In Wealth and Poverty, Gilder characterizes capitalists as altruistic givers and claims that capitalism begins with giving. He attempts to put his own ideas in contrast to the ideas of Adam Smith; however, I was unable to find any substantive differences between the theories of the two economists. Gilder uses language with a more positive connotation to describe the same phenomenon within capitalists that Smith describes using language of a negative connotation. The overall result is the same: capitalists are motivated by a desire to accumulate capital and make decisions to maximize this accumulation of wealth.
Defining Giving
Gilder describes giving as the fundamental underpinning of capitalism. However, when describing this giving, he qualifies that it only occurs with the assumption of receiving something of greater value to oneself in return. In this way, giving is self-interested and therefore so are the capitalists, just as Adam Smith described. A voluntary exchange can certainly be characterized as a gift being given by two sides, even if this gift is based on obligation or expectation. Calling it a gift does not change the motivations or the outcomes of the exchange. Both parties benefit by receiving a “gift” that is more valuable to them than they received, and both participated in the exchange because they wished to obtain that item of higher value. Neither party likely participated in the exchange due to a primary motivation of kindness in the same way I probably would not pay someone $400 for making me a sandwich. The making of a sandwich is not worth $400 to me, and I am not motivated by giving the person $400, I am motivated by receiving the sandwich.
Strengths vs Motivations
Entrepreneurs likely find a strength in understanding the world around them, and it is with this strength that they find success in a capitalist society. Gilder seems to describe this strength as a motivation, however, supposing that just because they are using this strength certainly means that giving to the world around them is their primary reason for entrepreneurship is flawed logic. Their motivation is to profit. Gilder even says so. He says we should not blame them for their desire to achieve profit, but that this is the motivation for every “gift” that is given. It seems to me that Adam Smith did not blame them for this either and in fact looked upon it as positive that they were motivated by profit, going as far as to say this desire for profit is the very reason for the success of capitalism. Again, we see that Gilder and Smith agree. Both concede that capitalists are motivated by profits and both concede that this is beneficial to a capitalist economic system.
Investments as Gifts
At the end of the chapter, Gilder seems to switch gears to describe investment into creative entrepreneurial endeavors before a return on that investment is guaranteed as the “gift” which he believes is given by capitalists. He makes sure to note that only an entrepreneur who understands the market will be able to succeed in this endeavor. However, it is important to note that nobody who thinks they will not succeed is going to pursue an entrepreneurial investment. Although Gilder describes this as a gift, it is a calculated decision based on rational thought processes, particularly the belief that their investment will lead to capital gain in the long run. This is yet another example of Gilder and Smith describing the same phenomenon within capitalism, but simply using language with different connotations. This investment is self-interested and motivated by the desire to turn a profit, as Smith says, but Gilder in his attempt to paint entrepreneurs as noble heroes pretends that it is not self-interested as he simultaneously describes all the ways in which the system would not work if there was no selfishness involved. Gilder further attempts to shut down the idea that investments are selfish by asserting that the input (investment) does not predict the output (profit) in a capitalist system. While it may be true that nobody can say definitively that a product or idea will succeed, an entrepreneur will at least vaguely understand that there is a probability of success and a probability of failure with every investment. Based on these probabilities and the expected profits in the case of success, an entrepreneur has all the information they need to make an entirely self-motivated decision about whether it is rational to take this investment opportunity. If they do not calculate it to be rational (meaning if the expected value of the profit is not at the very minimum greater than zero) they certainly will not invest because they are not interested in this endeavor for the primary purpose of giving, their primary motivation is profit driven by self-interest.
Is Gilder Describing Capitalism or Communism?
When Gilder was describing how capitalism begins with giving and the world which occurs when everyone is giving freely, I couldn’t help but draw parallels between this idea and communism. He even provides imagery that evokes the idea of a society where there is boundless giving to the point where goods and services are so free flowing, they may as well be shared. I believe it is fair to describe communism as giving goods or services that you produce with the expectation that others will give the goods or services that they produce. This sounds very similar to the “capitalist” ideas that Gilder was talking about. Gilder argues that giving is what allows an economy to grow, which can extend to be taken as communism would help an economy grow even more effectively because of just how efficient and unhindered giving is. If we take Gilder’s words as he says them instead of as he means them, it is hard to imagine he is describing capitalism. Everyone is primarily motivated by giving, and turning a profit is simply something that is required to give more effectively. If this were truly the case, there would be no need for capital ownership beyond what is necessary to survive, and all excess goods would become gifts. Even investment would occur by a community rather than by an individual, as limitless giving would mean that all would invest just as all would freely give goods and services as they are able. Although I am certain this picture is quite the opposite of what Gilder intended, I believe he makes a much more compelling argument for communism than he does for capitalism through his choice of language in this chapter.