Throughout the 1800s, as Americans spread across the continent, so too did “snake oil salesman” — charlatans peddling the latest medicinal cures that could “fix” everything from chronic pain to kidney problems. Snake oil salesmen are still with us today, but some are now peddling more than physical cures. The lucky ones get the big bucks to peddle economic theories that lack a fundamental understanding of basic economic principles. Politicians, business leaders, and even Prime Ministers listen to these quacks declare the “end of capitalism,” the “end of work,” the coming “worker-less society.”
Perhaps the biggest and, unfortunately, most influential of these sophists is Jeremy Rifkin, the American economic and social theorist, who had advised the European Union and a host of European leaders, including Angela Merkel of Germany. But Rifkin is more than an economist. He is an evangelical against the market arguing that the world must shift to a “low-carbon economy” for its very survival. After listening to Rifkin for fifteen minutes, one can understand why the British people decided they had enough and escaped from the EU.
One has to give Rifkin some credit for consistency. His war on carbon goes back to 1973 when he organized the “Boston Oil Party,” a protest over the skyrocketing price of oil due to the OPEC oil embargo. In the early 1980s, he wrote “Entropy: A New Worldview,” where he argued that humans were wasting resources at an alarming rate and that humans would ultimately destroy civilization.
It’s not surprising that Rifkin jumped on board the global warming train, organizing Hollywood meetings and speeches geared toward his belief that man was destroying the world. Rifkin’s environmental views are so complete that he launched the “Beyond Beef Campaign”, arguing that cattle farts (methane) are warming the earth at a higher rate than carbon dioxide, making the case that humans need to move to a plant-based diet to save the world.
Unlike other snake oil salesmen who peddle unproven theories, Rifkin’s “the end is near” hypothesis has received a sympathetic ear from the Europeans, whose economies, not surprisingly, have been moribund for years. Rather than offer views that challenge the socialist tendencies and orthodoxies of the continent who enjoy 35-hour work weeks and ten-week vacations, Rifkin placates them.
Rifkin’s theories and predictions include his belief that capitalism is killing itself through its cutthroat efficiency. He argues that production costs are being reduced to the point of zero, making goods “potentially free” and ending profit. “Over the past decade millions of consumers have become prosumers, producing and sharing music, videos, news, and knowledge at near-zero marginal cost and nearly for free, shrinking revenues in the music, newspaper, and book publishing industries,” he writes.
One could call this the locust view of capitalism – the effectiveness of the swarm is so strong that it eats the crops it needs to survive until there is no more food. But it is utter nonsense. Under capitalism, the market responds to the needs and demands of the consumer. It is a bottom-up world, rather than a top-down one, Rifkin sees. In the music industry, for instance, consumers have benefited from technological changes that allow them to purchase songs individually rather than being forced to buy $20 records to hear the one song they like. Many people can also listen to songs for free once they are posted on YouTube, while others download illegally. But a glance at industry statistics shows that the $42 billion music business is still expected to grow to almost $48 billion over the next few years.
While the newspaper industry, cited by Rifkin, is losing market share, their upstart competitors on the Internet are gaining revenue. Rifkin’s argument was mocked by the great economist Frederic Bastiat in his famous “Candle Maker’s Petition,” where the industry, including “the manufacturers of candles, tapers, lanterns, sticks, street lamps, snuffers and extinguishers, and from producers of tallow, oil, resin, alcohol, and generally of everything connected with lighting” call upon the French government to take protective action against the unfair competition of the sun.
Rifkin argues that the unfair competition comes not from outside forces but from the effectiveness of the candle makers to reduce the costs of making candles to the point that there is no profit to be made.
But what about the technological changes that capitalism brings about? What about the light bulb? The marketplace is not stagnant but ever changing. New technology is often expensive. So while the plasma and LED television have dramatically dropped in price, new televisions such at the 4K or curved screen cost more. Will Samsung or other manufacturers go out of business because the consumers are able to purchase more TVs due to their price drops? Will Samsung give away televisions for free because they can make them for close to nothing?
Economist William Anderson has called this argument “Rifkin’s Folly” — the belief that scarcity will end and manufacturers, retailers, and producers will have no choice than to give away their products. Anderson notes that economist Carl Menger in 1971 refuted this claim by noting the value of a product comes not from its production costs but from the profitability that good brings to the entrepreneurs who created it.
Ultimately, the basis of Rifkin’s snake oil sales pitch is a hatred and misunderstanding of free markets. Rifkin sees competition as destructive and replacing it will make people more community-minded. He fails to see that capitalism is the ultimate creator of community. He sees capitalism as a destructive, rather than a constructive, force.
Like the charlatans of the 1800s, historians will one day look back at Rifkin’s theories and influence and wonder how someone with so little understanding of basic economics could gain such influence over the “Dying Continent.” But perhaps it’s because of Rikfin and his believers that the continent is dying.