George Glider on the strength of capitalism

George Glider on the strength of capitalism

The strength of capitalism, says writer George Gilder, is that success depends on taking others into account | Marvin Olasky

George Gilder jumpstarted Ronald Reagan’s supply side revolution with Wealth and Poverty (1981), which put forward not only a practical but a moral argument for capitalism. Over the past two decades Gilder, born in 1939, has similarly pioneered discussions of new technology. His uniting of a Christian ethos with business success garnered a furious reaction from philosopher/novelist Ayn Rand. Here are edited excerpts of our recent interview.

Ayn Rand, in her last public speech in 1982, just before she died, attacked you furiously. What got her goat? Altruism. She thought I was ascribing altruism to capitalism. Altruism in her theory is the foundation of socialism, and she thought capitalism is supported by egoism or by individual fulfillment above all. She was blinded in part by her atheism. If you read her books, her characters lead sacrificial lives in order to serve others in many instances. But her objectivist philosophy denies the existence of God, and she found my Christian orientation obnoxious. I said businesses succeed by serving others.

Many on the left also equate capitalism with egoism, and for that reason hate it. Capitalists do not get to follow their own dreams, whatever they may be. Academic intellectuals can propagate their ideas whether anyone wants to hear them or not. They can enforce their whims if they join the government—but capitalists cannot succeed without serving others. Profit registers the difference between the value of the output to the customers and the value to the producers. If the capitalist just makes things that he wants, he’s unlikely to triumph. This is offensive to a secular society that believes there can be no ideal greater than personal pleasure and personal fulfillment.

Personal fulfillment is good, financial fulfillment is evil? A lot of people think that capitalism can sometimes be productive, but it also has a moral cost. Profit means that you succumbed to greed. But those who look out for No. 1 are often not investing. They’re buying gold or espousing theories of how to invest in a period of catastrophe or how to benefit from the coming great depression. These guys are really anti-entrepreneurial. Their vision does not lead to bold investment in the face of obstacles. It doesn’t lead to creative enterprise. It leads to a retreat from the marketplace. Capitalists have to operate in economies that are full of predatory governments and vicious people. They have to learn how to prevail over these obstacles—that is what entrepreneurs do.

We need a different definition of investing . . . Investors succeed by giving. This is what the investment process is. You give before you get a return; you are not guaranteed a return. Your success is completely dependent on how other people respond to the product you offer. One of the great delusions of economics is that supply and demand are equally balanced sides of economic transactions. No: What matters in economics is supply. Supply creates its own demand. Demand is like gravity. It exists everywhere: People demand things. But they can only receive products if they offer productive services. Production, innovation, invention, enterprise, service: Those make possible economic growth and advancement.

Why does the left associate self-interest with capitalism rather than socialism? Self-interest is an all-purpose agency. To say it drives capitalism: How does that distinguish capitalism from any other­ system? Self-interest certainly could be said to drive socialism as well, because what a greedy, self-interested person wants is guaranteed returns. He thinks he is entitled. He seeks guarantees from the government. What is more greedy than a public-service union controlling the government and getting 70 percent greater salaries and benefits than comparable private-sector workers because of their political clout? Entrepreneurs don’t have guarantees. They are willing to rise and fall on the basis of what other people think of their work.

But entrepreneurs still have self-interest—didn’t Adam Smith write, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” It is true that you should take care of yourself. It is an important obligation of human life and of Christian life. Ultimately you are clearly dependent on God, but part of that dependence means taking care of yourself, well enough that you can be a worthy proponent and servant of the needs of others. Christians shouldn’t become a burden on the rest of society. I think Christians are not a burden: They are a source of the bounties that the rest of society enjoys.

I’ve seen your connecting of profit and entropy, the term from thermodynamics that can be used more broadly as a measure of disorder, change, innovation . . . Creativity is what matters in economics. It is what makes economies grow. The interest rate is the predictable yield, but profit is the unexpected, variable yield from an investment. In other words, profit is entropy in economics. Paul Romer, the leading advocate of entrepreneurial economics, sees an entrepreneur as a reassembler of chemical elements, or a developer of new combinations of atoms. Other theorists describe the entrepreneur as an opportunity scout. He is looking for opportunities in the material environment, or looking for demand configuration.

Entrepreneurs increase entropy? Entrepreneurs create new things, and whether they succeed or not is dependent on the willingness of other producers to exchange their production for the output of the entrepreneurs. If they produce high-entropy creations, they get a big response. The customers are surprised by the new iPod or whatever it is and are willing to exchange the fruits of their own production for the production of the entrepreneur.

And entrepreneurs can best increase productive entropy when they know what to expect from government policy? In my information theory terms, you need a low-entropy carrier—no surprises in the carrier—to bear high-entropy information. The carrier is the rules, the rules of the road, the laws. If laws are multiplying and changing all the time, that stifles the kind of creative activity that can overcome our U.S. debt predicament.

We grow ourselves out of debt? If you have a positive, pro-enterprise government and a solid, predictable currency—a low-entropy carrier—the value of American assets will increase immensely and greatly reduce the burden of our current debts. The 1970s were just as bad as things are now, and change in policy completely turned it around. It can happen again today. The Tea Party people are the spearhead of that transformation.

They’ve surprised some mainstream journalists . . . Entropy measures the degree of surprisal in a communication: How much is unexpected, surprising? If I give a speech and if everything I say you knew already, no information has been transmitted. It’s a zero entropy communication. Politicians seem so boring because they poll their audiences before they speak, and thus manage to achieve totally boring zero entropy communication: No surprise.

How does your understanding of creativity lead you into the critique of Darwinian materialism that you’ve been doing? The essence of Darwinian thought is that at the beginning is matter, and everything else that happens derives from a random selection among random mutations in material systems. Darwinian theory is just another materialist theory. There are tons of them—Marxism, Darwinism, Freudianism (based on the pleasure principle which is basically a materialist concept). All these theories have collapsed in the 21st century. Creation is a fact. The entire universe is oriented to produce creative human beings in the image of their Creator. His presence pervades it. All of the universe is perfectly designed, in some sense, to support human minds.