Poverty and Capitalism

“Capitalism has created the highest standard of living ever known on earth. The evidence is incontrovertible. The contrast between West and East Berlin is the latest demonstration, like a laboratory experiment for all to see. Yet those who are loudest in proclaiming their desire to eliminate poverty are loudest in denouncing capitalism. Man’s well-being is not their goal.” — AYN RAND, “Theory and Practice,” Capitalism: The Unknown Ideal, 136

Poverty is not a justification to rob “the rich.”

What about the poor under capitalism? The question accepts the collectivist premise that wealth is a static quantity owned by that amorphous super-organism the “collective” to be looted from those individuals who create it.

The other side of that question is: what about those who are not poor?

What of them? Let us not forget that the “rich” are people too with an equal right to their life, liberty, property, and the pursuit of happiness.

The fact that one is poor is no justification for robbing someone who is less poor than you. That a man does not have riches, and another does, is no excuse for the first to rob the latter — neither is it a moral justification for the state to rob the first for the benefit of the latter.


Riches obtained through economic production vs. political plunder

Now when I mean “rich,” I do not mean cronies who gained their fortunes by political pull, by having the government grant them favors and franchises at the expense of their fellow-men. By “rich,” in this context, I refer to businessmen who achieved their fortunes by economic means — through production and trade.


The poor, like the rich, require economic freedom under a rule of law

As for poverty, under capitalism, no poor man is prohibited from creating a fortune.

Observe that in the late nineteenth and early twentieth-century America how hundreds of poor immigrants, came to America and within a generation were America’s newest elite. Even today, in semi-free America, many such immigrants come here starting with nothing and create fortunes — despite the volumes of irrational regulations that punish those who have an urgent need to accumulate capital (the poor).

The “poor” don’t need government handouts — they need government off their backs and off the backs of those who can help them — the “rich.”

“The real problem of poverty is not a problem of “distribution” but of production. The poor are poor not because something is being withheld from them but because, for whatever reason, they are not producing enough.” — Henry Hazlitt

Who is the poor man better off under Mother Teresa or Bill Gates? A Mother Teresa who hands them bowls of slop every day, so they can barely exist — or a genius like Bill Gates who creates a fortune for himself by helping others to create fortunes for themselves, i.e., “where the first feed them for a day, the second helps them feed themselves.” Observe that it is the Bill Gates of the world (until recently) who are not allowed to exist in India — and the Mother Teresas who are.

To answer the question, “What about the poor under capitalism?” one must first answer, “Why are there poor people in the first place?” The source of all poverty is the lack of wealth, which must be produced. The source of production (and thus wealth) is man’s mind, which politically has only one requirement: freedom. Politically, this is the single cause of mass poverty: the lack of freedom. Observe the poorest countries are those where capitalism is lacking.


Capitalism did not create absolute poverty, but it inherited it from pre-capitalist systems.

Far from being a cause of absolute poverty, laissez-faire capitalism is the only solution to solving it.

Observe that the freedom that a rich man needs to maintain and add to his wealth, is the same freedom a poor man needs to create his wealth — and the creation of wealth for both has the same root — reason.

The only requirement of reason from the state is entirely singular in principle: freedom, that is, the banishment of the initiation of force from all social relationships. This is precisely the freedom that the “humanitarians” oppose, since this “right” to freedom and liberty, can only come at the expense of the alleged humanitarian’s “might.” Since all men are free to create wealth under capitalism, no one is forced into poverty, as in non-capitalist countries.

Keep in mind that the moral justification of capitalism is not that it serves the “needs of the many,” but that it protects the rights of every individual — in particular, it protects the individual from the “many” (majority). Capitalism is not egalitarianism ideal of “social justice”; capitalism is for justice.

Capitalism is the best — the ideal — theory, because to the extent that it is allowed to work, it works in practice.

Whom does our “nation’s wealth” belong to?

Wealth is not a “collective resource” to be distributed by some totalitarian or his cronies, but is produced by individuals. Wealth is the product of the individual mind. Wealth is the result of man’s ability to think applied to the sphere of production and trade. Wealth belongs to the individual who produced it. It is not an amorphous public good to be distributed by looters for the aid of moochers.

Doesn’t capitalism distribute wealth unfairly?

No. Capitalism “distributes” wealth justly, i.e., to those who earned it, in proportion to how much they produced. Wealth must not be distributed, but created and earned.

What is wealth? Wealth, like its corollary knowledge, is not a static quantity but is potentially limitless. The only limit to one’s wealth, in a capitalist society, is the power of one’s ability to think and produce. If one wishes for the wealth of all to increase only one requirement is necessary — freedom.

Reason, ultimately, is the source of all wealth. As capitalism is the only social system that leaves the individual free to think and act (if one respects the equal freedom of others), capitalism is the social system of maximum wealth creation for all.

Private Charity of Capitalism vs. Government Welfare of Statism

Welfare is the forcible transfer of wealth by the government from those who produced the wealth to other individuals who “need” that wealth.

Welfare is the forcible transfer of wealth (usually by taxes) by the government from those who produced the wealth to another individual (or group of individuals).

Where private charity is voluntary, the “paternalism” of government welfare is involuntary.

The alleged justification for welfare is altruism: sacrifice of one’s interests for others

The justification for this expropriation of funds is that those who are receiving the wealth (handouts) “need” it, and those who do not voluntarily give their money have “greed” so their money must be forcibly taken from them.

At the root of the claim that the creators of wealth owe the non-creators is the ethical code of altruism — self-sacrifice of one’s own life for others (‘altru’ meaning other). In Marxist jargon, this means that wealth is plundered “from each according to his ability” and distributed “to each according to his needs.” The producer has the ability, i.e., “greed”—the welfare recipient has a need—the inalienable rights of the producer be damned.

Welfare renders the producers slaves and the “humanitarian” middle-men as their masters. Whether the thief is wearing a ski mask or is a dressed in a pinstripe suit of a congressman, does not change the nature of their actions in principle: both are looters as both are initiators of force. With one exception, the man wearing the ski mask is more honest: he is not a big enough hypocrite to tell the citizen he is robbing him of his hard-earned wealth “for his good,” or “for the good of the people.”

What of those who cannot help themselves under capitalism?

Under capitalism, all government coercion and theft is prohibited and replaced with voluntary methods, i.e., private charity.

The few individuals in a capitalist society who are incapable of taking care of themselves — such as the mentally disabled, crippled, and orphans (which are a small and tiny minority in any free country) — are provided for through voluntary means, i.e., private charity.



Recommend Reading:

Rooseveltcare: How Social Security is Sabotaging the Land of Self-Reliance by Don Watkins
This elegantly written book, explains how the entitlement-welfare state is destroying our hope for the future. The definitive case for gradually abolishing social security and the welfare state.

What is the moral meaning of money?

Money is a tool of exchange that allows men to indirectly trade goods and services that they have produced in a market economy.

In a laissez-faire society, uncrippled by government bureaucrats, money is a symbol of man’s unspent production, which has yet to be consumed. When money has been earned (as opposed to looted, stolen, and begged), it is a sign of material and spiritual greatness.

Observe that being “rich” is not a sign of greatness if one has not earned it — to assume otherwise is to reverse cause and effect, as those men who achieve their wealth by plunder and political pull (government favors) attempt to do.

Money is the physical symbol of man’s successful use of his mind in production — whose success is essential to the support of his life. How can this be the root of evil? It cannot. In truth, money is not the root of all evil, but when honesty earned is a sign of good.

What is a graduated income tax?

It is the principle of equal treatment under the law that a graduated “progressive” income tax violates.

 “A heavy progressive or graduated income tax.” — Plank 2 of the Communist Manifesto

A so-called graduated “progressive” income tax is a violation of the principles of justice as it punishes those who are successful at creating wealth.

The advocates of a graduated income tax“progressive taxation” are calling for justice. What they are asking for is not equal treatment under the law for all individuals, regardless of race, gender or income. What they are asking for is the unequal treatment before the law. The demand the state to violate the inalienable rights of some individuals, to discriminate against them because they are “rich.”

What so-called “progressives” (a euphemism for communism) mean by “fairness” is a form of injustice known as egalitarianism. They are asking for “social justice” -– “justice” based on the moral principles underlying socialism.

According to egalitarians, it is unfair that some people are more wealthy than others. It does not matter to them whether that person earned their wealth through honest work and industry, or whether they robbed a bank; whether they obtained their wealth through economic production or by political graft. The fact that some people are wealthier than others is proof of unfairness since in their view everyone should be economically equal. Equal, that is, not in their right to life, liberty, and property; but equal in results.

As people are not of equal intelligence, ability, talent, or determination under a system of equal rights and equal freedom (capitalism) some people will become more wealthy than others.

According to progressives, it is the government’s job to remedy this “defect.” Or, in the words of Karl Marx and Frederick Engels: “From each according to his abilities, to each according to his needs.” In practice, this means in today’s “mixed economy” a progressive government’s job is to “redistribute the wealth” of those with the ability to those who can garner enough votes.

A progressive tax is nothing more than “Jim Crow” reasoning applied to wealth creation. It discriminates and punishes an individual, by treating people differently not based on the color of their skin, race or religion, but based on how much money they make. It is thus a clear violation of their property rights. Or, in the words of American Founding Father, John Adams:

“It must be remembered, that the rich are people as well as the poor; that they have rights as well as others;that they have as clear and as sacred a right to their large property as others have to theirs which is smaller; that oppression to them is as possible and as wicked as to others.”

It is the principle of equal treatment under the law that a progressive “fair” income tax violates.

Writes Arthur Mode,

“Most Americans accept the idea that if two men commit the same crime, they should receive the same punishment. Equal treatment under the law for criminal offenses is considered just. If a Congressman were to propose that, for the same offense, Hispanics should be given longer jail terms, or that Catholics should never be subjected to capital punishment, he would be hooted down.

“When the subject changes from criminal to tax law, the concept of equal treatment under the law suddenly goes halfway out the window. Halfway, because there would be no support for taxing some groups differentially, e.g., higher rates for certain religious groups, racial groups, or genders. Such unequal treatment is still viewed as wrong. However, equal treatment does go out the window when one group is mentioned: the rich.

“The graduated tax is in fact an envy tax, not motivated by love for the poor, but for hatred of those who are not.  Or, in philosopher Ayn Rand’s words, ‘hatred of the good for being the good.’ If progressives were truly concerned with the poor, they would cry out for more freedom. Instead what they have created is a spoils system where pressure groups battle politically to decide what to do with other “people’s” money.”

One politically feasible alternative tax system, in today’s intellectual climate, is a just, proportional tax.

A proportional income tax system unlike a graduated discriminatory tax, is proportional, i.e., a “flat” tax. Under such a system, a wealthy man would pay the same percentage as a man less wealthy man. Now in total amount, the rich man would pay more, i.e., at 10% tax rates a millionaire would pay $100,000, whereas an unemployed person would pay nothing, but both would be treated equally under the law.

Is inheritance a right?

The right to dispose of one’s income belongs to the producer of that wealth, and if one wishes to give it to an heir, a charity, or to flush it down the toilet — that is the producer’s right. It is not any of your concern, and it certainly is not the concern of the government.

As wealth is not a static quantity, to be looted and stolen, the wealth that you can earn is not affected by how much wealth someone else has, creates, or inherits. Since wealth is the result of the human mind, if someone has a mind, and is left free to use it, wealth is theirs to create.

As the creation of wealth is not automatic, those who cannot manage their wealth will soon lose it. As evidence of this fact witness what happens when a rich man passes on his money to a worthless heir — the heir soon loses it. Such is the meaning of the saying, “from shirtsleeves to shirtsleeves in three generations.”

Will labor laws banning child labor in non-capitalist countries put an end to child poverty?

Passing child labor laws in these countries will not solve the problem, but will only lead to starvation — which is why the “poor” themselves resist such laws. It is primarily for the benefit of the “humanitarians” — that live in capitalist countries — who cry out for these laws that these laws are implemented. Child labor will only cease when parents have the means to support their children.

The real solution is to make the parents productive enough so that they can produce enough for themselves — and for their children. What poor people in India and the like need, are not more humanitarians like Mother Theresa, but more businessman like Steve Jobs and Bill Gates. What these countries need is not more government controls, but more freedom.