The Capitalist decides to build a new factory. He calls a real estate agent and buys a parcel of farm land. He whistles for his chauffeur and rides out to the site in his limo. He walks to the center of his land, raises his cane to the sky and lets out a mighty bellow: “Let there be construction!” And…
Nothing happens. And thus, Capitalism is refuted.
In order for a factory to appear on the site, somebody has to do some labor. Maybe the capitalist will take off his top hat and monocle, roll up his sleeves, and dig the foundation himself. Plenty of capitalists are more than willing to labor. For example, Mark Zuckerberg shoveled tons of bits before he became a robber baron trying to flood the nation with cheap labor. But without labor, nothing happens. Ever.
Now, what are the Capitalist’s options?
Plan A – He could knock on doors, and after negotiations, hire some of the local population to come work for him.
Plan B – If his neighbors want too much money for their trouble, the Capitalist can bring in foreign workers from some downtrodden nation like Bangladesh whose citizens are desperate to work for peanuts.
Plan C – The Capitalist can get laws passed that destroy the local economy in order to make the locals more pliable. That’s how they did it in Britain when they repealed the Corn Laws.
Plan D – The Capitalist can offer very generous compensation to a few of the locals, arm them with weapons, and frog-march the rest of the people onto the work site.
Throughout history, Plan D, slavery, has been the most common, and most profitable option. In recent decades, the USA has been following Plan B, and that too has been enormously profitable for the capitalists.
Plan A is the ideal, of course, but it is impossible under a regime of mass immigration, and free-trade with low-wage nations. The capitalists have stacked the deck in their favor for negotiating with workers.
The moral of the story is that Capitalism is not an economic system, but only the notion that the capitalist should hold the upper hand over the worker. And Socialism is the notion that the worker should hold the upper hand over the capitalist. Both are foolish notions that lead to disaster.
My preferred way of solving this social problem is to create a slight, artificial scarcity of workers such that capitalists would have to bid against each other for their services. When workers are scarce, they will automatically be well paid, and well treated. No regulation necessary. That’s what happened during World War II. While all the men were away, women like my mother had plenty of job opportunities to work for grateful and generous managers.
So, curtail mass immigration, curtail trade with low-wage nations like China, and problem solved. Nobody needs to be enslaved, and no capitalists need to be marched into ovens, Tom Perkins style. Income inequality narrows and everybody lives happily ever after.
The problem, of course, is that the capitalists have control of both immigration policy and trade policy. So, don’t expect any improvements until that control is broken. The people of Switzerland recently voted to put an end to mass immigration. Perhaps such sentiment will spread to the voters of other Western countries. After all, it is painfully obvious that mass immigration only increases income inequality.