The Tao of Capitalism
The harmonious balance between supply and demand
Justin Hartfield

The Tao is the natural order of the world. The Tao, or "the Way", is an invisible set of universal guiding rules. It is referenced in many cultures, but best described by the ancient Chinese philosopher Laozi.

Tao Te Ching describes the Tao in this way:
The Tao is abstract,
and therefore has no form,
it is neither bright in rising,
nor dark in sinking,
cannot be grasped, and makes no sound

Because the Tao is intangible, it cannot be easily described with words, but examples of the Tao can be found all throughout nature. It is found in the way simple organisms arrange themselves in complex interdependent ecosystems, or in the perfect orbits of the stars in the solar system. In nature, balance between the species is achieved without conscious effort of the animals. Sometimes there is growth of one species and a decline of another. Other times, the opposite is true. The only constant is the Tao. The Tao came before nature, and nature always follows it.

Extrapolating Laozi's idea, we can see some of the same natural patterns in the business world. The business cycle works in exactly the same way as all other complex natural systems found on Earth. In some years, the economy is booming and the nation is prosperous, while in others the economy is receding and many struggle to make a living wage. The Taoist refers to this cycle as yin and yang. The balance of yin and yang creates the harmony between all things.

Yin and yang in the market is supply and demand; each is worthless without the other. Supply is only highly profitable when it satiates a substantial demand. In the Tao, the successful capitalist makes money not by blindly producing supply, but by intelligently harmonizing his supply with the demand of his consumers.

Unfair competition always violates the Tao. In nature, when humans introduce a non-indigenous species to a region (e.g. the mountain goats that are currently destroying beautiful vegetation in Hawai'i), the yin and yang of that particular region is thrown out of balance. The natural way is not being followed, growth becomes stunted, and gradual decay follows. Since harmony is symmetry, and symmetry is beauty, the beauty of the region suffers until that foreign agent is removed and balance is once again restored.

In the market, unscrupulous business practices aimed to augment one's earnings over what one would earn in an open market also violate the Tao. Malicious non-disclosure to consumers, government lobbying for special treatment, fraud and deceit, and many other so-called "robber baron" tactics destroy the quality of a market. Harmonious profit-making only occurs when supply and demand freely interact by mutual assent. When competing businesses are denied their contribution to market balance, all suffer. Any interference with the flow of consumer choice and preference disturbs the balance of yin and yang, to disastrous effects.

Discord in the Tao also occurs with excessive government regulation. Excessive market entry costs, censorship, regulatory restrictions, and protectionist policies all cause the market to be thrown out of its natural balance. Very often the government seeks to modify consumer preferences. However, in the Tao, harmony is simply perfectly controlled chaos. The Tao is in a constant state of flux; nothing is ever stagnant or otherwise disposed to central government planning.

Just as in nature, this interference with market harmony - by government or businessmen - destroys the beauty and quality of the exchange. The quality of available products suffer, consumers distrust the market, economic growth is inhibited, and beneficial innovations never reach their intended audience. By contrast, free and open market exchange has been proven to deliver the most prosperous and comfortable standard of living the world has ever seen.

Just as market is constantly seeking its own internal balance point, the successful capitalist balances yin and yang in his own life. There is a commonly held presumption that successful capitalists value money above all else, while one should abhor possessions and only find true value in nature. However, these are only half-truths. Even though the idea may seem conflicting to some, it is entirely possible to be a successful capitalist and in harmony at the same time. A true capitalist does not require a vast amount of material things in order to be successful.

In many ways, the classic Taoist has an excellent mindset for success in the market. He produces only that which his fellow citizens desire; he creates harmony in the market by balancing supply and demand. He spends only what he needs; he creates value by saving money for his consumers. By thus abiding by the Tao, he obtains many rewards besides the influx of funds in his bank accounts. He gains peace of mind knowing that he has contributed to the wholeness of the world. He leaves the world in better shape than when he first entered it. The Taoist thus appreciates his possessions but does not need them.

Recent history has proven the paradox that the better the capitalist, the better the Taoist. Bill Gates, Andrew Carnegie, and Warren Buffett have all donated billions of dollars in the name of others. They reached enlightenment and realized that the ultimate goal of the successful capitalist is not to become wealthy, but to become harmonious with the world.

Nature acts without intent,
so cannot be described
as acting with benevolence,
nor malevolence to any thing.

In this respect, the Tao is just the same,
though in reality it should be said
that nature follows the rule of Tao.
- Tao Te Ching

The above work is the opinion of the author, and not necessarily that of the Prometheus Institute.

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