Capitalism, Population, and Falsified History

"There is no fence or hedge around time that is gone. You can go back and have what you like of it, if you can remember."
--Huw Morgan (How Green Was My Valley)

In this missive, Mises discusses the oft cited falsehood that people were better off prior to capitalism. Capitalism came into its own in the early 18th century.

Before the advent of capitalism, a person's social status was fixed from beginning to end of life. Status was inherited from ancestors and rarely changed. The poor, which comprised most of the population, had little if any upward mobility.

Primitive production processes of the time were operated primarily for the benefit of the wealthy. In Europe. more than 90% of the population worked the land and rarely interacted with city-oriented processing industries. Feudalism was the dominant social design for hundreds of years.

Of the many problems inherent to this social structure was that production was designed to meet the needs of the well-heeled few. As population grew, there were many more people born into poor conditions than into rich conditions. Thus, particularly in rural areas, there were more people than there was work for them to do (since work was designed to support the rich--a limited growth market).

Productivity, defined as output per person, declined as growth in the denominator outpaced growth in the numerator.

In time, a significant fraction of population lived as outcasts on the edge of death. No work to be done with seemingly nowhere to go to change their condition.

Facing extinction, some people among the outcasts set up shop to produce goods. Unlike the orientation of conventional production of the time, however, these entrepreneurs targeted the masses. They produced cheaper products that could be bought and used by the masses.

This was the onset of capitalism. Sagely stated by Mises, capitalism can be seen as "everyone's having the right to serve the customer better and/or more cheaply."

Mises suggests that a central measure of capitalism's effectiveness is growth in population. Population cannot grow significantly if scarcity is not alleviated via production. Population has grown by orders of magnitude since the advent of capitalism. And, in countries that have engaged in capitalistic practices, the great majority of people enjoy standards of living far greater than their pre-capitalist ancestors.

Mises also dispels the oft-repeated myth that people who went to work in early capitalist operations were worse off than they were in their previous conditions. Mothers did not leave their kitchens to work in factories. Most had no kitchens. Those that had kitchens had little food to cook in them. Children did not come from comfortable nurseries. They were starving and dying.

The 'unspeakable horrors' of capitalism is once again refuted by simple population statistics. The fact that populations exploded during capitalism's early periods demonstrates that scores of children who would have died under previous conditions survived to become men and women.

No doubt conditions could be improved--and they were subsequently improved via productivity advancement. However, it is a mistake to consider conditions of early capitalism as if they could be replaced with current conditions. Instead, one must consider the conditions and choices available to people at the time.

Those that make this mistake promote falsification of history.