Perfect capitalism and perfect communism

Theory

There's a theory that says the following: extreme left on the political scale eventually meets up with extreme right. That is, communism in its most perfect and pure form is identical with capitalism in its most perfect and pure form. This comes close to being the truth, except for one quite major detail, as I show below.

The most queer thing about pure unadulterated capitalism, for me, is that it does not assume the need or existence of nation-states. The nation-state system is merely a byproduct of politics. "Imagine no countries", if you will.

Another concept that is an integral part of our world, but not of classical and neoclassical economic theory, is distance. In the twenty-first century, in an age of intense globalisation, we are moving towards reduced transport and communication costs. But the "death of distance" is not merely far away; it is impossible.

The practical existence of these two concepts, the nation-state system and distance, is not presupposed by economic theory. This goes a long way in explaining the following three things.

Firstly, and most obviously, that factor prices are not equal all around the world. Barriers to free trade exist due to the existence of different countries, and in any case distance makes it impossible to outsource things like manual labour.

Secondly, that we are not all a light-brown colour. Again, the existence of nations and distance makes it impossible for the gene pool to be all mixed up.

Thirdly, and finally, that some areas of the world are poorer than others. Convergence theory, despite its utter lack empirical evidence to support it in the real world, would work in a classical or neoclassical world (if there were any divergence in the first place).

In a perfectly capitalist world, therefore, all prices would be equal all over the world, factor prices would converge, and all people would be equal by their colour of skin.

Notice that in this perfectly capitalist world, if every single person faced exactly the same prices for goods and services, the same factor prices, and if everybody had the same colour of skin, he would be equal to everybody else. (I have not yet figured if this equivalence is merely by definition, but I suspect not.) If the total amount of utility in such a society were denoted by E, and there were n people in this society, each person would have E/n.

Perfect communism, by definition, has everybody equal. If the total amount of utility in a perfectly communist society were denoted by e, and there were n people in this society (same as the perfectly capitalist society above), each person would have e/n.

How do we compare these? It is clear that a comparison would involve analysing E and e to see which is bigger. Now how do we calculate relative values of E and e?

Imagine the state of the world as it is today, and imagine converting it into a perfectly capitalist system. By removing all barriers to trade, one can conservatively estimate that world GDP would double. By removing all barriers to international migration, world GDP would double again. Kill distance: its death would (I'm guessing here) increase world GDP tenfold. Remove away politics and nation-states: GDP would increase another tenfold (I'm again guessing). If € denoted present-day utility, it is abundantly clear from the above that E >>> €.

Now imagine the process of converting today's world into a perfectly communist system. Everybody's utility will decrease until the level hits the utility level of the person with lowest utility. In other words, everybody receives the lowest common denominator of utility. Given that the world today is unequal, at least one person's utility level decreases when making the transition to a perfectly communist world. The proof is sufficient to show that e <<< €.

Now, e <<< € <<< E. Assuming transitivity, e <<< E.

Thus both perfect capitalism and perfect communism have everybody equal, but the average utility of people living under perfect capitalism is much higher than the average utility living under perfect communism. This better expressed by the following statement: capitalism makes the economic pie bigger for everyone, eventually having everybody receive an equal slice; communism merely cuts up the pie into equal slices, not caring about each slice's value.

Personal reaction

I am currently a conservative because I believe that we can make the economic pie bigger. Much bigger. But equality is an anathema to me. So if we start liberalising the world economy to such an extent that perfect capitalism looks on the horizon (unlikely, but still), I will certainly turn to the left.

The case against charity

Most people unthinkingly associate the word charity with good; indeed, charity has become a synonym for the word good. I disagree with this association. I will list the causes of this association between charity and good and will attempt to show that it is unfounded.

All people are equal

As much as we would like to believe that all people are somehow equal, the notion of equality is quite groundless. Plainly, everyone is different. Some people have white skin; others have black, brown, and yellow skin. Some people have amazing capacities of rumination; others are quite bovine. Since every human being is unique in body and mind, one wonders whence this tendency to impose an arbitrary, transcendental, metaphysical equality comes from. Applying Occam’s razor (that we must not make more assumptions than necessary to explain something) to this question shows that any notion of arbitrary equality is unsubstantiated. Since there is no scientific or philosophical evidence to prove that one human being is somehow worth the same as another, we must conclude that equality is a spurious and illegitimate claim.

All people deserve equal opportunities

Social mobility is not as high as we would like it to be; even in the United States, the land of the American dream, most of the wealth of the rich can be attributed to social factors that are outside the control of the wealthy. For example, the argument goes, Bill Gates would not be so wealthy if it were not for America’s relatively stable economy, its public schooling, and its universities. Proponents of charity argue that we thus have a debt to pay back to society, which must be done through voluntary donations to charitable organisations. But this argument is clearly a logical fallacy. The statement ‘social and economic factors beyond our control indirectly are the cause of much of rich people’s wealth’ is a descriptive one. To change it into a normative statement, that ‘we are in debt to society and must pay it back’, is groundless. There is no reason to suppose that just because we profit from society we must pay it back. To invent the notion of the inherent fairness of the universe is ruled out by, again, Occam’s razor.

Charity genuinely improves people’s lives

Many charities proclaim that we can save a starving child’s life in Africa if we donate but HKD 50. We must ask ourselves, to what extent is this true? The answer is: not at all. To dream, nay, fantasise that your pitiful and pathetic contribution can do anything to improve the world is stupidity to the point of lunacy. Tim Harford in Slate Magazine writes that most charity work is about feeling good about ourselves and not about solving the world’s problems. For example, if we have HKD 10,000, most people would give a little proportion of that money to several different charities. HKD 2000 for curing AIDS, HKD 2000 for Darfur, and so on. But surely HKD 2000 isn’t going to cure AIDS, and neither is it going to stop genocide. Another example: between working overtime (earning more money) and volunteer work, most people choose the latter. Why? – because volunteer work makes us feel warm and fuzzy inside. Actually going to Africa to shove food inside the mouths of thin African kids makes you feel good. Of course, the alternative (earning much more money and using this to combat poverty) is more effective, but far less ‘hand-on’.

So should we abandon charity?

The sooner that you get it into your head that you are worthless and must stop trying to be a hero the better. Instead of wasting your time volunteering or wasting your money donating, try the following: when you have HKD 10,000, for example, at the end of the year that you intended to give to charity, invest it to make more money. You will amass much more wealth in this way.

At the end of your life, when you actually have a sizable and not insignificant amount of money to give, then, and only then, perhaps contemplate donating it to charity.

Until then, charity cannot be associated with good; it can only be associated with stupidity.