The Moral Justification for Capitalism

The topic of capitalism vs. planned/organized economies and their variations (socialism, fascism, communism, etc) is too complex to completely dissect in a blog posting but due to the fact that so many of President Obama’s domestic policies (health care, cap & trade, extensive regulation of the financial industry, wealth redistribution policies employed under the tax system) are based upon a perceived deficiency of capitalism and the free markets, it is important to examine the moral justification for capitalism when compared to planned economies. This blog posting will only examine the moral justification for capitalism and will reserve discussion regarding planned economies and President Obama’s concept of a planned economy for soon-to-be posted blog discussions.

When considering whether a social system should be adopted by a society, it makes sense to ask whether individual citizens will retain their freedom under the proposed system. A number of economists, philosophers, and Founding Fathers of our country have outlined the concept of freedom and the reality that in order to guarantee freedom, a social system must uphold and protect the rights of the individual. As the Declaration of Independence and other Founding documents have indicated, a citizen’s individual rights can only be assured by upholding a political and economic system that guarantees an individual’s right to his own life, his own liberty, and to the pursuit of his own happiness. If we assume that the primary goal of a social system is to provide and protect freedom, we must consider whether the system respects individual rights and whether physical force is banned from human relationships.

Although many of the concepts and thoughts about capitalism that I am about to discuss are common knowledge, I think it is important to revisit them from the moral perspective of who is permitted to make decisions and the freedom provided under capitalism. Generally, capitalism is defined as “an economic and social system in which trade and industry are privately controlled (instead of state-controlled) for profit.” Under capitalism, all human relationships (investments, distribution, income, production, pricing, and supply) are voluntary. As a social system, capitalism respects individual rights by respecting the concept of property rights. A cornerstone of capitalism is the concept of privately-owned property. The concept of private property (the right to keep property purchased and earned as a result of one’s labor) provides an incentive for each individual to strive to pursue his own good for his own sake. By allowing human relationships to remain voluntary, capitalism permits each individual to decide what product or service provides the most value. Additionally, capitalism, through the mechanism of competition, creates an incentive for each producer to continue to provide better quality and lower priced products in order to survive. By allowing every business, producer and consumer to keep the property they have earned as a result of their labor and value created within the market, capitalism provides an incentive and reward for all parties in the market: consumer, producer and service provider.

The economic benefits of capitalism are widely recognized but many proponents of capitalism advocate its use for efficiency reasons, while neglecting the freedom of choice free from coercion that capitalism provides. As an example, many passive proponents of capitalism argue that the concept of the free market can only be justified because it provides for the “best allocation of the national resources” or that it represents “the best way to achieve the common good.” These arguments are misplaced because as Ayn Rand and F.A. Hayek and others have pointed out, man is not a national resource and the fact that capitalism provides the most effective means of achieving the “common good” is merely a secondary consequence and not the primary justification for capitalism.

Many critics of capitalism argue that this desire to act in one’s own self-interest through the existence of the “profit motive” is immoral because it creates greed, excess and a misallocation of resources that leaves a segment of the population neglected and in poverty. This focus on selflessness/altruism is an admirable quality for individuals to pursue in their own lives. However, altruism is a philosophy that should be accepted or rejected by each individual based upon their own decisions, not a political philosophy employed and directed by the government. When government imposes altruism upon its citizens through claims that every citizen must act in the best interest of the public or that each citizen has a social or societal duty, it imposes a moral duty upon the competent to serve the incompetent and the willing to serve the unwilling.

The moral justification for capitalism is that it is the only system that provides for and protects the individual and his right to exist for his own sake. Capitalism provides an equal opportunity to each individual and does not discriminate or make judgments upon individuals: “The economic value of a man’s work is determined, on a free market, by a single principle: by the voluntary consent of those who are willing to trade him their work or products in return. It wholly rejects altruism (the deliberate pursuit of the interests or welfare of others or the public interest). Man is not the property or the servant of society – a man works in order to support his OWN life and must be guided by his own self-interest and if he wants to trade with others he must not expect sacrificial victims.”

The Founding Fathers always expressed their deepest respect and conviction for the freedom of individuals in society and the necessity that governments limit their sphere of influence and control. It was for this reason that America has long remained the most free of all men since its founding. Our Founding Fathers also knew that government should concern itself with providing a framework in which freedom and equality of opportunity can be assured and maintained and understood that it is wiser to leave altruism and benevolence to the moral conviction of each individual and the philanthropy of every man.