The Radical Center
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The Radical Center

The Symphony of Markets

NOTE: My comedy novel tackling “ex-gays” and faith-healers, City Limits, has been republished. In celebration of my birthday I have had the priced lowered. If you want a laugh or two it’s for you. See below.

Depoliticized markets are like a symphony, allow me to explain.

Prior to creating a successful business, labor already exists, but it is underutilized and under-valued. The various components necessary to make a successful product or service already exist. The customers exist. The resources required to create the goods or service exists.

Everything is there but still there is no production or service offered. Why?

In a nutshell, it isn’t there because the key factor in the productive process is missing. The key factor is an entrepreneur who combines all these factors, with the right combination of each, so the product or service created has greater value than the individual components required to produce it.

That last part is important. The end product has to have greater value than all the individual components in order to create new wealth. And, it is the new wealth that allows expansion and greater prosperity for all. Expansion creates more wealth which is what is needed to lift the poor out of poverty.

Redistribution of existing wealth only punishes those who produce, leading to lower productivity and less wealth, exacerbating poverty, as Venezuela, Cuba, and Soviet Russia demonstrated. What is needed, if you care about the long-term consequences, is the creation of greater wealth, not just redistribution of existing wealth

Even after the product or service exists we still require the right person keeping these factors of production in a balanced, symbiotic relationship for the enterprise to remain in existence. If the harmony becomes unbalanced the entire productive eco-system can collapse to the point that the value of the resources becomes greater when divided than when united — which is when corporate “raiders” buy the whole and sell off the factors of production (buildings, inventory, equipment, all assets) to capture the last gasp of value remaining — which leaves labor floundering as they were before the entrepreneur comes on the scene.

Karl Marx made the false, but common, assumption that the value of any product or service is the creation entirely of labor and he never really saw the entrepreneur as the most important laborer. To him the “capitalist,” as he called them, stole all his profits by taking the “surplus” value of the laborers. Yet, before the entrpreneur came along labor was there and was unemployed or under-employed. If all value comes from the labor of employees then the profit should have pre-existed the entrepreneur, but it didn’t.

In reality it is the entrepreneur who creates the wealth, not labor. When entrepreneurs come along and combine just the right resources together, seek out the right methods of production and distribution, and locate the customers for the results of his effort, then new wealth is created. This is not just in conflict with Marxist theory; it is the complete opposite of it.

In this sense labor is similar to seeds sitting in a packet waiting for some farmer to plant them in just the right soil, to water and fertilize them to then produce a crop, harvest it, and get it to consumers. Yes, the seeds are a necessary component to feed the hungry, but without the farmer it just doesn’t work in a manner sufficient to feed people.

It is the “capitalist” who is the key factor in creating wealth. But not all “capitalists” are actually capitalists. (See the caveat below.) A legimitate entrepreneur doesn’t live off the efforts of workers; the workers live off of his efforts. But even that isn’t quite right. In truth, neither “lives off” the other. Each trades and benefits from one another. The worker sells labor to the entrepreneur in exchange for payment. And here again the entrepreneur is a necessary component.

The entrepreneur pays the workers before he has a good or service to sell. Laborers may help produce the product but they don’t wait until it has sold to get paid. They want payment when they work, not months in the future. Like every other factor in production, labor is paid for in advance; while the entrepreneur is taking the risk that no one will want what is produced.

This is how markets are like a symphony. All the notes necessary for great music already exist but it is the composer who brings them together in just the right combination and balance to create a product of great value. The entrepreneur is the composer to capitalism’s symphony.

Composers create the value out of pre-existing factors. The entrepreneur creates value from pre-existing factors as well. In so doing he or she gives greater value, not just to the final product or service, but to each of the factors of production he uses.

Through the hiring of workers the value of labor increases and not just the value of the entrepreneur’s workers, but of all workers. The utilization of labor makes it more scarce and thus more valuable, which is why labor continues to increase in value in market economies in spite of the dire predictions of the doomsday cults in both the anti-market Right and anti-market Left.

Caveat: The term entrepreneur and capitalist are used inconsistently in popular culture and many people think any “business” leader qualifies. This is only true if the business in question exists solely through the voluntary efforts of exchange, and not via government favors, handouts and such. Those latter “businesses” tend to take wealth from the general public, thus destroying wealthy, not creating it. Redistributing other people’s productive labor—which is what you do when you confiscate wealth—does not create wealth. There is a world of difference between those who created wealth, such as Jobs and Wozniak, and those who use political favoritism to redistribute other people’s wealth to themselves, Elon Musk for instance.

GET YOUR COPY OF CITY LIMITS

One review from Amazon had this to say: “This is a beautifully crafted story. It took me into a world I knew nothing about and then whipped me around on an extremely fun ride. I was left with an overwhelming sense of well-being and a renewed appreciation for the diversity of mankind.

I read this in a single sitting on the front porch on a sunny fall day roughly a year ago. I laughed out loud, I read for pages on end with my mouth literally agape, and on more than one occasion I sobbed like a baby. When done, I sat quietly in bliss watching the wind in the trees with a huge grin on my face. It was as if the entire world were giving me a big warm hug.”

(It is more expensive at Amazon and we will stop using Amazon entirely due to their policies.) Order direct to save.

To order an autographed copy click here.

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James Peron

James Peron

James Peron is the president of the Moorfield Storey Institute, was the founding editor of Esteem a LGBT publication in South Africa under apartheid.