Wednesday, August 01, 2012

A moral argument in favor of capitalism

The Wall Street Journal carried an article on Saturday that was designed to bolster the business-friendly sentiments among us. According to the author, Charles Murray, things have sunk badly, and “the principled case for capitalism must be made anew”.

I think this is worth a look.

in today's political climate, updating the case for capitalism requires a restatement of old truths in ways that Americans from across the political spectrum can accept. Here is my best effort:

The U.S. was created to foster human flourishing. The means to that end was the exercise of liberty in the pursuit of happiness. Capitalism is the economic expression of liberty. The pursuit of happiness, with happiness defined in the classic sense of justified and lasting satisfaction with life as a whole, depends on economic liberty every bit as much as it depends on other kinds of freedom.

"Lasting and justified satisfaction with life as a whole" is produced by a relatively small set of important achievements that we can rightly attribute to our own actions. Arthur Brooks, my colleague at the American Enterprise Institute, has usefully labeled such achievements "earned success." Earned success can arise from a successful marriage, children raised well, a valued place as a member of a community, or devotion to a faith. Earned success also arises from achievement in the economic realm, which is where capitalism comes in.

Earning a living for yourself and your family through your own efforts is the most elemental form of earned success. Successfully starting a business, no matter how small, is an act of creating something out of nothing that carries satisfactions far beyond those of the money it brings in. Finding work that not only pays the bills but that you enjoy is a crucially important resource for earned success.

Making a living, starting a business and finding work that you enjoy all depend on freedom to act in the economic realm. What government can do to help is establish the rule of law so that informed and voluntary trades can take place. More formally, government can vigorously enforce laws against the use of force, fraud and criminal collusion, and use tort law to hold people liable for harm they cause others.

Everything else the government does inherently restricts economic freedom to act in pursuit of earned success
. I am a libertarian and think that almost none of those restrictions are justified. But accepting the case for capitalism doesn't require you to be a libertarian. You are free to argue that certain government interventions are justified. You just need to acknowledge this truth: Every intervention that erects barriers to starting a business, makes it expensive to hire or fire employees, restricts entry into vocations, prescribes work conditions and facilities, or confiscates profits interferes with economic liberty and usually makes it more difficult for both employers and employees to earn success. You also don't need to be a libertarian to demand that any new intervention meet this burden of proof: It will accomplish something that tort law and enforcement of basic laws against force, fraud and collusion do not accomplish.

People with a wide range of political views can also acknowledge that these interventions do the most harm to individuals and small enterprises. Huge banks can, albeit at great expense, cope with the Dodd-Frank law's absurd regulatory burdens; many small banks cannot. Huge corporations can cope with the myriad rules issued by the Occupational Safety and Health Administration, the Environmental Protection Agency, the Equal Employment Opportunity Commission and their state-level counterparts. The same rules can crush small businesses and individuals trying to start small businesses.

Finally, people with a wide range of political views can acknowledge that what has happened incrementally over the past half-century has led to a labyrinthine regulatory system, irrational liability law and a corrupt tax code. Sweeping simplifications and rationalizations of all these systems are possible in ways that even moderate Democrats could accept in a less polarized political environment.

To put it another way, it should be possible to revive a national consensus affirming that capitalism embraces the best and most essential things about American life; that freeing capitalism to do what it does best won't just create national wealth and reduce poverty, but expand the ability of Americans to achieve earned success—to pursue happiness.

Reviving that consensus also requires us to return to the vocabulary of virtue when we talk about capitalism. Personal integrity, a sense of seemliness and concern for those who depend on us are not "values" that are no better or worse than other values. Historically, they have been deeply embedded in the American version of capitalism. If it is necessary to remind the middle class and working class that the rich are not their enemies, it is equally necessary to remind the most successful among us that their obligations are not to be measured in terms of their tax bills. Their principled stewardship can nurture and restore our heritage of liberty. Their indifference to that heritage can destroy it.


  1. I believe in capitalism. My wife and are both children of small business owner/families. I have seen firsthand how inconvenient government regulation can be at the sole proprietor level.

    With that said, how do large corporations factor into the ideal? How can corporate persons be moral and who holds corporate persons to moral accountability? Churches? Families? Neighbors? How do they do it?

    In the case with small businesses, the integrity of the business is tied to the integrity of the person, and that person can be disciplined or shunned in the community if they're shady. How does that work with corps? I find BigName bank's activitites to be questionable and I'd prefer not to do business with them. I can't shun BigName bank because my recent small, regional bank mortgage was almost immediately sold to BigName. How will I vote with my dollars in that case and how do I hold BigName accountable for the havok they may wreak with my money?

    To be sure, I'm no fan of massive government intervention in business. But, I just can't see how the rules of "fair play" work equally at the bottom and the top.

    1. Hi Christopher, thanks for commenting.

      Murray does allow that "You are free to argue that certain government interventions are justified.... He puts conditions on them, though.

      Ultimately, I think the solution is in God's hands. That is, we need more Godly people to work in large corporations, and it is up to God to convert more people to repentance.

      Maybe the rules don't work the same way in both places. But the more people who are respectful of the rules, the better both sets of rules will work.

    2. Christopher, what makes you think that government regulation would be a solution to abuses of corporations?

      Look at how these regulatory commissions are set up: they are run by people *within* the industry, who give special breaks to their cronies. Just look at John Corzine being brought before the CFTC by his former crony Garry Gensler. This is not by accident. This is why piling on regulations on top of regulations only hurts small businesses. They don't have the clout to get government to give them the passes or breaks it gives to corporations.

      Giving power to the government will just make the problem worse.

    3. Hi Christopher,

      It's the role of government to hold corporations accountable to criminal law (e.g. fraud) just as it's the role of government to hold sole proprietors accountable to criminal law.

      Incidentally, BigName banks are not examples of capitalism. They're examples of Fascism. They're in partnership with Big Government, are an instrument of Big Government and, indeed, carry out many unlawful practices due to the privileges granted to them by Big Government as a function of the latter's monopoly over the money supply.

  2. John

    a whole lot in there! I am reminded of this flaw Jesus identifies about the children/sons/daughters of light:

    Luk 16:8 The master commended the dishonest manager for his shrewdness. For the sons of this world are more shrewd in dealing with their own generation than the sons of light.

    The sheepherders don't call sheep dumb for nothing!

    We do have this promise to hold on too:

    Eze 34:28 They shall no more be a prey to the nations, nor shall the beasts of the land devour them. They shall dwell securely, and none shall make them afraid.
    Eze 34:29 And I will provide for them renowned plantations so that they shall no more be consumed with hunger in the land, and no longer suffer the reproach of the nations.
    Eze 34:30 And they shall know that I am the LORD their God with them, and that they, the house of Israel, are my people, declares the Lord GOD.
    Eze 34:31 And you are my sheep, human sheep of my pasture, and I am your God, declares the Lord GOD."