A New Holiday to Celebrate

Happy Capital Day!

by Lawrence W. Reed

From Mexico to the south and everywhere in between, Labor Day falls on May 1 each year. In Canada and the United States, it’s always the first Monday of September—which in 2021 means September 6.

Over the past century, the holiday’s purpose and meaning have changed somewhat. Early in its history, its advocates used the day to push for better working conditions, higher pay, and greater bargaining and political power for unions. Some of those things may be good in the abstract but are not without costs in reality—often in the form of fewer jobs, higher prices, economic slowdowns and forced union membership.

In more recent decades, Labor Day has come to mean little more than a nebulous celebration of work and an extra day away from it.

This much is indisputable and non-political: Labor is essential to our standard of living. We don’t live in a Garden of Eden, so if we all quit working most of us would starve in a matter of weeks or months. Labor is ennobling because it’s an important source of such values as self-esteem, personal fulfillment, responsibility, accomplishment, and voluntary cooperation. It’s both a vehicle and an outlet for our talents and ambitions. Good parents instinctively teach their children that work is a virtue and a benefit, while idleness and laziness are to be avoided.

But all of that could also be said of another vital ingredient in our standard of living—capital. Most of us would starve without it. Creating it and then deploying it to increase material wealth is ennobling just as much as labor is, and for the same reasons. The creator and user of capital is furthering his talents and ambitions in the process. And every parent who tells his child to mow the lawn hopes he’ll do it with a piece of capital equipment like a lawn mower instead of his teeth.

Any good economist will tell you that as factors of production, labor and capital are not only indispensable but hugely dependent upon each other as well.

Capital can refer to either the tools of production or the funds (principally from savings) that finance them. It ought to be abundantly clear that the vast improvement in living standards over the past century are not explained by physical labor alone (we actually do less of that), but rather to the application of capital. Capital without labor means machines with no operators, or financial resources without the manpower to invest them in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers or starting a small enterprise with pocket change instead of a bank loan.

There may be no place in the world where there’s a persistent shortage of labor but every inch of the planet is always short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture capital behind him.

This is not class warfare. I’m not “taking sides” between labor and capital. I don’t see them as natural antagonists despite some people’s attempts to make them so. Don’t think of capital as something possessed and deployed only by bankers, the college-educated, the rich, or the elite. We workers of all income levels are “capital-ists” too—every time we save and invest, buy a share of stock, fix a machine, or start a business. In fact, it’s small business that creates most of the jobs in today’s economy and the risk-taking heroes who create those small businesses couldn’t do it without the capital that comes from savings—their own and that of others who invest in them.

And yet, we have a “Labor Day” in many countries but no one celebrates a “Capital Day.” The one thing that magnifies the power of physical labor more than anything else might occasionally earn a footnote, but it has no holiday.

You might say in response, “We can put a face on labor because it’s people who do it, whereas capital is faceless and can’t speak for itself.” So what? How would you explain the holidays to which no human face is directly connected—New Year’s Day, Groundhog Day, Flag Day, Earth Day, Cinco de Mayo, or Halloween? Which do you think does more to lengthen and enrich our lives—groundhogs or capital, flags or capital, pumpkins or capital?

You could walk from Miami to Seattle in four months but you could drive from Miami to Seattle in four days. If you wanted to salute what makes the difference between four months and four days, would you tip your hat to the driver or the car? In other words, the labor or the capital? At the very least, it seems only fair (as well as accurate) to note that working together, the car and the driver can achieve far more than either one alone.

Like most Americans, I’ve traditionally celebrated labor on Labor Day weekend—not organized labor or compulsory labor unions, but the noble act of physical labor to produce the things we want and need. Nothing at all wrong about that!

But this year on Labor Day weekend, I’ll also be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody must dig a ditch with a spoon or cut his lawn with a knife.  Labor Day and Capital Day—I don’t know why we should have just one and not the other.

Happy Labor Day, whenever you celebrate it. And Happy Capital Day too, whenever we get one or any day between now and then.