The Anti-Capitalist Mentality

By Nick Sallnow-Smith

(As appeared on our April 2017 Newsletter)

In 1956 Ludwig von Mises published his short book “The Anti-Capitalist Mentality”. In the immediate post-war era, when the Soviet Union had been an ally of the western powers, socialist thinking was the dominant stream of economic thought. Mises’ book, however, did not address the politics of the matter. Rather than posing the question, why are socialist parties so popular? he asked, why are the business community and the intelligentsia full of those who demonise capitalism?

It is a short book and easy to read. Yet although published 60 years old, it reads as if it had been written yesterday. The trend of business itself being ashamed of profit has become common in recent years. The whole CSR initiative in the business sector is typical of this mentality. How often today do you hear business people talking of “giving back” to the community, as if they had stolen something? This attitude of mind has gained pace since Thomas Piketty’s book “Capitalism in the 20th Century” was published in 2013. This book, the economics and research base of which have been widely shown to be in error (see George Reisman, “Piketty’s Capital, Wrong Theory, Destructive Program”), appeared to give academic legitimacy to attacks on capitalism as a way of organising economic life. This has lead to a widespread belief amongst citizens in developed societies that capitalism is inherently damaging and, while grudgingly accommodated, must be controlled, regulated, taxed and reviled.

Why am I drawing attention to this when writing from a Hong Kong perspective? My concern is that in Hong Kong of all cities, where you might think a positive view of capitalism might be most common since prosperity has been driven for 175 years by capitalist free enterprise, it is instead increasingly under attack, just as it is in Europe and the US.

The most common focus of criticism of business is the idea of profit as somehow intrinsically immoral. But I do not want to deal here with the mistaken idea that a “not-for-profit” organisation is morally superior to a “for profit” firm, Rather I want to point to an even more worrying concern; the risks to private property rights.

In the policy debate about land supply issues, many op-ed commentaries and letters to the press, have proposed what, from the authors’ perspective, is a simple solution to this problem. The Administration should in one way or another, simply confiscate the land bank held by the large developers. A similar line is regularly proposed for New Territories’ villagers who hold land rights. I have yet to see a commentator recommending this solution bothering to address the property rights encroachment here. Their mindset is so overwhelmingly against any wealthy company or person who owns assets, that the fundamental problem of disregarding legal rights does not even enter the discussion.

Let’s think about the magnitude of the risk here. The temptation is to move from the commonplace idea that “money doesn’t buy everything” – a truism of course – to the idea the money is inherently evil. Therefore, the moral argument continues, we are justified in ignoring the rights of those with money, in cases where no one would entertain if such action were proposed against the poor. To suggest that someone with a small 3 bedroomed apartment should be somehow forced to allow the unused spare room to house a homeless needy stranger would meet a lot of resistance, for good reason. Yet to suggest “greedy” property developers would be similarly forced to give up their legally owned land because it is “needed” by others follows an identical train of thought.

One core value (no one ever seems to set out what the non-core values are!) on which all Hongkongers seem to be of one mind is the importance of the rule of law. Our common law system with its in-built protection of private property rights underpinned the development of western civilization as we know it today. Protection of private property against Government encroachment (typically the monarch in those days) was crucial for the development of a civil society independent of state power. For the liberal minded today, who would no doubt present themselves as supporting the rule of law and many of the other tenets of western civilization, to argue that precisely these rights should be overridden, simply because the target group is “rich” puts our basic freedoms in mortal danger. The supposed “public interest” in these debates is simply code for the new “sovereign” power. But the immoral act of a monarch who confiscated the private property of citizens, is equally immoral when the sovereign is “the people” rather than the Emperor. This is a slippery slope with no end. 100 years ago this year, the world observed exactly this experiment applied in Soviet Russia. The “ interest of the people” was the “sovereign” in the name of which all property was confiscated. Families were forcibly lodged with anyone rich enough to have spare rooms and all landlords were expropriated.

I would urge all those of you who find the idea of punitively repossessing land from the “greedy rich” an attractive solution to the ills they perceive in society, to consider whether there is perhaps a group poorer than you are, in whose interests your property too should be taken by the state and redistributed in our “caring” society.

Why does this inherently immoral idea finds such fertile soil in our supposedly civilised society? In my view one root weakness which feeds this mentality is the modern system of progressive taxation. Throughout the developed world such is system is regarded as “normal”, including by everyone in Hong Kong – even the majority who have never paid any tax.

Apart from its many economic disadvantages due to the disincentive structure it creates, the idea of progressive taxation itself feeds the idea that the income of the richer members of society can (indeed should) be taken from them without their consent, without those observing this situation seeing any immorality in it. But at least Hong Kong applies this pernicious policy only to income, not assets. We have no Capital Gains Tax, no Inheritance Tax (any more), no Wealth Tax, no ”Mansion Tax” (yet). If however policy debates succeed in persuading Hong Kong people to support the confiscation of legally acquired assets in addition to legally earned income, the survival of the free market and common law protections of citizens of Hong Kong are at serious risk. They have been the engine of personal freedom and economic growth for over 170 years. Let’s not screw it up now!

Nick Sallnow-Smith

Chairman

The Lion Rock Institute