Mass Production and Capitalism

I'm not expecting to grow flowers in the desert
But I can look and breathe and see the sun in winter time
--Big Country

In operations management, mass production is often defined as generating high volumes of low variety output. Mises masterfully observes that mass production essentially involves producing for the masses.

Prior to the advent of capitalism, processing methods existed almost exclusively to serve the needs of the upper class. Below aristocracy, people lived in a state of squalor--a condition that held for centuries.

Capitalistic industries changed this because they produced things that could be purchased by the general population. Despite laughable claims by anti-capitalist pundits to the contrary, capitalism, even in hampered form, has alleviated scarcity like no other system. Standard of living has been elevated to levels that aristocrats could not have contemplated a couple hundred years ago.

This article is taken from a series of lectures that Mises delivered to officials in Argentina in 1958. Mises was urging Argentina to turn away from socialism toward capitalism via talks given at the University of Buenos Aires.

In addition to the mass production observation, this lecture on "Capitalism" contains many other nuggets, including:

Producers are not kings in capitalism but servants. The biggest enterprise loses its power and influence when it does not adequately serve customers.

Freedom of competition means freedom to invent something to challenge existing producers in an industry. This might incur developing a 'substitute' industry to challenge encumbent producers (the railroad example). "The development of capitalism consists in everyone's right to serve the customer better and/or more cheaply."

The familiar stories about 'sweatshops' in early capitalism commonly ignore the precapitalism alternatives that workers were escaping, namely starvation and death.

Mises observes that the basic difference between higher and lower classes has narrowed with capitalism. In the 18th century and earlier, the middle class had shoes while the lower class did not have shoes. American's categorized as 'poor' today enjoy more amenities than the wealthly of two centuries ago.

In capitalism, wage rates are not set by employers. They are set by consumers.

Interestingly enough, the term 'capitalism' was coined by one of its greatest enemies, Karl Marx. But that is no reason to reject the term, suggests Mises, because "it describes clearly the source of the great social improvements brought about by capitalism. Those improvements are the results of capital accumulation; they are based on the fact that people, as a rule, do not consumer everything they have produced, that they save - and invest - a part of it."

"Higher standard of living depends on the supply of capital."

This is wonderful piece that should be read in its entirety.