Capitalism Fosters Human Cooperation Like Nothing Else

Barry Brownstein – April 18, 2019

There is an apocryphal story about a man who sees his neighbor searching under a streetlight. Being a good neighbor, he offers to help. The man who is searching explains he lost his car keys. The two men look, but the keys are nowhere to be found. “Are you sure you dropped your keys under the streetlight?” asks the concerned neighbor. “I’m not sure,” responds the man who lost his keys, “but this is where the light is.”

If you have ever looked for any missing item in the same place repeatedly, you know there is a natural tendency to turn to what is familiar for solutions. Availability bias may cause us to give “undue attention and importance to information that is immediately available at hand” while ignoring “wider evidence that clearly exists but is not as easily remembered or accessed.”

Day after day, the media promotes a narrative that politicians are the source of goodness in our lives. Don’t blame a biased media. Many watching CNN, Fox News, and MSNBC sit in rapt attention. Some spend hours a day gravitating toward the light the media shines on politicians, with endless coverage of who is running, who may run, who should run. Do those watching believe their “keys” to a good life are found where politicians scrimmage?

If you live in an ideological bubble, it might surprise you to learn how many well-meaning individuals think Alexandria Ocasio-Cortez is brilliant and support the democratic socialist platform. They believe that brilliant individuals have the knowledge to solve the societal problems they perceive, and only the mendacity of non-caring people is blocking the deployment of solutions. This idea about knowledge is mistaken. They do not understand that useful knowledge is not a stock to be deployed; instead, knowledge must be discovered in a process.

Why can’t we cooperate more and solve these problems? they wonder. We have to do something, they say.

They are so focused on looking toward government solutions, they do not notice the discovery process underway every day. As Jonah Goldberg puts it in his book Suicide of the West, “Capitalism is the most cooperative system ever created for the peaceful improvement of peoples’ lives.” Goldberg continues, “The market system is so good at getting people — from all over the world — to work together that we barely notice how much we’re cooperating.”

A Shopping Trip

My family eats a diet rich in fresh produce. We live in a rural area; during the summer months, we are served by local farmers. When the growing season ends, shopping becomes harder. One store may have received a shipment of rich green kale, another bok choy, while another grapefruit. We are fussy consumers demanding freshness and quality.

Recently, my wife and I spent a weekend in Boston. On the drive home, we stopped to shop at different exits off the highway: first at Wegmans, next Costco, then Trader Joe’s, then Market Basket, then Whole Foods, and finally a local co-op.

Each market had a jammed parking lot and a vibrant, thriving atmosphere. No politicians or planners issued commands about what products these stores should stock. By the time we returned home our car was full of our bounty. Those seeking to serve us produced at our fingertips a cornucopia that not even a king or Rockefeller could have imagined a mere century ago.

Politicians such as Elizabeth Warren may rail against corporations. But what power did these stores have over us? Supermarket chains that don’t serve us well, we pass by. The consumer is the real boss, not “capitalists, the enterprisers, [or] farmers,” as Ludwig von Mises explains in his book Bureaucracy.

[Consumers] by their buying and by their abstention from buying; decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit.

As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy.

What We Don’t Notice about the Economy

Sometimes the ordinary can reveal the miraculous.

The parking area around Whole Foods in Bedford, New Hampshire, is under construction. Signs split the incoming traffic for customers and deliveries.

Stores need deliveries and customers. A thriving store doesn’t take its customers for granted, but sometimes customers take the deliveries for granted.

Every day, trucks bringing food from all over the world arrive at Whole Foods. Vendors trust that they will be paid on time. Manufacturers and farmers who sell their goods to distributors trust they will be paid on time. Customers trust they are buying quality products.

Imagine if there was no trust. Imagine the increase in transaction costs if vendors and farmers weren’t certain of being paid; if customers couldn’t trust the products they were buying to be fresh and high quality. Imagine how commerce would grind to a halt.

In tribal societies, there is limited trust outside the tribe. In capitalist societies, there is an extended web of trust; an invisible beneficence that envelops us all.

In his book, Conscious Capitalism, Whole Foods founder John Mackey observes, “Trust is critical to having a good relationship with customers.” Mackey quotes Home Depot co-founder Bernie Marcus, who said, “I actually love the customers. When I would go into stores, I would hug and kiss customers because I recognize that everything I had in my life came from them.” Instead of focusing on the bottom line, Marcus believed, “if we treat the customer right, we eventually would have the bottom line.”

Is it a coincidence that some high-trust stores spend virtually nothing on advertising? Mackey reports that Trader Joe’s spends less than 1 percent of its revenue on advertising. In an interview with Mackey, Doug Rauch, former president of Trader Joe’s, explains why Trader Joe’s doesn’t have to “try to create demand artificially and temporarily” through advertising:

Trader Joe’s has a clear sense of purpose and a strong focus on the customer experience. Over time, this has resulted in customers becoming raving fans and highly effective unpaid ambassadors and marketing agents for the company. Not only do their employees, but even their vendors become marketers for them!

Market Basket is a beloved New England grocery chain whose customers went on strike during a hostile takeover attempt a few years ago. Market Basket, along with Wegmans, is known for the fierce loyalty of its customers and employees.

So much goodness is created by capitalists who can be fired at any time by consumers. Socialism destroys trust and human cooperation. For a case in point, look at Venezuela.

Why Do We Keep Looking in the Wrong Place?

I have explored in many essays the enduring appeal of socialism. For example, some believe good intentions trump all; others think socialism is more compassionate.

There is a meta-reason many keep looking in the wrong place. Our ego is narcissistic; our ego takes its seat at the center of the universe. Our ego discounts what it can’t understand, what it didn’t create, and what it can’t control.

Supermarket chains rise and fall. Brands of food may come and go. Online ordering and delivery of food may grow in popularity. Specialized diets will rise and fall in popularity. What doesn’t change is the backdrop of the marketplace that will produce all phenomena. This is a backdrop that no human mind can control or fully understand.

Stop looking under the lamppost for the latest politician who promises to fix problems. Nobel laureate F.A. Hayek in his classic chapter “Cosmos and Taxis” in Volume 1 of Law, Legislation and Liberty, points us in a different direction. Much of the cooperation we take for granted in life is a spontaneous phenomenon that is not controlled by anyone or any group of people.

I wrote in my essay, “Better than Self-Esteem Is Reality-Esteem”:

Hayek splashes a bucket of ice water on our ego’s understanding of reality. We’re not in charge. We cannot fully comprehend the miracle of unplanned order that produces modern life. Hayek instructs us that spontaneous order has a “degree of complexity” that “is not limited to what the human mind can master.” Many cannot conceive of order emerging from the billions of daily actions of individuals with no coordination by a mastermind.

Until “humble pie” becomes the latest dietary craze, people will keep searching under the streetlight for the next politician who will promise to save them. Before it is too late, behold the miracles of the modern world built by a market discovery process. Look at the nearly invisible order that fosters human cooperation and has allowed human beings to lift billions out of poverty in an amazingly short period of time.

This article was originally published at Barry Brownstein is professor emeritus of economics and leadership at the University of Baltimore. He is the author of The Inner-Work of Leadership. 

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