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POV: What Is Capitalism?
by Ayn Rand | November-December 1965
In Pursuit of Wealth: The Moral Case for Finance
by Yaron Brook | September 30, 2017
Inequality Doesn't Matter If We’re All Paid According to the Value We Create
by Don Watkins | October 18, 2016
Who Cares about Inequality?
by Don Watkins | April 28, 2016
Equal Is Unfair: America’s Misguided Fight Against Income Inequality
by Don Watkins | April 19, 2016
Economic Inequality Complaints Are Just A Cover For Anti-Rich Prejudice
by Don Watkins | April 14, 2016
Equality of Opportunity Doesn’t Exist in America — and That’s a Good Thing
by Don Watkins | April 06, 2016
Inherit The Wind . . . And Not Much Else
by Don Watkins | April 05, 2016
Equal is Unfair: America’s Misguided Fight Against Income Inequality
by Don Watkins | October 20, 2015
Religion in America
by The Editors | December 05, 2014
Religion vs. Freedom
by Onkar Ghate | December 03, 2014
Debate: “Inequality: Should We Care?”
by Yaron Brook | May 08, 2014
Economic Inequality: Who Cares?
by The Editors | March 25, 2014
Our Poverty Problem?
by Don Watkins | March 11, 2014
Is Inequality Fair?
by Yaron Brook | March 05, 2014
Government tries to do too much: Opposing view
by Don Watkins | January 26, 2014
“You didn’t build that,” conservative style
by Steve Simpson | December 09, 2013
Why Do 1.4 Million Americans Work At Walmart, With Many More Trying To?
by Doug Altner | November 27, 2013
Atlas Shrugged Is A Book About Pride In One’s Work, And The Success That Results
by Steve Simpson | November 08, 2013
Bernie Madoff, Steve Jobs, and Wall Street Greed
by Don Watkins | September 26, 2013
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Be Born Poor Doesn’t Mean You’ll Always Be Poor
by Yaron Brook | April 12, 2013
We Should Be Embarrassed by the Sequester Debate
by Yaron Brook | March 20, 2013
“Give Back” Is One of the World's Most Impoverishing Commands
by Yaron Brook | March 12, 2013
Capitalism in No Way Created Poverty, It Inherited It
by Yaron Brook | February 25, 2013
3 crucial lessons Ayn Rand can teach us today
by Yaron Brook | February 02, 2013
Capitalism without Guilt
by Yaron Brook | January 21, 2013
President Obama Duels With Ayn Rand Over What Makes America Great
by Don Watkins | October 29, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
The Virtue of Employee Layoffs
by Yaron Brook | September 06, 2012
Ayn Rand’s Atlas Shrugged: A Paean to American Liberty
by Don Watkins | August 17, 2012
President Obama vs. My Grandfather
by Don Watkins | July 30, 2012
The Dog-Eat-Dog Welfare State Is Lose-Lose
by Don Watkins | July 12, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
Private Equity Firms Want Acquisitions To Profit, Not Fold
by Doug Altner | June 05, 2012
Opposing view: Celebrate private equity
by Don Watkins | May 29, 2012
The “On Your Own” Economy
by Don Watkins | March 09, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
Happy Birthday, Ayn Rand — Why Are You Still So Misunderstood?
by Don Watkins | February 02, 2012
America Before The Entitlement State
by Don Watkins | November 18, 2011
How Did Ayn Rand’s Atlas Shrugged Predict an America Spinning Out of Control?
by Onkar Ghate | October 31, 2011
What We Owe Steve Jobs
by Don Watkins | October 06, 2011
What’s Missing From The Budget Debate
by Don Watkins | July 12, 2011
Does America Need Ayn Rand or Jesus?
by Onkar Ghate | June 29, 2011
When It Comes to Wealth Creation, There Is No Pie
by Yaron Brook | June 14, 2011
It’s Time To Kill The “Robin Hood” Myth
by Yaron Brook | May 06, 2011
Using Ayn Rand's Values to Create Competitive Advantage in Business
by John Allison | April 04, 2011
In Defense of Finance
by Yaron Brook | February 15, 2011
The Tea Party Will Fail — Unless it Fully Embraces Individualism as a Moral Ideal
by Tom Bowden | January 21, 2011
How About Tax Reparations for the Rich?
by Don Watkins | January 18, 2011
The Guilt Pledge
by Don Watkins | September 22, 2010
How To Succeed In Business: Really Try
by Don Watkins | September 13, 2010
The U.S. Anti-Business Epidemic
by Don Watkins | August 17, 2010
Atlas Shrugged’s Timeless Moral: Profit-Making Is Virtue, Not Vice
by Yaron Brook | July 20, 2010
Capitalism: Who Needs It — Ayn Rand and the American System
by Yaron Brook | June 09, 2010
Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Commercialism Only Adds to Joy of the Holidays
by Onkar Ghate | December 18, 2009
Why is Ayn Rand Still Relevant: Atlas Shrugged and Today’s World
by Yaron Brook | August 10, 2009
The Corrupt Critics of CEO Pay
by Yaron Brook | May 2009
America’s Unfree Market
by Yaron Brook | May 2009
Energy at the Speed of Thought: The Original Alternative Energy Market
by Alex Epstein | Summer 2009
Is Rand Relevant?
by Yaron Brook | March 14, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
From Flat World To Free World
by Yaron Brook | June 26, 2008
Vindicating Capitalism: The Real History of the Standard Oil Company
by Alex Epstein | Summer 2008
The Right Vision Of Health Care
by Yaron Brook | January 08, 2008
Deep-Six the Law of the Sea
by Tom Bowden | November 20, 2007
The Influence of Atlas Shrugged
by Yaron Brook | October 09, 2007
The Morality of Moneylending: A Short History
by Yaron Brook | Fall 2007
Say “No Way!” to “Say on Pay”
by Yaron Brook | May 22, 2007
Atlas Shrugged — America's Second Declaration of Independence
by Onkar Ghate | March 01, 2007
Pay Is Company’s Prerogative
by Yaron Brook | January 08, 2007
Religion and Morality
by Onkar Ghate | October 18, 2006
Net Neutrality vs. Internet Freedom
by Alex Epstein | August 16, 2006
Why Are CEOs Paid So Much?
by Elan Journo | May 11, 2006
To Outsource or to Stagnate?
by Onkar Ghate | August 01, 2004
Ayn Rand's Ideas — An Introduction
by Onkar Ghate | June 02, 2003
Capitalists vs. Crooks
by Elan Journo | July 22, 2002
Forgotten Heroes of 9/11
by Onkar Ghate | May 17, 2002
Religion vs. America
by Leonard Peikoff | 1986
The Sanction of the Victims
by Ayn Rand | November 21, 1981
Egalitarianism and Inflation
by Ayn Rand | 1974
The Moratorium on Brains
by Ayn Rand | November 14, 1971
What Is Capitalism?
by Ayn Rand | November 19, 1967
Is Atlas Shrugging?
by Ayn Rand | April 19, 1964
The Fascist New Frontier
by Ayn Rand | December 16, 1962
America’s Persecuted Minority: Big Business
by Ayn Rand | December 17, 1961
The “New Intellectual”
by Ayn Rand | May 15, 1961
Capitalism vs. Communism
by Ayn Rand | 1961

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Capitalism in No Way Created Poverty, It Inherited It

by Yaron Brook and Don Watkins | February 25, 2013 | Forbes.com

The nineteenth century, many people believe, was an era in American history when workers were forced to toil in sweatshops twenty-eight hours a day for starvation wages. It was only when governments intervened, either directly on behalf of workers or indirectly by empowering unions, that conditions improved.

The facts tell a different story — one that reveals the unmatched power of capitalism to improve human life.

Remember the historical context. As Ayn Rand observed, “Capitalism did not create poverty — it inherited it.” For much of human history, the vast majority of the population was mired in poverty. All too often, the average individual lived in unimaginably wretched conditions. It was only in the nineteenth century, and then only in the West, that the masses started to enjoy prosperity.

Keep that in mind when you hear about living and working conditions during the nineteenth century. Because it’s true — by today’s standards, the living and working conditions of the time were often miserable. But by the standards of everything that had come before, they were not. For the men and women working those jobs, they were often a godsend.

Remember also, the population of the time was growing at a rate never before seen in human history — so fast that early economists like Malthus wrung their hands over whether such growth could be sustainable. How did the West actually sustain those growing numbers? Only through the rising productivity made possible by capitalism. Many of the workers who manned the factories would not have been able to survive at all in the era before capitalism.

Indeed, two basic facts speak more loudly than any statistical study could. First, factory owners did not have the power to force workers to labor in their factories; all they could do was offer work at a given wage to people who were free to accept the offer, or reject it and look for work elsewhere. Second, people flocked to those jobs, emigrating to the cities from America’s farms and from abroad.

How, then, did conditions for workers improve? Just as businessmen had to compete for customers, offering better products and lower prices, so they had to compete for workers, offering them better wages and better working conditions. This process of competition led businessmen to bid wages up to reflect workers’ productivity: the more productive workers became — the more skills they developed, the more efficiently they were managed, the more capital and technology they could employ — the higher their wages tended to rise.

As a result of the era’s mounting productivity, the statistics show steadily rising wages and steadily declining working hours — long before the government intervened to “protect” workers. Real wages more than tripled over the course of the nineteenth century.

In 1870, according to research from Michael Cox and Richard Alm, the average worker worked 3,069 hours a year. But as his productivity increased, by 1913 he could enjoy a much-improved standard of living working only 2,632 hours. Or consider how much easier it got to earn the money for a half-gallon of milk (56 minutes in 1900, down to 31 minutes in 1930) or 100 kilowatt hours of electricity (107 hours in 1900, but only 11 hours in 1930).

What about child labor? Didn’t nineteenth-century capitalism sentence children to hard and dangerous work? Child labor, despite what we’ve heard, was not created by capitalism. It’s a practice that stretches back to prehistory, when children would spend hours toiling in the scorching sun or freezing rain, risking disease, injury, or death, virtually as soon as they could walk.

Why were most children made to work before the twentieth century? Is it because parents were sadistic and governments cruel? Hardly. It’s because, before capitalism made us rich, children had to work if they were to survive at all. When a family lives on the equivalent of a dollar a day, there is no alternative: if you can work, you work.

What eliminates child labor is not government decree but a rising standard of living. That’s what eliminated it in the West during the nineteenth century, and that is what is eliminating it today in countries like China. As parents grow richer, one of the first things they do is use their burgeoning incomes to send their children to school.

If capitalism is what caused the West to grow rich, then it was capitalism, not government intervention, that eliminated child labor in the developed world.

This is not to deny that governments have limited or forbidden child labor by law. But child labor was going away on its own, and the laws were far from benign. By pushing children out of the newer, more visible factories where these laws were easier to enforce, hungry children were forced to seek work at smaller, older, more dangerous factories — or failing that, as economist Ludwig von Mises notes, to “infest the country as vagabonds, beggars, tramps, robbers, and prostitutes.”

To be sure, life during the early days of capitalism was hard (as life had always been), but for anyone willing and able to work, life was better than it had ever been — and getting better.

The lesson for us today? Laissez-faire doesn’t impoverish us, but makes us progressively richer.

About The Authors

Yaron Brook

Chairman of the Board, Ayn Rand Institute

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute