Much to the delight of our two young children, my wife decided to make pancakes for dinner a few nights ago. The kids thought their mother must have gone mad, as it was their equivalent of being served dessert for dinner. However what is it that made this meal that made it so appealing to their taste buds? I would argue that it was a capitalism since it would have been far more bland, expensive or even non-existent in a centrally planned economy.
To create all the ingredients required for our pancake dinner myself would be immensely time consuming and costly. Let’s just look at some of the ingredients required:
This would require a wait of at least four months (depending on the wheat variety, conditions, etc) for the wheat to grow and be ready for harvest. I would require some land to plant the wheat, fertilizer, tools to plant and harvest, irrigation to water if there’s no rain and favorable weather conditions. On top of all that, I’d also need insecticide to repel the many bugs that would no doubt love to devour my crop before I have the chance.
Once harvested, I now have some wheat that would now need to undergo a milling process. For a small amount I may be able to do it with some hand tools rather than having to invest in expensive machinery. But this still requires more time and money.
You don’t have to be a genius to work out what’s required here. Chickens obviously. They’d have to be bred or purchased as chicks and then have months of time and money spent on raising them up until the point where they begin producing eggs. Even if they were purchased at the point of lay then they still require food to be grown for them (I hope you liked the idea of growing your own wheat in my first point). They also require time to give them their feed regularly and collect the eggs. On top of this you’ll have to worry about providing them some sort of secure shelter if you don’t want the local fox to enjoy a good meal and send me back to square one of my egg production effort.
Milk & Butter
Off to market we go to purchase a cow. There’s the up front cost of buying the cow as well as the constant cost and work in providing food. Of course I have to make sure it’s milked twice a day whether I need the milk or not. I can forget any future holidays unless I’ve got some very caring friends who would be keen to take over milking duties for a while. Then there’s even more work, learning, equipment, time and money involved in turning some of the milk into butter.
In similar fashion to the flour, I would need to plant sugar cane, fertilize it, water it, protect it from pests & disease, harvest it and then crush it to gain the raw sugar.
We also enjoyed bananas, blackberries, ginger syrup and maple syrup as toppings on our pancakes. How could we enjoy all of these ingredients from all around the world for the cost of about 1% of my daily wage? Because of the self-interested motivation of farmers, truck drivers, warehouse operators, retailers, etc all built on the back of capital accumulation throughout history. As Adam Smith wrote in Wealth of Nations Volume 1:
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
When people are free to produce what they believe will benefit them most and trade as they please, then society as a whole benefits and becomes much more prosperous. This is the reason that we are not all having to farm our own food, make our own clothes, build our own homes, etc. By having the freedom to focus on what we do best and trade with others we can become richer while also making others in society around us richer, even if our motivation is self-interest..
Yes, a centrally planned economy may be able to produce some or even all of the ingredients required for our meal. However it will never be able to produce them in the correct and abundant supplies that a market economy can. It would also end up costing a far higher proportion of the average person’s income since the whole economy will be run in a far less productive manner. The best outcomes for society, families and individuals are obtained when there is freedom in the marketplace and – also known as Capitalism.
Recommended reading on this subject:
Economics In One Lesson by Henry Hazlitt
I, Pencil by Leonard Read (also available in video format on YouTube)
How An Economy Grows And Why It Crashes by Peter D. Schiff