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Columns

The Morality of Capitalism

October 24, 2019 - 8:00am
Larry Salzman
Larry Salzman

Socialism is popular again. The rise of politicians such as Bernie Sanders and Alexandra Ocasio-Cortez shows how the promises of socialism are once again influencing our political debate. It’s not easy to pin down a single reason for socialism coming back in vogue, but one undeniable factor is the longstanding belief that socialism is a more moral and caring system than capitalism.

This perspective, however, overlooks the moral bankruptcy of socialism while denying the moral virtues of capitalism. We’ve explored in this issue many of the ideas behind these two political systems and their consequences, both good and bad. It’s no coincidence that capitalism’s morality is a driving factor in its success.

America was founded on the moral ideal of individualism -- the view that each of us is sovereign, possessing an inalienable right to life, liberty, and the pursuit of our own happiness. Our government was created to secure these rights. Its aim according to the Constitution is to “establish justice” and “secure the blessings of liberty.”

The social system compatible with America’s Constitution is capitalism. This is the political-economic system that fully recognizes individual rights—including property rights -- leaving each person at liberty to think, produce, and trade voluntarily for mutual improvement. It is the system that respects individuals as free and independent.

Yet today, the capitalist system has been emblazoned with the scarlet letter of immorality.

On its surface, this is surprising. Capitalism has lifted millions of people out of poverty and has proven to be the most practical system for large-scale prosperity. Economists from Adam Smith to Ludwig von Mises have demonstrated that free enterprise enables economic progress. History has shown that wherever capitalism is tried, innovation and production flourish. After millennia of relative economic stagnation, capitalism’s emergence in the late 18th and early 19th centuries transformed the modern world with continuous growth in living standards. People living only a few generations ago would be shocked at the comforts we enjoy today.

So why does socialism continue to attract so many?

While most people acknowledge that capitalism produces the wealth, many are not fully convinced the system is right. These critics view capitalism, entrepreneurs, and business owners with suspicion. Meanwhile, they discount the practical failures of socialism because they view the system as more noble or compassionate.

But this moral confusion has devastating consequences. People clung to dysfunctional political systems in the 20th century, even in the face of misery, because they believed these systems had moral aims. Communists did not give up on collectivism after 75 years, even as tens of millions of corpses piled up. Even today, there are apologists for the ongoing catastrophes in Cuba and Venezuela.

Socialists do not typically oppose capitalism because they believe it is an economic failure but because they feel that on some level it is immoral. The fact that capitalism champions the profit motive and depends on and rewards self–interest is seen as selfish.

We should ask, then, what the moral status of the profit motive is. What does it take to profit in a free economy?

One profits by gaining something for oneself through trade. Under capitalism, no government bureaucrat commands and controls your economic choices. A person gets what he wants only by offering something of value to others in exchange for labor, service, savings, or a valuable idea or product.

Under capitalism, pursuing one’s self-interest is a matter of disciplined virtue. It requires a person to accept responsibility for her own life—to engage in thought, effort, independence, and productivity to create and contribute something useful. Moreover, the hallmark of capitalism is justice: each of us is paid only what we have earned according to the uncoerced judgment of those who trade with us.

Under capitalism, wealth is not static and trade is not zero-sum. New ideas, effort, productivity, and trade lead to the constant creation of new wealth. Under capitalism, people don’t fight for their share of a single economic pie; we create an ever-expanding number of new pies.

The profit motive is therefore not merely practical but good -- an economic expression of each individual’s constitutional right to live responsibly and productively in pursuit of happiness.

Is every businessperson and individual living under capitalism a moral exemplar? Of course not. Dishonest and unethical people exist in every society. But capitalism encourages and rewards virtue, while the market works against the unthinking, the unproductive, and the immoral.

By contrast, socialism penalizes a person for his virtues -- as the slogan made famous by Marx says: “from each according to his ability; to each according to his need.” It takes from those who think, plan, and create, for the sake of those who do not. Seen in this light, it’s capitalism -- not socialism -- that is the moral system.

Larry Salzman is Pacific Legal Foundation’s litigation director. His practice has focused on property rights and economic liberty, including cases involving eminent domain, civil forfeiture, regulatory takings and exactions, the Commerce Clause, and challenges to occupational licensing and “certificate of need” laws that infringe on the constitutional right to earn a living. This article is featured in the fall edition of PLF's quarterly magazine Sword&Scales. To read the full edition visit: swordandscales.pacificlegal.org/

Comments

Like the article. The proper role of government, in regards to capitalism, is to be like the referee at a game, who knows the rules, watches the plays like a hawk and blows the whistle whenever there is a foul, and never favors a side. Good statesmen make good referees, but opportunistic politicians will cut deals with those offering the bribes. That’s where freedom of the press is supposed to come in to expose the fouls, but the Scallawags have bought up the mega media conglomerates so their bought and paid for refs can run the game. Corruption abounds, but put the light to them and they’ll scatter like the *** roaches they are.

There is no morality in either system. They are both flawed and destined to greed, corruption and failure. The only system with any hint of morality is through a Constitutional Republic with a series of checks and balances, with the key word here being Balance...

"Capitalism" has no "morality". And, if anything, captalism's goal of separating every consumer from as much as his/her cash as possible - is wickedly IMMORAL!

The democRAT party has no "morality". And, if anything, the democRAT party's goal of separating every consumer from as much as his/her cash as possible - is wickedly IMMORAL!

The goal of socialism is communism.

And both are the spawn of hate-filled fascist left-wingers.

The goal of capitalism is for those at the top of the heap to amass as much of their society's and/or the world's capital as possible. The 'New Feudalism' might be the most apt appellation. Those at the top are achieving their goal in this country today.

Transformation is the driver of guidance. The goal of sonar energy is to plant the seeds of wellbeing rather than ego. The stratosphere is calling to you via atomic ionization. Can you hear it? Traveller, look within and inspire yourself. Have you found your quest?

Delusional ...…………..Neither socialism or capitalism is moral and neither in their real form turn out good. …………….Everything we do together from government, military, police force, roads, etc is socialistic so how can Socialism be all bad as we use it every day to make our lives better?...……….....And excesses of capitalism leading to boom, bust and eventually to 1 owning everything, is far worse.........…...The key is using the best of both to bring prosperity to everyone by controlling both.........Otherwise you end up with Mao, USSR, Enron, Saudi Arabia, etc, all ending badly...…….....Since a serious lack of jobs is coming as people are too productive, we'll need more socialistic programs to tame the ills of capitalism that causes it............And if you think this is far fetched, don't bet your job can't be replaced by an app, AI or a robot............….We can have a much better world if we do this right or riots, wars if not...…Right now the repub ideas lead us to riots, wars, unemployment from capitalism......Your choice .

A highly ignorant post Jerry.

Agreed!

Not just ignorant, but hallucinatory.

Not nearly as ignorant as yours, Helen.

Well said Jerry. When uncontrolled Capitalism leads to corrupted laws that lead to monopolist's who control every aspect of society then it is time to refresh the tree of liberty. Under normal conditions what Mr. Salzman say's is correct, but he overlooks the facts that government is instituted to protect those values and to oversee those that seek to profit by cornering the market or buying corrupted politicians to look the other way. Mr. Salzman asks: "So why does socialism continue to attract so many? " Take a look at the pharmaceutical industrial complex as an example, the cost of medications has skyrocketed bringing great profits, at the cost of human lives. It is well known that the industry spends a lot of money to influence legislators to craft laws that will benefit the industry, although this practice falls under the tent of Capitalism it is a practice most foul and should be avoided.

Have you ever studied history? Socialism has NEVER brought people out of poverty.

However, it has purchased the votes of the incompetent.

Have you ever studied economics and sociology Travis? That's where an effective discussion of "poverty" most often takes place.

So after flipping burgers all day, you're thinking about going to night school. I hope you finally learn something.

Unemployment is caused because of Unions. Unions are a Socialist process. If a company has a Union, the company will go out of business eventually, due because of Socialist union rules and higher production costs. Socialism HAS NO PLACE in a Capitalist society. America will reject ALL known Socialist activities, person by person. Companies with Unions are forced to take rainey day accounts to pay higher individual costs and to raise component costs higher than their competition. Union workers are not individuals, but none other than a Socialist, where all are paid the same high wage, and their Union leader is their MAO, Stalin, Putin as in Venezula, Cuba, China, Russia, Yeman, North Korea, yes even Canada. Canada is a Socialist pact.

Nutty? Nuttier? Nuttiest? Geez, I can't decide!

Sounds like you're feeling through Adam's Schiff-bag looking for your lunch.

If Labor Laws were enforced there would be no need for unions. Who looks out for the worker?

Ayn Rand - the Virtue of Capitalism.

Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.

Envy is a big driver of actions of the left wing. They hate to see achievers be successful and be forced to reconsider why they incompetently went for the womyn's studies degree.

Now, she was a Russian, raised under communism, arrived in this country illegally, and fancied herself a novelist in the fiction genre. That's your source of expertise???

Wonderful article!

Agreed!

The guy's a lawyer, Betty, NOT an economist.

I'm just a country doctor Jim, Not a brick mason.

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