A Lesson From Andrew Caernegie (Part 1)
Andrew Carnegie was considered a ruthless employer who squeezed as much production out of his workers for as little wages as absolutely possible. He used his power to immobilize workers and give them few options but to do his bidding. Working for Carnegie was life in a sweat shop. His view was that the workers would spend their money on consumables that would be gone by the end of the month. Instead, he would spend it for them.
Carnegie never had the intention to consume all the wealth he had amassed (and I’m not sure any one man had the capacity to do so). His view was that he would use the money to create an endowment to invest in things that would last 1,000 years, primarily the arts. Hospitals and education. What is interesting is that he empirically saw that the public’s propensity to consume would never create lasting wealth. For the general public this was great in the long run, but must have really sucked if you were a Carnegie worker. These Carnegie workers paid the price for the greater good of later generations though it was not their choice to do so.
Economies need to be careful that the gap between the wealthy and poor classes does not get to be too wide since envy may cause a revolt. Certain segments of the poorer class will invariable face certain circumstances where they earn below even sustenance living. Whether it is mismanagement of resources, or circumstances like a blind brother who is unable to work, war or weather, the poorer class is vulnerable. They still need to survive and they may very well take what they need to live regardless of how much script their market wage has earned them.
Wealthy individuals who live in countries where there is a wide gap between the haves and have not’s, live behind tall walls with barbed wire and armed guards. A smart wealthy class will create some measure of a safety net that ensures that everyone is taken care of at some basic level. Smart economies create a balance that must be maintained for the benefit of everyone.
Pure unregulated capitalism and controlled socialism are two extreme ends of a spectrum of possibilities. History has shown us that each extreme has certain benefits and flaws. Unregulated capitalism, where individuals act independently according to their own personal interest will create a class system with an ever widening gap, but will allocate resources efficiently and invest in infrastructure that will tend to improve the standard of living for everyone. The Industrial Revolution has shown that unregulated capitalism can be quite cruel to the working class.
Pure socialism is more egalitarian, but is also, terribly inefficient with its allocation of resources. Socialism will likely go down in history as a failed experiment. The paradox of capitalism is that when individuals make independent decisions, it is better for the group as a whole though it is not very egalitarian. Socialism has a similar paradox that a centrally planned economy is inferior for the group as a whole but seems to champion the individuals. (The Communist made an attempt at socialism, but for the most part replaced the capitalist class with the elite and privileged Communist Party.) Socialism just doesn’t seem to fit the nature of human beings to differentiate themselves in a world of Two-ness. The contradiction simply could not endure and it is drifting into Darwinian extinction. The question is, do we really have free market capitalism?
