -- it is just "mass" culture.

The great traditional alternative to capitalistic political economy has been socialism (or communism), where persons are expected to work for the interests of others, either directly or by proxy of the state, and not just for their own interests. As intentionally implemented in communist states, socialist rules of political economy failed by both criteria above:  1) the autonomy of persons was repeatedly violated by massive applications of murderous force and by large scale restrictions on innocent speech and activities, and 2) wealth was produced nowhere near to the extent promised or anticipated, production and development lagged far behind capitalistic countries, and much of the wealth that was produced became concentrated in the hands of the politically privileged, despite constant criticism of the disparities of wealth under capitalism. Without a marketplace, economic planners are expected to know what people want; but clearly they cannot know all, and even if they do find out some, they may well reject the wants as unworthy. And so many people's wants, and needs, will not be provided for. Since prices depend on demand, and demand cannot be calculated without a market, the great Austrian economist Ludwig von Mises (1881-1973), a man with the distinction of having his papers stolen first by the Nazis and then by the Soviets, argued in 1920 that a socialist economy cannot calculate prices and so cannot calculate how much or how little to produce of anything. I have already noted how F.A. Hayek developed this argument from limited knowledge. It is a sorry truth of history that it took another seventy years for that truth to be brought home by the practice, by the general pauperization, by the devastation of land and industry, and especially by the terror and murder of millions, in the Soviet Union and its satellites. Even on the verge of collapse, the Soviet Union still managed to deceive the credulous:  The dean of the MIT school of business, Lester Thurow, said in 1989:

Can economic command significantly accelerate the growth process? The remarkable performance of the Soviet Union suggests it can. Today it is a country whose economic achievements bear comparison with those of the United States. [Hoover Digest, 2000 No. 2, p.151]

This was bitter, ignorant nonsense at the time, especially considering that glasnost had made it possible for outsiders in the late 80's to inspect the Soviet Union as previous travelers had been unable to. Yet even today, after the full story is out, American politicians and academics still advocate price-fixing (in medical care, the labor market, and agriculture especially) and other command-economy forms of regulation, justifying them with outrageous Marxist clichés, as though nothing had ever happened to self-professedly "social" economies. Meanwhile, in 2003 Russia stood, according to The Economist, as only the 18th largest economy in the world, behind Taiwan (16) and even Argentina (17). The ranking of the Soviet Union as the 2nd largest economy in the world, as it was from the 50's to the 80's, is open to serious question. No one ever believed Russia's own statistics, but its economy was never as large as even the CIA thought it was -- some anti-American critics now even claim that the CIA did that deliberately, in order to exaggerate the Soviet threat and perpetuate the Cold War (whose existence was to the CIA's bureaucratic advantage).

The starting point for an evaluation of capitalism must be the principle that poverty is not an injustice:  it is no more than the natural condition of humanity [note]. There are therefore no "causes of poverty," only causes of wealth. This means that there is no such thing as "social justice" -- poverty in the presence of wealth is not as such a wrong. Only theft, taking by fraud or force, is a wrong. Property and contract, commerce and industry are what alter the natural condition of humanity thanks to the enterprise and imagination -- the hortative virtues of prudence -- of those who create the products of technological society and hire the people to manufacture them. Wealth is not found, it is created [note]. It is not justice to "distribute" wealth that must be coercively taken from its creators in order to be given to those who have not created it. That is theft. And doing that, sacrificing freedom in order to create "equality," never accomplishes that end, since it is the distributors themselves, given power over people's freedom, who become "more equal than others."

Capitalism, by separating the private personal sphere of life from an impersonal public sphere, the marketplace, is inevitably perceived as dehumanizing public life. The impersonal marketplace is merciless and uncaring, operating without compassion or charity. What that contrasts with are older conceptions of society where everyone has the right to be directly cared for by a personal public authority. Those were institutions of religious and political altruistic moralism:  a moral infantilization where the right of support is gained at the expense of paternalism and the loss of privacy and autonomy -- i.e. hortative goods are determined by those in authority. The expense of personal "caring" is perpetual dependency; and in a society that may be without much wealth to start with, it can provide real abundance only for those charged with its charitable distribution to others. That distribution was curiously never so great as to leave the distributors with any dearth for themselves.

Karl Popper distinguishes the "closed society" from the "open society." The closed society means the pattern of all traditional societies, and that of the utopianism that would like to return to the form of traditional societies, namely socialism. The pattern is that all moral and factual knowledge needed to run society is actually known to those in authority. That is why the society is "closed":  it is complete and self-contained -- everything has a place and everything (and everyone) is in its place. Those in authority, knowing the good (as in Plato's Republic), are thereby able to arrange society into its proper hierarchical structure of those who are dependent and cared for and those who are altruistically productive and caring -- all as in Confucian relationships of xiào, "filial piety." The opposite of this, which is found only in Western liberal democracy and capitalism, is the "open" society, which means that no one in authority actually has or is expected to have moral and factual knowledge in any complete or finished manner. The openness of the society consists in the limitation of the authority of those with political power and the provision of the free market for the exchange of value for value as everyone provides or seeks out all the different kinds of goods that imagination and taste can conceive and prefer.

Objections to the privilege of those in traditional and supposedly benevolent political authority led to capitalism itself; but yearning has never ceased for the comfort, security, and certainty of the older societies. For much as "hierarchy" has become a dirty word to many trendy intellectuals, hierarchical, paternalistic societies are the "natural" state of human communities and exert a constant pull on our sentiments. Demand for them tends to return either through outright conservative and religious yearnings for the old ways or more subtly through socialistic and so-called "liberal" conceptions, which, promoted by the trendy intellectuals themselves, with the old religious trappings stripped away, again would establish a personal authority to redistribute wealth out of compassion and caring:  in practice, of course, the compassion and caring become a patronizing condescension that sees to its own comfort first and then uses its political power to prevent criticism. The old abuses of aristocratic privilege returned to full life in the Soviet Union. There is privilege in capitalism also, for anyone with money; but the difference is that in the free market anybody can make a buck, if they are ambitious and imaginative enough. They don't have to have anyone's permission to do that (unless bureaucracy and regulation have closed in on their industry); all they need is something to sell that someone wants to buy. The irony in American capitalism is that some of its loudest public critics, actors and popular singers, make their often considerable fortunes doing things that no rational (i.e. paternalistically controlled) society would have paid them nearly so much for doing. In traditional societies from Europe to Japan actors have usually had the status of outcastes -- because they are typically productive of nothing except disrespect for authority. Their popularity in the free market, however, often provides them fortunes comparable to those of the industrialists whom they so frequently despise and disparage.

The disparity of wealth that exists under capitalism is the incentive for all to improve the poverty of nature through their own enterprise and imagination. Under both socialism and capitalism the ability of governments to promote industry and growth has proven limited:  and in mixed systems of capitalism and socialism, which to an extent includes all major capitalistic countries today but most famously is displayed in Sweden and Denmark, the effect of the total security provided by social programs is uniformly to remove incentives and stifle initiative, creating a passive dependence on paternalistic government. Society may only sink slowly under that burden, but sink it does [note]. The famous planned market economies of Europe, including that of Germany, only produced about 2 million new jobs in the 80's. The United States, in the infamous decade of "greed" and waste, produced 18 million. Since 1970, Europe has produced exactly zero new jobs in the private sector [at the time this was written in 1996]. As of 1993 many socialized European economies seem to be in permanent recession, with unemployment at 10% or worse, with some, like Spain, at depression levels of unemployment, 20% or more. Those figures may be deceptive, however, since much employment is deliberately kept off the books, especially in Spain, to avoid taxes, mandated benefits, etc. The free market becomes the black market where it is otherwise restricted or forbidden.

The principal Marxist moral concept is exploitation (although Marx himself despised the whole idea of moral objections to capitalism). Marx's theory is that the whole value of a product is produced by the labor of the workers. If the capitalist then derives a profit from the sale of the product, this must in effect have been stolen from the workers. Profit is therefore entirely an illegitimate thing, and the capitalist is ultimately simply unnecessary for the production of wealth. Attempting to remove the capitalist in communist countries, however, only succeeded in removing what the capitalist actually provided:  knowledge, imagination, drive, ambition, innovation, an interest in protecting capital investment, etc. Marx seemed to think that industry grew up as some organic thing to which capitalists were parasites. Such a sad view, with such disastrous consequences, was exactly the opposite of the truth. It was the imagination, labor, and interest of the industrialist that made the modern production of wealth possible. Far from being "exploited," industrial workers were actually rescued from what Marx himself called the "idiocy" of rural life. Yet even in capitalist states today there are laws to prevent capitalists from making "excessive" profits, which in some sense really would be exploitative. The effect of this, as with all such nostrums, must be to remove the incentive for innovation and to drain away the capital accumulations that are the only thing that can provide for new investment and new industry and thus for new jobs. For decades American railroads were starved into bankruptcy and almost into the complete collapse of their physical capital (rails, engines, etc.) by rules that limited their profitability.

Another significant Marxist principle is that free transactions in the market are not "really" free because we may need the things that are offered to us. We do not "really" have a choice because we can only choose what happens to be offered to us at the moment:  "capitalist" or "bourgeois" freedom is actually slavery, "wage slavery." This principle has been eagerly seized upon by anyone who wishes to limit the liberties of individuals by increasing the power of government, and that movement tragically includes civil rights groups, feminists, and others who had real grievances against the abuse of government power in the past in limiting their freedom. Instead of being content with the worthy goal of freedom from being victimized by government, such groups have gone ahead in an attempt to preëmpt the power of government for themselves and to use the coercive force of the state in pursuit of what they regard as their interests (which are ipso facto absolute and unquestionable goods for all, whether the all think so or not) to limit the innocent liberties of others. By saying that free exchanges are not "really" free, this results in the real limitation of freedom in restricting the voluntary nature of the exchanges offered in the market. That restriction leads to the converse of the "freedom is slavery" principle:  a logical consequence already well understood by George Orwell and epitomized by him in the famous formula of the Party in 1984:  "Slavery is freedom" -- the arbitrary tyranny always inherent in state authority will actually make us "free." It is an eternal and, in its seductiveness, almost Satanic temptation.

For the "freedom is slavery" principle to appeal to us, we must be persuaded of our own helplessness, dependency, and especially victimization, i.e. that we are being used and exploited even in the free mutual exchanges that we consent to engage in with other people. The only way that we will not be exploited, presumably, is if people are forced to give us what we need or want without a mutually agreeable exchange. Of course, it is not expressed in the terms that they must be "forced," instead their "consciousness" must be changed in such a way that they will want to fulfill their moral duty to give us what we need and want even if we don't have anything they need or want. Thus a political principle dictates a nightmarish invasion of mind and conscience. As a moral claim on people's behavior this is in effect Marx's principle for the utopian society:  "From each according to his ability, to each according to his need." This has been considered above in relation to non-contractual duties of commission, and Ayn Rand clearly saw the slippery slope established by such a principle:  it fosters nothing but bitterness among the productive and corruption among the non-productive. That was the lesson of Communism:  nobody tried....except the ideologues, who were actually more interested in trying to order everyone else around than in doing anything dull but constructive themselves.

The disastrous error of socialistic thinking -- whether under communism or under mixed capitalism -- is to forget that imagination drives progress and that no government bureaucracy ever rewarded imagination. Instead, as Karl Marx himself understood, bureaucracy only seeks to perpetuate itself and only rewards conformity. As they are based on political power and not on profit, government and bureaucracy cannot fail as businesses can. In capitalism there is failure, both personal and corporate; and it is failure, like natural selection, that makes for progress, to the benefit of all, even if failures seem like disaster at the time, especially to laid off employees. Where failure is impossible, there is no need for effort. Without effort, society begins to sink back to the natural poverty enjoyed by humanity for countless millennia. That has actually become a goal for some in the ecological movement ("Back to the Pleistocene!"), but even they realize that it will mean the poverty, starvation, and death of millions, probably billions, of human beings. What Marx actually envisioned in communism was a spontaneous order, without government, since he regarded all government as oppression. Communism never had a hope of being a spontaneous order, but the freedom of the marketplace actually is, planned by no one and run by all, just as Darwin's principle of evolution by natural selection describes the spontaneous order of nature that produced us in the first place.

Part of the price represents the profit of the supplier. Marx, of course, regarded all profit as illegitimate. Without at least breaking even, however, a supplier cannot cover costs and will go bankrupt. The profit represents the return on the supplier's risk and effort invested in the business. For most small businesses, the profit of the business is in effect the wage of the businessman. It often doesn't amount to much. Nevertheless, people still respond to accusations of "excessive" profits. That is "exploitation." Large profits, however, are precisely what attract competition to a market. Entering a market requires a large investment and a lot of trouble starting up a business or product line. The prospect of large profits makes that worthwhile. Once various competitors have entered a market, competition reduces profits even as the need to attract competition declines. The bogeyman of anti-capitalist propaganda was the prospect of a monopoly:  where all competitors are driven out of business by one, which is then free to charge anything. The trouble with the propaganda is that it never happened, except at brief and isolated moments (before, indeed, competition was attracted to a market). There never was an enduring monopoly as described -- with the great exception of the ones established by governments. Standard Oil had more competition in its day than oil companies do now [note]. It drove down the prices of oil products:  and the prices stayed down. The truth is that in the free market, there will always be competitors if the prospect of profit is great enough. The Southern Pacific Railroad gouged its customers in Los Angeles until the day that the Santa Fe Railroad arrived, and prices then plummeted. The Southern Pacific's only hope of maintaining its brief monopoly was in keeping out the Santa Fe through political action -- it had actually done rather well at that by interfering in California politics. That is the only hope there has ever been for true monopolies. The best recent example of the failure of a monopoly is OPEC. OPEC continually tries to set oil prices and production quotas; and OPEC members continually (secretly) undersell and overproduce their fellow members. That was one source of Saddam Hussein's irritation with Kuwait.

"Excessive" profits are also condemned because they just make the rich richer. There are a lot of things wrong with that. For one thing, the profits of large companies usually go to stockholders, who are often just ordinary people, or to mutual funds or pension funds that benefit ordinary people. Even if profits merely went to the rich, the wealth of the rich is not simply "lost" to other people. Wealth does not uselessly sit in treasure chests, as it might have done in the Middle Ages. It is invested, goes into banks, etc. What it does then is generate more economic activity, investment and entrepreneurial activities which are more important to growth and employment than simple consumption. The problem with the Marxist principle that the rich get richer and the poor get poorer is that it is impossible:  the rich cannot get richer unless the poor get richer. Ruling elites that use violence and theft to enrich themselves at the expense of their people often end up destroying their own quality of life as well as that of the poor. A large market with a small profit margin always produces more profit than a small market with a large profit margin. Henry Ford was not the first industrialist to recognize that, but in recognizing it he transformed modern life by almost single-handedly replacing the horse with the automobile. Ford brought down the price of a car from some $3000 to $380. That put the Model T within reach of a great mass of consumers [note]. Ford also decided to help put it within reach of his own workers in 1914 by raising the daily wage from $2.34 to $5. Since average weekly earnings in 1909 were $9.84, usually for a six day week, that put the average daily wage at only $1.64 [note]. The raise was certainly good for Ford workers, but it shows a "demand side" understanding of economic growth that had disastrous results when Ford advised Herbert Hoover how to deal with the Depression.

Real wages have been falling lately even during the prosperity of the 80's. But wages are not all that an employer pays for a worker. Benefits that the employer pays to a third party (including health insurance, worker's compensation insurance, social security, Medicare, etc.) are now a substantial portion of compensation. If those are figured in, real wages have still been rising, though obviously only for full-time workers with all those benefits. Furthermore, there is more to the cost of a worker to an employer than paid wages and benefits. In the past, workers might be willing to work under dangerous conditions in the hope of getting paid a higher wage. Now that is mostly not allowed by the government (OSHA, Department of Labor, etc.). But safety is not free. Stringent safety measures or environmental protections, which are often mandated without regard to cost, are really part of a worker's benefits package. If modern life and work are going to be safer than in the past, the cost is going to come out of real income. Workers are mostly not asked about tradeoffs.

Continued in:  Varieties of Civil/Social Rights

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Capitalism, the Free Market,
and the Duties of Property and Contract, Note 1


Of course, the actual legal definition is not always the best way to promote the "general welfare." Rights to broadcast wavelengths are presently temporary privileges on the sufferance of the government, not real rights to property; and this method is justified on the ground of a scarcity of wavelengths. That scarcity of course no longer exists, but the control by government continues because politicians and bureaucrats enjoy having the chance to violate the First Amendment with broadcasters in ways that they cannot with the print media. That is of a piece with the politicization of economics and the decline in private property rights in this century.

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Capitalism, the Free Market,
and the Duties of Property and Contract, Note 2;
Child Labor

The point that poverty is not an injustice is similar to one of the supposed greatest evils of capitalism:  child labor. One would think that Mediaeval children had just enjoyed carefree childhoods playing, skipping about, growing, learning, and wondering at the world until reaching maturity. Of course, nothing could be further from the truth. An interesting light on that can be found in a decree of the Ottoman Sultan Mahmud II, a great reformer, in 1824:

Whereas according to our Moslem faith, learning the elements of religion comes before everything else, taking precedence over all worldly considerations, most people avoid sending their children to school in these days and prefer to teach them a trade as artisans or apprentices when they reach the age of five or six, because of their desire to earn money quickly. This leads to widespread illiteracy and ignorance of religion, and hence has been the cause of our misfortunes. [For all these reasons] no man hence shall prevent his children from attending school until they have reached adult age. [Quoted in Paul Johnson's The Birth of the Modern]

This is of interest since it refers to conditions entirely outside of capitalism and European civilization -- it is indeed a desperate response to them. What it reveals, however, that children tended to start their working lives at five or six, was true quite generally until the wealth produced by capitalism enabled parents to educate their children (instead of relying on their income) and until the greater productivity made possible by capitalism enabled employers to rely on much more highly paid adult workers, instead of children. The progress of child-protective legislation in England is revealing, for no legislation was ever passed until industrialists indicated that they could live with it. Mahmud II's decree, of course, had little effect, since families needed the income of their children in the sort of pre-industrial country that Turkey was. This is still a common fallacy:  people assume that because child labor is bad, then it must be immediately abolished everywhere for moral reasons, regardless of whether an economy is advanced enough to accommodate this change or not. Losing the labor of their children may put families into worse poverty than they were in already.

What children were expected to do in Mediaeval Europe is addressed by William Kremer, "What Medieval Europe Did With Its Teenagers":

Around the year 1500, an assistant to the Venetian ambassador to England was struck by the strange attitude to parenting that he had encountered on his travels.

He wrote to his masters in Venice that the English kept their children at home "till the age of seven or nine at the utmost" but then "put them out, both males and females, to hard service in the houses of other people, binding them generally for another seven or nine years." The unfortunate children were sent away regardless of their class, "for everyone, however rich he may be, sends away his children into the houses of others, whilst he, in return, receives those of strangers into his own."

It was for the children's own good, he was told -- but he suspected the English preferred having other people's children in the household because they could feed them less and work them harder...

Perhaps it was also a way for parents to get rid of unruly teenagers. According to social historian Shulamith Shahar, it was thought easier for strangers to raise children -- a belief that had some currency even in parts of Italy. The 14th Century Florentine merchant Paolo of Certaldo advised: "If you have a son who does nothing good... deliver him at once into the hands of a merchant who will send him to another country. Or send him yourself to one of your close friends... Nothing else can be done. While he remains with you, he will not mend his ways." [BBC World Service, bbc.com, "Notable & Quotable: Tiger Parents of Europe," The Wall Street Journal, March 27, 2014, A17]

It is noteworthy how rare these accounts of Mediaeval childhood seem to be in the modern literature and how often debates about child labor are influenced by ignorant or fantastic notions about what childhood had been like. Some years ago, a correspondent had been reading about the abuses of apprentices in Colonial America and wrote in great indignation about this cruel capitalist exploitation of the young. The correspondent failed to reflect that capitalism as such didn't exist yet and that the institution he was describing long antedated the Industrial Revolution. It would have continued even had a factory system never come into existence.

Instead, we may notice things such as the use of smaller children to duck between the power looms of the early 19th century in order to tie together broken threads. Such work became unnecessary as soon as the machinery improved and the looms mostly stopped breaking threads. This is part of the general pattern of the improvement of wealth, by which capital intensive work replaces labor intensive work, which is the very key to Say's Law and the success of capitalism -- operating on an economic and technological dimension of value invisible in principle to Marxism. Children in factories were a brief transition from the traditional use of children's labor to the modern conditions of prolonged schooling and the often irresponsible years of modern adolescence. Indeed, I did not finish my own education until I was 35 and did not have a proper job until I was 37. In the Middle Ages, it is more likely I would have been dead long before then.

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Capitalism, the Free Market,
and the Duties of Property and Contract, Note 3


Even "natural resources" are worth nothing until they come to be wanted by someone who has found some way to use them. And then they are only relatively valuable:  OPEC discovered that charging too much for the oil "exploited" by the West created conservation that lowered demand. Inflation also devalued the payment. In constant dollars, oil now [at the time of writing, c.2000] sells for no more than it did in 1970. On the other hand OPEC sought to charge more for oil only after Western states began to greatly inflate their currencies for political reasons, seduced by Keynesian economics. In the long run, OPEC's actions simply served to keep up with the inflation. We can hardly blame them for that, but then that isn't really what they thought they were doing.

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Capitalism, the Free Market,
and the Duties of Property and Contract, Note 4


Swedish manufacturing companies are troubled with such high absenteeism that they often must hire 25% extra workers just so that the plant will be fully staffed. The deadbeat workers, of course, add to the cost of the product for everyone and subtract from the wages of all the workers and from the profits of the firm. Even with this kind of featherbedding, when this page was originally written (1996/7) Sweden still had a depression level of unemployment:  14%

Subsequently, the Swedes actually voted out their socialist government and began privatizing government owned enterprises, cutting taxes, and launching other reforms. It is tough to break people's sense that they have a "right" to free public services, but there is growing international recognition that no such services are really free and that only the free market can solve the stagnation, decline, inefficiency, and corruption spawned by all such socialist devices and expectations. Although the Swedes balked at any real rollback of their welfare state, and problems like deadbeat workers are still serious, the Swedish economy has nevertheless improved considerably. According to The Economist of July 19th-25th 2003, Sweden has had 2.2% annual growth and only 4.2% unemployment. This is quite good, better than the European Community, whose average growth is 0.8% and whose average unemployment is 8.8%.

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Capitalism, the Free Market,
and the Duties of Property and Contract, Note 5


Standard Oil controlled 90% of the US oil business in 1881. Nevertheless, prices continued to fall, in great measure because of competition with Russian oil; and by the time the Standard Oil Trust was prohibited in 1911, Standard's market share had declined considerably. If John D. Rockefeller had ever had a "monopolistic" control of the market, it was never used, as it could not have been used in the circumstances, to raise prices or prevent competition from arising. Most of the complaints about Rockefeller, indeed, were not from consumers complaining about price gouging, but from competitors being put in the red by Rockefeller's low prices. Rockefeller was not above playing hard ball, but if the story is that he created a monopoly in order to drive up prices, this is a myth. In American history, it has been the Federal Government that has manipulated the market to drive up prices, right down to the present. The real cartels in American life now are those established, for the dairy industry and others, by the government.

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Capitalism, the Free Market,
and the Duties of Property and Contract, Note 6


$380 in 1913 would be about $5700 in 1990 dollars. This should be compared with the prices of cars now that might be regarded as the equivalents of the Model T. Since there really aren't any cars cheaper than that, it should be clear that something has prevented the value of cars from falling further.

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Capitalism, the Free Market,
and the Duties of Property and Contract, Note 7


Average US weekly earnings in 1995 were $486 ($25,272 per year). That would be about $32.40 in gold standard dollars. For a five day week, that would be $6.48 a day, or 130% of Ford's 1913 $5 a day (for a six day week). The growth in wealth over time is apparent in one statistic:  the United States Gross Domestic Product per capita in 1900 was $246 (1995 dollars); in 1995 it was $25,514 (nearly identical to the average weekly earnings).

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The Du Ponts

The Du Ponts are one of the oldest and most successful great industrial families in America. They left France in 1799. As Huguenots, French Protestants, we might have expected them to have fled the persecution of Louis XIV, like the Delanos, especially after the Edit of Nantes was revoked in 1685. Despite the legal disabilities that then applied to Protestants, most of the Du Ponts had remained. We see Samuel du Pont baptized as a Catholic when he was born in 1708, but the practice of the family remained Protestant. The French Revolution evidently was just too much, and America too welcoming.

While it was the whole family that fled, the future of the Du Ponts depended on Éleuthère Irénée "E.I." du Pont de Nemours (1771-1834). Irénée had been an assistant to the immortal French chemist Antoine-Laurent de Lavoisier (17431794), who we see in the great portrait at right (although it should be obvious that the portrait is actually of his wife, Marie-Anne Pierrette Paulze, who was a student of the artist, Jacques-Louis David). Through Lavoisier, Irénée became acquainted with what were essentially French State secrets concerning the manufacture of gunpowder. In America, Thomas Jefferson, who knew the Du Ponts in Paris in the early days of the Revolution, commissioned Irénée to supply the United States military, small as it was, with gunpowder. By 1802, the Du Ponts works were established in Delaware, where they have remained ever since.

Building the business on the manufacture of gunpowder, its future would involve broadening its products. Lammot du Pont I (18311884) realized that the future of explosives would go in the direction of dynamite. Since the rest of the Du Pont company wasn't interested, he started his own concern, which was very successful. Unfortunately, he died in an accidental explosion of his own wares. This resulted in his independent business then being absorbed by the larger family concern, which would have been his goal in the first place. Lammot life's had been distinguished by a secret mission to Britain to buy up saltpeter for the Union war effort. After buying three million pounds, Lammot came to the attention of the British Government, which was not sure that allowing the export of this material was consistent with British neutrality in the American Civil War. British business, however, became alarmed that if the saltpeter was dumped back on the British market, the price would collapse. This persuaded the Government to allow Lammot to export his purchases. Although Delaware was technically a Slave State, I don't think there were more than a half dozen slaves in the place, and once the Du Ponts made known their Unionist sentiments, there was never any chance of the State joining the Confederacy.

The DuPont business was almost sold away from the family in 1902, but Alfred Irénée du Pont (18641935) marshalled family support and regained control. Since then, DuPont has spread out into the manufacture of many kinds of chemical products; and family members have been prominent in various areas of business, including the management of General Motors, and in politics -- they sometimes seem to have dominated the politics of the State of Delaware. DuPont Circle in Washington D.C. is named after an earlier member of the family, Rear Admiral Samuel Francis Du Pont (18031865).

I have had some difficultly identifying the descent of many members of the Du Pont family and have been troubled by at least one case of conflicting information. The genealogical diagram below is thus a work in progress.

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The Astors

John Jacob Astor has the distinction of being the first millionaire in America. His fortune of $20,000,000 now seems like small potatoes, but this is only in comparison to the amount of wealth that later could be generated and accumulated. Born in Waldorf, Germany, Astor arrived in New York at the age of 20. After various jobs, he got into the fur trade in 1787. This is how he made his money. His 1811 trading post on the Columbia River, the first American settlement west of the Rockies, became the city of Astoria, Oregon. With his money, he bought land in New York, including that upon which the Empire State Building would later stand, and the land on Park Avenue where Astors would live and then build the new Waldorf-Astoria Hotel. The hotel began as the Waldorf Hotel on the 5th Avenue property, built by John Jacob's great-grandson William Waldorf, and then the adjacent Astoria, built by another great-grandson, William Waldorf's cousin, John Jacob IV. John Jacob IV also built the Knickerbocker and St. Regis hotels. He then found an even more durable place in history by going down with the Titanic. Well, not exactly "going down," because his body was recovered and properly buried. Meanwhile, William Waldorf had moved to England, where his family has remained ever since, acquiring at least two titles, Viscount Astor and Baron Astor of Hever. Thus, the Astors, like the Vanderbilts, translated their New Money not only into Old Money, but into British nobility. Although the Waldorf and Astoria Hotels were built separately, they were later combined into one -- the Waldorf-Astoria. The new Waldorf-Astoria Hotel was built on Park Avenue after the 5th Avenue hotels were demolished to make way for the Empire State Building. Conrad Hilton bought the new hotel in 1949.

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The Rockefellers

From 1865 to 1870, what John D. Rockefeller did (a man whose first job, in 1855, paid 50¢ a day) was drive down the price of kerosene from 58¢ to 26¢ a gallon. Eventually this got down to 5.2¢ a gallon. Today (2006) when gasoline is hitting $4.00 a gallon, it is worth remembering that this would have been 20¢ in the prices at the beginning of the 1890's. Still not bad compared to the 1870's, but not what Rockefeller would have been happy with.

What this meant to people at the time was light. Wood, candles, or other oils (whale, olive) for lighting were and remained relatively expensive. With John D. Rockefeller, however, we didn't need Captain Ahab. As William H. Libby, Standard Oil's foreign agent, said to the Governor-General of India:

I may claim for petroleum that it is something of a civilizer, as promoting among the poorest classes of these countries a host of evening occupations, industrial, educational, and recreative, not feasible prior to its introduction; and if it has brought a fair reward to the capital ventured in its development, it has also carried more cheap comfort into more poor homes than almost any discovery of modern times. [quoted by Burton W. Folsom, The Myth of the Robber Barons, Young American's Foundation, 1991, p.92]

Critics of capitalism usually don't care about things like this, or that Henry Ford sold a solid and reliable car for $300. They just hate the profits that men like Rockefeller and Ford made. Now it is noteworthy that the consistent effect of "consumer protection" and government regulation has always been to drive up consumer prices -- thus I personally still drive a relatively dangerous 1972 car because buying a new one for $20,000 (a good $2000 in Henry Ford's day) or more is too daunting. Perhaps this goes along with the strategy to drive up wages also. Rockefeller and Ford both believed in high wages, which meant that Rockefeller missed the labor troubles of the 1890's. However, when Ford gave high wage advice to Herbert Hoover, the result was catastrophe.

Later Rockefellers become conspicuous for the political careers. In the genealogy we see no less than three governors, and Nelson becomes Vice President of the United States, only the second appointed one so far, under Gerald Ford, who had been the first. But as Governor of New York, Nelson sponsored vicious and draconian drug laws that are still in force there. This was and is bad enough, but the most recent political Rockefeller has done much worse. "Jay" (John D. IV) Rockefeller has become the most appalling kind of doctrinaire, tax-and-spend, anti-capitalist Democrat in the U.S. Senate. In 2014, "Jay," having announced his most welcome retirement, demonstrated the vicious and doctrine nature of his political mentality:

It's an American characteristic that you don't do anything which displeases the voters, because you always have to get re-elected here. I understand part of it. It has to do with -- for some, it's just we don't want anything good to happen under this president, because he's the wrong color. [quoted by Larry Elder, "White people be playing the race card," 22 May 2014]

And so we find "Jay" repeating the smear that Republicans and others oppose the socialism promoted by the Democrats just because the President, Barack Obama, is black. It is not patriotism that is the last refuge of the scoundrel, it is Democrats accusing everyone of racism, when they no longer have substantive arguments. Why someone like this creep thinks that Republicans would have voted for a national socialist medical system if only a white President had proposed it is astonishing. But then logic is no part of it. Why "Jay" thinks that a parting shot with this sort of thing is necessary is puzzling; but it is even more mysterious how the good voters of West Virginia, of all places, could have kept electing and reelecting this clown all these years.

Old John D. I must be gravely mortified. Better has been the banking career of David Rockefeller, around whom the conspiracy theories of the anti-banking leftists (and rightists) have often centered. In general, however, even the Republican Rockefellers represent what have been called "Country Club Republicans," i.e. well to do Eastern Republicans who have such good manners that they often aim to please Democrats rather than promote traditional principles, like Constitutional Government, that the Democrats have subverted. When George H.W. Bush said he wanted a "kinder, gentler" nation, and then agreed with the Democrats on raising taxes, he was acting as a "Country Club Republican," and acted more like he belonged in Maine, more the family homeland, than Texas, where he had moved. Even George W. Bush, although raised in Texas, with notions like "compassionate conservativism," continued this tradition. So perhaps it is altogether understandable and logical that Jay Rockefeller should just go all the way, go off the deep end, and become a raving Democrat himself.

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The Hearsts

William Randolph Hearst, unlike John D. Rockefeller, Cornelius Vanderbilt, Henry Ford, or Conrad Hilton, did not make his own money. He inherited his father's mining fortune, and then, as an adult, decided what to do with it. What he decided to do with it was newspapers. This is all marvelously recounted in a thinly fictionalized movie, Citizen Kane (1941), by Orson Wells, who also played the lead character. The moral of the movie, however, that Kane (i.e. Hearst) was left lonely and unhappy by his life, does not ring entirely true. There is no doubt that his life seems a little peculiar. He married late, to a woman twenty years his junior. When they drifted apart, Hearst then took up with a woman, Marion Davies, more than thirty years his junior. But this relationship (he and his wife were never divorced) seems to have continued. Hearst and Davies held court, as it were, at the "castle" he built on the California coast at San Simeon ("Xanadu" in Citizen Kane). This spectacular site was frequented by the Hollywood elite for many years. Whether Hearst was really happy with all this, I can't really say. When he died, the family wasn't much interested in maintaining the place. My own great uncle, R. Leslie Kelley, who had made his own money, used to say that they actually offered to sell the place to him. He certainly wasn't interested in holding court and entertaining like Hearst. So the place was given to the State of California and now, as the "Hearst Castle," is a State Park and popular tourist attraction.

The Hearst newspapers continued after William Randolph; but special notoriety for the family again arrived from an unexpected direction. On 4 February 1974, one of Hearst's grandchildren, Patricia ("Patty"), was kidnapped from her college apartment in Berkeley by a group of terrorists who called themselves the "Symbionese Liberation Army" (SLA). Patty was held, tortured, and brainwashed until she actually believed, somehow, that these characters were good guys. In April 1974 she participated in an SLA bank robbery. In May 1974, most of the SLA members were killed in a shootout with police in Los Angeles. Patty was not with them but was captured in September 1975. The government actually put her on trial for the bank robbery and, incredibly, gained a conviction. Her sentence was commuted by Jimmy Carter in 1979 and eventually a full pardon was granted by Bill Clinton in 2001. Patty settled into an ordinary life. Her former boyfriend, philosophy student Steven Weed, faded into history, and she married a man who had been her bodyguard. Unlike most ordinarily lives, however, Patty's has included cameo parts in several movies by eccentric director John Waters. The most apt of these would have been in Cecil B. Demented (2000), about a kidnapped actress who joins the cause of her kidnappers.

Now a bit more notoriety comes from the recent fashion model careers of one of Patty's daughters, Lydia, and her niece Amanda. They have joined the group of conspicuous young "beautiful people" that includes the likes of the young Hiltons and even a young Bush.

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Copyright (c) 2006 Kelley L. Ross, Ph.D. All Rights Reserved

The Fords

Henry Ford is a good example of what can go right and what can go wrong with one man, his ideas, and his business. Ford wanted to make a car that would be good enough and cheap enough that just everyone would want to buy one and would be able to do so. At his first company, his partners didn't believe that this was possible or desirable. They wanted to make luxury cars and sell them to rich people. This was where they figured the money was. In disgust, Ford sold out his share and started another company on his own. The car he came up with was the Model-T Ford. By 1920, the Model-T, which was all but indestructible, was going for $300. Since these sold like hotcakes, it made Ford fabulously wealthy. Meanwhile, his old company had become Cadillac, which is still making luxury cars but has become a division of General Motors.

Now we begin to get onto the less solid ground. Ford believed in high wages and paid them. When he raised the daily wage to $5 in 1914, this was a sensation. It was very nearly true, in an era of generally open immigration, that people came from the ends of the earth to wait outside the Ford Motor Company plant, hoping for a job there. Unfortunately, it wasn't just that Ford wanted to attract the best workers with high wages, he believed that high wages in general were essential for prosperity. If it was just him, that wouldn't have made any difference, and Ford employees would have enjoyed a windfall; but in 1929 when he told Herbert Hoover that high wages in general would prevent an economic downturn, and Hoover took the advice, the result was disaster. He had gotten Say's Law backwards. The Great Depression then not only rebounded against the auto industry and the whole economy, but it led to the extension of the high wage idea by giving labor unions increased powers. Ford hated the unions, but by 1937 his own plants were unionized against his will. This didn't help end the Depression (at the time it was getting worse again), but there is no denying that this was in line with the logic of Ford's own beliefs.

Ford's $5 wage was not unconditional. The difference with the previous wage was paid as a bonus if workers and their families passed the moral tests laid down by Ford. Their houses were inspected. This was part of the Progressive, paternalistic movement in American politics. Ford was against smoking and against drinking. As such, he helped get Prohibition passed in the form of the 18th Amendment. This turned out no better than his economic advice. Thus, we could credit Ford with the successive disasters of Prohibition and then the Great Depression. We can also see him as the forerunner of the health nazis who today hector us constantly over smoking, fatty foods, etc., and who have driven smokers not only out of doors, but usually some distance from doors, and in some cases all the way back to their own homes, and sometimes not even unmolested there. It is strange to think of the 19th century as a more enlightened era, but in some ways it was. When it was rude to smoke in the presence of ladies, and trains confined smoking to smoking cars, there was clearly an ethic at work to both preserve the unwilling from unwanted smoke and accommodate the willing. This is no longer the paradigm. No one cares about accommodating smokers in the least; and, like Ford's morality police, the health nazis are in hot pursuit.

If we can already blame several evils on Ford's ideas, it is sobering that these may not even be the worst. Although a successful and wealthy industrialist, Ford nevertheless didn't understand finance and hated bankers. This would be bad enough, but Ford had also gotten the idea, not unfamiliar then or now, that it is mainly the Jews behind finance and banking. This led to a series of anti-Semitic writings under Ford's name. It is now disputed whether he was the actual author of them or not. And when he was sued over them as slanders, he made a public retraction. But it is now also disputed whether he really meant the retraction and only issued it for legal and public relations reasons. Either way, it was an ugly mess, and there is no doubt that Adolf Hitler possessed copies of these writings in Ford's name. Since lack of understanding and dislike for finance and banking is still not uncommon -- not to mention those who still associate it with an international Jewish conspiracy -- it is a particularly unfortunate part of Ford's legacy that his economic success went along with such a witches' brew of ignorance.

Ford's most famous saying may be, "History is bunk." Since he seems to have meant by this that the story of the common man is not commonly featured in the historical narrative, there is a positive and sympathetic side to the thought. However, a failure to learn from history, and the perpetuation of historical fictions (the Jewish conspiracy), illuminate the extent to which there was a lot more to history than Ford evidently believed, and to which he should have paid more serious attention.

The Ford family has continued to play a significant role in the governance of the Ford Motor Company (FoMoCo). And Ford has done better, of course, than Chrysler, which had to be bailed out from looming bankruptcy by the Federal government, and it has at times challenged General Motors -- although the latter has retained the lead that Henry himself lost when he refused to diversify the models he offered. Indeed, another one of Ford's most famous sayings, about the Model-T, was, "You can have any color you want, as long as it's black." But, after a while, people were willing to pay for other colors, and General Motors, rather than Ford, was first ready to offer them. Nevertheless, Ford has done alright -- until recently. I now gather that the company has been suffering losses, and there has been a management shakeup.

But I must end with another of Henry Ford's errors. This was not the fault of his own ideas. He was advised, in light of the predatory taxing policies of the Roosevelt Administration, that he should shelter most of his wealth in a non-profit foundation. Thus the Ford Foundation was born. In principle, there was nothing wrong with this. The problem was something that probably could not have been anticipated, and that is that control of the Foundation ended up in the hands of virtual leftist ideologues. Thus, Ford Foundation money continues to fund the most radical of socialist and anti-American causes. This is appalling and a disgrace, although it is simply part of the Zeitgeist of academics and intellectuals who continue to promote the Marxism and worse that we might have thought discredited by the events of 1989-1991. Indeed, that is why control was lost, since the intellectuals hired by the Foundation, whose credentials looked solid and unobjectionable, were nevertheless educated in such a leftist milieu. It was like the air they breathed. Since their ideology includes some of Ford's own bad ideas, including the anti-Semitism that now has a bit more life on the Left, and especially in Islâmic Fascism, than it has on the old neo-Nazi right, it is a development, like Ford's experience in the Depression, that is not without its ironies.

The Du Ponts

The Astors

The Vanderbilts

The Rockefellers

The Hearsts

The Roosevelts & Delanos

The Hiltons

The Kennedies

The Bushes

Political Economy

Philosophy of History

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Copyright (c) 2006, 2007 Kelley L. Ross, Ph.D. All Rights Reserved

The Roosevelts & Delanos

The Roosevelts have loomed large in American history primary as a political family, contributing two Presidents, Theodore and Franklin Roosevelt, both conspicuous and highly ranked by historians, if usually for the wrong reasons. On the other hand, the fortune of the Delanos, the maternal relatives of Franklin Roosevelt, is of interest in economic history, since it was made off the early China trade. Some of the children of Warren Delano II were born in China, and the rest, including Franklin Roosevelt's mother, Sara, spent part of their childhoods in China.

Theodore and Franklin Roosevelt were fifth cousins, and Eleanor Roosevelt, Theodore's niece, was Franklin's fifth cousin once removed. Sara Delano's own uncle, Franklin Hughes Delano, after whom her son was named, himself married an Astor. The Delano family itself went back to Philippe de la Noye (hence "Delano," 1602-1681), who was a Huguenot and arrived in Massachusetts in 1621. Other Delanos included Columbus Delano (1809-1896), who served as Secretary of the Interior under U.S. Grant (1870-1875) and after whom Delano, California, was named. The Roosevelts were an old New York Dutch family that went back to the early days of the New Netherlands and became perhaps the most influential such family in American history. The historical importance of the Roosevelt Presidents is discussed at their places in the list of Presidents, linked through their names above.

The Alsop brothers, descended through Theodore Roosevelt's sister Corinne, became influential columnists and advisors to various Presidents, especially John F. Kennedy. Apart from the China trading of the early Delanos, none of this family seemed to have much success in business, although they were prudent enough to retain their wealth. Franklin Roosvelt himself was not so prudent and had no success at any endeavor until he got into politics -- when his lack of economic understanding could only damage the Nation, not his own fortunes.

The Du Ponts

The Astors

The Vanderbilts

The Rockefellers

The Hearsts

The Fords

The Hiltons

The Kennedies

The Bushes

Political Economy

Philosophy of History

Home Page

Copyright (c) 2006, 2014 Kelley L. Ross, Ph.D. All Rights Reserved