[First published on Free Life]
The myth that capitalism is exploitative – or rather, that capitalists and entrepreneurs are responsible for the exploitation of both workers and consumers – is almost as old as the history of this political-economic system itself, having been a primary driving force behind the growth of the state and, indeed, of outright socialist and communist revolution. Although much watered down from those early days, the idea that there is some kind of antagonism between the capitalist “class” and the rest of us seems to persist.
As “Austrian” economists we know, of course, that it is absolutely and undeniably true that any free and voluntary exchange, upon which capitalism and private property must rely, only takes place because each party expects to benefit from the transaction. This alone is sufficient scientific proof to dismiss any idea that capitalism exploits one party for the benefit of another. Nevertheless we should, of course, tackle directly the specific incarnations of this myth as they appear today.
The myth has its roots in the Marxian confusion of political castes with economic classes – the idea that the relationship between capitalists and workers, which is free and voluntary, was akin to that of king and subject, or lord and serf, relationships that were involuntary and subjected the masses to servitude. Caste systems were static and designed to keep people in their place; under conditions of free exchange, however, economic classes have a continually changing membership based upon one’s ability to serve consumers.
This ability varies from person to person, of course, but the critical point is that nobody is legally prevented from becoming an entrepreneur and nobody, once they are a successful entrepreneur, has either their wealth or status legally protected. A wealthy capitalist might find his fortune decimated when he loses this crucial ability to serve consumers as the latter turn to other suppliers for their wares; he may have to re-join the ranks of salaried employees if he is to make ends meet. On the other hand, an ordinary worker may see a gap in the market that has been unnoticed by the current entrepreneurs of the day and he may set up a successful business accordingly.