#68 The Capitalist Manifesto: Saving, Investing, and Working Hard
The Pillars of Prosperity: Economic Principles for Wealth
The emergence of Javier Milei in the political and economic landscape has marked a temporal inflexion point in the public discussion about liberal ideas (libertarian for our North American readers). This ideological revolution has shaken the foundations of a debate many considered monopolized by more totalitarian currents of the mainstream thought.
In this context, it seemed essential to me to rescue and share the roots of the ideas that have inspired Milei, focusing especially on the two most prominent Spanish figures of the current Austrian economic school, who surely are unknown to many readers: Jesús Huerta de Soto and Miguel Anxo Bastos. While the former stands as one of the contemporary maximum exponents of this school, offering a theoretical and academic vision of the economy, the latter has dedicated himself to disseminating this knowledge in a more accessible and understandable way for the general public. Both, each in their own way, have contributed to enriching the current economic debate with perspectives that challenge the status quo and promote deeper reflection on the workings of our societies and economies.
Following this line, I want to introduce a speech by Miguel Anxo Bastos that exemplarily illustrates the essence of capitalism and the importance of saving, investment, and hard work as pillars for development and prosperity:
"Why is there no poverty in Switzerland and there is in Congo?
Because in Switzerland, the Swiss worker works with a Massey Ferguson tractor of 500 horsepower. That is, his work force, his muscles, are multiplied by a thousand or by 10,000, and one day he does the work of 200 men from before. Therefore, he produces wheat about 200 times what was produced before. The Banyamulenge worker of the Mulenge mountains continues to work as it has always been worked, that is, in a non-capitalist, non-capitalized way. He works with a skinny ox, with his hands, or with a wooden plow. Therefore, his productivity is 100 times less.
So I say, in some countries in Europe, they began to work with capital. They were enormously saving, enormously frugal, enormously capitalist countries. They capitalized, saved, bought machines. They began to work, instead of with their hands, with steam engines. Instead of transporting goods with oxen, they began to transport them on railways. This multiplied their productivity and was gradually making each worker richer. And this was spreading like an oil stain.
What needs to be explained is wealth, not poverty. Poverty was always the condition of humanity. The life expectancy of 30 years was not exceeded until the 20th century. Only with capitalist means of production, saving, market, and calculation, could this situation of poverty be gradually overcome. And little by little, wealth and prosperity are expanding around the world. Slowly, it is spreading around the world. Today, poverty is less than ever in the history of humanity, than ever in the history of humanity! If you want, tell me when people lived better than now, even in poor countries, look at what I'm saying. In any aspect. I tell you, the only solution is this. I know what I'm explaining is very simple, it needs more time. This is the solution to the problem, and there is no other solution to poverty.
CAPITALISM, SAVING (and investment), AND HARD WORK, there's nothing else.”
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1. Capitalism
Capitalism is based on the private ownership of the means of production, where capital symbolizes the future value that will be generated for third parties through entrepreneurial activity. Therefore, the goal of capitalism is the continuous revaluation of that capital, which can only be achieved by anticipating society's needs, providing better products and services for it.
One of the basic institutions of capitalism is the market and the price system. Prices are nothing but signals that contain and transmit information about the preferences of economic agents. A high price sends signals to entrepreneurs that a good is demanded by society. There is a possibility of obtaining extraordinary profits, and that invites entrepreneurs to provide more supply of that good. Moreover, it invites thinking about means to provide that good at lower costs, making a more productive use of resources, ergo increasing productivity and general wealth in society. That's why price interventions, whatever they may be, are a disaster for the price discovery process and everything that implies.
Prices and profits are like lights that guide us; they are like beacons in the night. They indicate where capital is needed and incentivize us to innovate and be more productive.
Capitalist societies emerge from cultures characterized by saving and a low time preference, that is, populations willing to defer present consumption in favor of capital accumulation. A historical example is Victorian England of the 19th century, whose puritan and frugal society prioritized the future over immediate pleasures. This attitude was not only derived from religious and social values but also economic ones, merging to create one of the most saving cultures known. Contrary to the popular belief that imperialism was the engine of industrial development, it was the accumulation of internal capital that financed the industrial revolution, which later spread throughout Europe (many countries had colonies before, like Spain and Portugal, and did not become capitalists, rather the opposite).
This analysis underscores the importance of culture and values of a society on its path toward prosperity. The differences between countries and cultures, even when exposed to capitalism, highlight the decisive influence of inclusive institutions, as argued in "Why Nations Fail". Understanding this intertwining of economy, culture, and values is crucial to grasp the bases on which the success or failure of nations in the realm of capitalism is built.
2. The Accumulation of Capital (and Investment)
At the heart of capitalism lies a fundamental principle often misunderstood: saving. Contrary to popular perception, capitalism does not sprout from unrestrained consumerism nor promotes immediate gratification. Rather, it is based on values diametrically opposed to hedonism and the wastefulness promoted by certain contemporary thought currents.
Daniel Bell, in his work on the cultural contradictions of capitalism, predicted that this economic system could fall victim to its own success. The wealth generated, Bell argued, could make us forget the values of saving and hard work that made such prosperity possible. This forgetfulness is dangerous because without the virtue of saving—the ability to defer present consumption to ensure a better future—the capitalist machinery would come to a halt.
The essence of saving in capitalism goes beyond mere capital accumulation. It represents a bet on the future, a belief in the possibility of improving not just our personal situation but also that of our community and society.
Capitalizing the Economy
Saving enables investment in capital goods, which in turn, drives productivity and overall well-being. By investing our savings in companies, we are not just buying pieces of paper that go up and down randomly; what we are doing is capitalizing the economy. We become owners of those means of production. Moreover, we invest our corporate earnings in CAPEX that makes our workers more productive with new and more efficient capital goods, to achieve more output with fewer goods, we seek to achieve higher returns with increasingly less capital. This will allow us to raise wages for workers and invest in R&D to find new methods that are more efficient, pollute less, etc.
Therefore, we are not only preserving the value of our capital but also contributing to the enhancement of the economy. Every rational investment today is a step toward a more productive and, therefore, more prosperous society tomorrow.
The relationship between saving, investment, and productivity is direct and fundamental. Without saving, there is no investment; without investment, there is no growth in productivity; and without growth in productivity, there is no improvement in living standards. This circle of wealth creation is the engine of capitalism and the foundation of its success.
Saving as a Virtue
Saving, far from being a mere financial tactic, is a virtue that requires discipline, foresight, and a commitment to the future. This virtue is not innate; it needs to be cultivated and valued within society. Cultures that encourage saving and productive investment, as opposed to those that promote immediate consumption, tend to achieve higher levels of economic prosperity.
The importance of a society's culture and values cannot be understated in this context. Societies that thrive are those that, like Victorian England, valued the long term over immediate pleasure, seeing in saving not a deprivation but an investment in the future. This mindset, this preference for the future over the present, is what allows a society to capitalize and advance.
The cultural contrast in attitudes towards saving and investment is crucial for understanding why some nations thrive while others remain stagnant. The thesis of inclusive institutions, as explored in "Why Nations Fail," complements this view by highlighting how political and economic structures that promote participation and investment in human and physical capital are essential for economic development.
3. Hard Work
At the heart of capitalism beats a work ethic that is often distorted by anti-capitalist critiques. Far from being an imposed yoke, hard work is the quintessence of self-actualization and advancement within this system. Capitalism, contrary to sometimes distorted views, not only rewards but is based on effort, dedication, and innovation.
Socialist views (class societies and their theory of surplus value) have historically tried to paint hard work as a curse, a tool of exploitation. However, this perspective fails to recognize that the development of the working classes and their emancipation from poverty have occurred more significantly and sustainably in capitalist contexts. Where entrepreneurship flourishes, workers also find paths to prosperity. History has shown that there is no communist country where the proletariat has achieved decent living standards, beyond those close to political organs.
The extreme dedication of entrepreneurs like Musk with his engineers and workers working up to 18 hours a day without vacations for more than a decade illustrates how unwavering commitment to vision and goals can revolutionize entire industries, from automotive with Tesla to space exploration with SpaceX.
Hard Work as a Cultural Value
In pre-capitalist societies and many cultures today, there was a habit of immediately spending earned money and not returning to work until it was gone. The adoption of capitalist work forms was achieved with great difficulty and was parallel to the development of its institutions (banks, stock exchanges, clearinghouses, etc.) but was achieved to a high degree.
Societies that value diligence, responsibility, and innovation tend to create more wealth and offer better living standards to their citizens. In contrast, cultures that promote idleness or the pursuit of immediate pleasure often find themselves stagnant or in decline.
Hard work, far from being a relic of the past, is an essential component for the future of capitalism and collective prosperity. Challenging narratives that devalue effort and promoting a culture that celebrates dedication and individual contribution to business success is crucial. Only in this way can we ensure that future generations inherit a legacy of progress, innovation, and well-being, based on the principles of capitalism: saving, investment, and fundamentally, hard work.
For those who have read to the end, I would be delighted to read your viewpoints.
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Here you can watch the full video in english: https://www.youtube.com/watch?v=_Z9ql7UY_1Q
Excellent piece, it elucidates well the underlying logic and values of capitalism. It must be said though that it reflects a view of how capitalism *should* work, but not (as far as I can tell) how it *is* working in the modern economy. Savings and investment feeding into a virtuous cycle of productivity-boosting technology, with broadly shared wealth gains fueling further savings and investment is the As-Seen-On-TV version of capitalism.
Once, the largest companies were in turn the largest investors, building plants, employing workers, investing into the productivity-boosting hard technologies that accelerated the U.S. post-WW2. Today, the largest companies need do little investment at all, their business models expressly capital-lite. They make money from economic rents charged on legally protected intellectual property. The value chain of production is staggeringly fractured. A business as seemingly straight-forward as a hotel likely licenses its branding, its physical property owned by another pool of capital, its operations outsourced, those operations themselves relying on sub-contractors for cleaning or food & beverage execution. In such a system the link between hard work and returns on capital become too disambiguated. Financialized, rentier capitalism becomes just as deleterious as socialism. When what you own supersedes what you do as a path to wealth, the populace is similarly directionless and unmotivated. Hard work ceases to be "the quintessence of self-actualization and advancement within this system."
The issue however is not that our current system is an aberration, or a case of capitalism gone rogue, rather it is the only logical endpoint. The golden age of capitalism existed when there was greater state protectionism, stronger labor unions and more robust social and community ties. Much of that has faded way into a shapeless global mass of GDP. I believe the faster we can dispense with misplaced nostalgia and pious repetition of Hayek, we can address the state of capitalism as we find it *today.* We can begin developing a new vision of market-based systems and a more classically conservative view of how capitalism should operate.