This blog grew out of a crazy idea I started having years ago that really solidified while I was in law school. I started wondering what would happen if a person got really serious about giving up the profit of a successful business and instead spent that money on increasing salaries and driving down the cost of goods and services as much as possible.
The more I thought about it the more excited I got. Because there’s a lot of good you can do when you’re interested in other people.
I’ve always been an idealist. I remember the first time I read Les Miserables. I was captivated by the change that came over Valjean after Bishop Myriel gives him the silver.
But this idea only works if the person (or people) who make the decision to stop chasing profits do it willingly. It’s not a form of socialism, neither is it communism. Those political and economic theories are based on a fundamental ideal in which the government imposes restrictions—whether with a light touch or a heavy—on the freedom of individual citizens.
This idea depends on its participants freely making an effort to sacrifice some part of their capacity, their earning power, and ultimately their hearts, to making the lives of those around them better. It’s a radical change in attitudes that changes the lives of both those who make the change and those who benefit from it.
Dave Ramsey is a brilliant leader. He teaches millions of people how to get out of debt, often mountains of debt, using the most fundamental financial tools available. One of the most powerful elements of his radio show happens when his listeners call in to give a “debt-free scream.” I literally get chills every time I hear the passion in those callers’ voices. This part of his show is so powerful precisely because it convinces his listeners that the radical changes he preaches actually do work.
The changes I’m advocating for here are just as radical, and they demand every bit as much “gazelle intensity” as Dave works to inspire in his audience. No employer will rationally give up her annual profits in the name of paying the highest wages possible unless she is totally convinced of the intrinsic value of that decision. And no employee will recognize the true humility of that sacrifice unless he understands the commitment that leads his employer to give up what is rightfully hers to withhold.
In short, I’m out to change the world.
And that’s crazy.
Capitalism as used in the context of a true, free market has a very critical role – that of sending signals, communicating critical messages about how adjustments should be made. Messages like we are lacking tire makers, or teachers, and we value that enough to pay extra. Does the implementation of your ideas affect those signals, possibly critically? What could be used to compensate?
I would observe, that realistically, many forces have effectively disabled many of those signals in our market, today. What do you think might be used to send the right messages in our market?
“Capitalism” is one of those terms that lots of different people use to mean lots of different things. Admittedly, most of those things are just variations on a theme.
In an earlier post, I defined capitalism as an economic system loosely based on the principles laid out by Adam Smith in which capital (in the form of cash or hard assets) is used to build a business for the purpose of maximizing profits for the owner or a relatively small number of shareholders of that business. I’m intentionally using a definition of capitalism that lets me challenge my fellow free marketers to think a little more deeply about the assumptions we make when we talk about business.
Capitalism, even understood this way, brings us lots of useful tools. I’m by no means recommending that we try to reinvent the wheel. I would use those tools wherever they support the overall purpose, which is to support as many other people’s efforts to improve their lives in as many ways as I can. As I continue to develop the blog, hopefully we’ll answer the rest of your questions.
I would argue that Ben’s ideas wouldn’t critically hinder the signals you spoke of. Increasing the wages of the worker would decrease the owner’s profit, but not affect the consumer’s cost of the good. Workers’s wages may have to be reduced during times of low demand to offset lost revenue, but the signals would still be sent efficiently.