Remembering Upton Sinclair’s The Jungle

I read this book in high school.  I remember thinking that all of those bad things happening to just one person seemed unlikely.  Some of those things happened to some people, but I seriously questioned whether all of those things happening to one individual was truly representative of reality.

I have vague recollections of plot points: a poor immigrant takes his family to Chicago and works at a meat packing plant.  Conditions are nasty there.  He gets swindled by landlords, doctors, and even buys milk watered down with formaldehyde.  Upton Sinclair wanted all of us to ask, “Isn’t capitalism evil?”  And then he wanted us to conclude, “Socialism is the clear answer to all of these problems.”  I beg to differ.

Isn’t capitalism evil?  Actually, it isn’t.  In light of my relatively recent and strong support of the free market, I would like to weigh in on why these examples are misrepresentations of a truly free market economy.  Granted, a free market economy did not exist in Chicago in the early 20th Century, to the best of my knowledge.  But if it did, then the problems above would not be as they were.

Take the meat packing plant.  In a true free market economy, there would be true competition to attracting the main character’s labor.  There would be other jobs which would pay more and less than the meat packing plant job.  Employers would have every incentive to get the best man for the job, and so in areas where work was truly in great demand, pay would be high.  In areas of lower demand, pay would be lower.  In areas where price floors were fixed (a la minimum wage) then finding employment would be more difficult.

What about the conditions of the meat-packing plant?  In a true free market economy, nastier working conditions would translate into a higher wage, in the form of dollars per hour or benefits, for instance.  Hence, garbage men make more than cashiers.  If consumers wanted meat processed differently, surely an entrepreneur would see an opening (those profit seeking heartless jerks!) and start his own business where cattle were treated more “humanely.”  For instance, organic produce started largely as an entrepreneurial, rather than government-sponsored venture.  If it is important to enough individuals, then they will be willing to pay for it.

What about evil greedy landlords?  In a free market, evil greedy landlords would be run out of business.  Yes, landlords must make a profit.  But they must also attract tenants, and with other landlords competing for the same tenants, they must offer something unique: a lower price, nicer accommodations, or higher quality service, for instance, as compared to their competitors.  Without a competitive advantage, their competition, who earns more money by better meeting the wants and needs of its tenants (i.e. installing a swimming pool, paying the water bill, etc.) would likely run these evil landlords out of business.  Yes, it is plausible that an evil greedy landlord with an evil greedy entrepreneur could start some sort of swindling operation, where the poor tenants do not get their market value’s worth of rent.  But should that happen, odds are very great (nearing 100%) that another entrepreneur, seeing a true opportunity for profit, would start another business where tenants were treated more humanely.  And of course, the incentive for tenants to stay with the second landlord are much greater.  And so on and so on, as more entrepreneurs jump in to better meet the needs of the tenants.  (When government jumps in, things get quite dicey, however.)

What about bad doctors?  In a free market, there are myriad options for medical care, just as there would be hundreds of different housing options to choose from, and hundreds of different employment opportunities to choose from in a big city like Chicago.  There would be medical options to meet every possible budget and scenario.  Whenever an entrepreneur finds an unmet want or need, there is an opportunity for profit, and so a new business is launched in hopes of generating more customers.  There would be a variety of medications available, and a variety of health professionals available as well.  Privately-run hospitals could take care of low income individuals and families at low costs.  Nowadays, of course, hospitals are HMO managed, thanks to our good ol’ federal government.  Take the city I work in, for instance.  Several decades ago, there used to be several hospitals on the same street, competing for the same sort of business.  Now there is just one hospital with different facilities.  The nearest competing hospital is roughly 30 minutes away.  Less competition translates into lower quality service.

What about milk with formaldehyde?  In a free market, an entrepreneur would have to actually see a need to get the capital up front for a business venture.  Combining milk with formaldehyde doesn’t meet too many consumer needs.  But, should an existing milk company dilute their milk down, an entrepreneur could enter the market selling higher quality milk (i.e. less diluted).  Or an entrepreneur could enter the market with a more palatable dilution factor, or one less expensive, should consumers be willing to pay for it.  I imagine that there would still be a market for undiluted milk, and so there would be, in any grocery store, diluted and undiluted milk to choose from, should diluted milk be truly popular.

The main theme is that competition and the profit motive, the drive to get more market share and satisfy an increasing number of consumers better than the competition, translates into higher quality goods and services.  This is the miracle of the free market, and largely the source of American prosperity.  Lower quality goods and services result when the free market is hampered in some way: for instance, the minimum wage price floors discussed above.  Price floors inflate production costs, and therefore prices, acting as a regressive tax on the low income consumer.  Price ceilings, on the other hand, can limit profit made from the product, resulting in artificially low prices, shortages, and reduced competition.  (Who wants to enter a sector where profits are low, nonexistent, or negative?)  Regulation, licensing, fees, and certifications, when government-mandated, also increase the cost of production and each acts as a barrier to market entrance, making it more difficult for a progressive-minded entrepreneur to start and maintain a business.

Unfortunately, the problems characterized in The Jungle are seen today much as they were seen back then: defects of a laissez-faire industrial economy which can only be overcome by government solutions and increasing government ownership (socialism).  The great irony with all of this as this is followed to its logical conclusion (more government control leads to the abolition of private property), then competition is reduced to the point that someone can sell diluted milk and make a profit, because there are no competitors, and the government apparatus has ensured there will not be any in the near future.  Evil greedy landlords can stay as evil as ever because there are no risks of any fresh-faced kindly entrepreneurs willing to treat tenants as humans rather than animals.  Licensed and extensively trained medical professionals can rest easy knowing that their services will always be in demand, even for simple and routine functions, which in actuality, could be performed just as well at a much lower cost should the entrance barriers be removed or reduced.

In other words, the very problems Upton Sinclair decries are symptoms of a centrally-planned government run economy, where monopoly reigns supreme, not a capitalistic free market, where choices are legion and poor value options are driven out of business.


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Filed under Austrian Economics, Libertarian, Personal, role of government, Social Commentary

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