Capitalism Is Moral

Capitalism Is Moral
by Barry A. Liebling

Capitalism Is Moral (2013 Apr 12 Fri)

by Barry A. Liebling

Steven Pearlstein, a Washington Post columnist and professor at George Mason University, recently published "Is Capitalism Moral?". His conclusion is - not so much. The essay is aimed at denouncing the thinking of free market advocates and bolstering the confidence of big government fans.
http://articles.washingtonpost.com/2013-03-15/opinions/37732829_1_free-markets-free-market-capitalism-historic-debate

Before getting to Mr Pearlstein's talking points consider what the proper conceptualization of capitalism is and how it relates to morality. Ayn Rand, the most eloquent and consistent advocate of pure capitalism defined it as a "social system based on the recognition of individual rights, including property rights, in which all property is privately owned." In her essays - see The Virtue of Selfishness (1964) and Capitalism: The Unknown Ideal (1966) - she explains how capitalism is based on the moral theory of rational egoism. Briefly, this is the doctrine of individualism where reason is the only proper guide to actions; each person has legitimate sovereignty of his own life, is an end in himself, is responsible for working in his own rational self-interest, and has personal happiness as his highest moral goal.

Note that once you understand and appreciate rational egoism, capitalism is the only moral system. Anything else involves coercive meddling and violates individual rights. But many people (especially mainstream intellectuals) mistakenly embrace variants of altruism and collectivism - the notion that the individual counts for little and that morality demands that you live for others, for the ruler, or for society.

Professor Pearlstein has commented on matters related to business and economics for many years. He is a modern progressive who is grounded in collectivist-altruist ethics and believes that an active, intervening government is essential to assure that "moral behavior" is encouraged and outcomes are "more fair."

In his article Mr Pearlstein points out that advocates of capitalism are promoting their viewpoint with new tactics. They used to tout capitalism as tremendously effective and efficient at generating wealth. Now, to the professor’s disapproval, they are claiming that capitalism is moral.

Mr Pearlstein repeatedly harps on what he finds most troubling about capitalism - too much inequality. He writes, "if markets were making most of us better off, regulating their own excesses, guaranteeing equal opportunity and fairly dividing the economic pie, then we wouldn't need government to take on all the things it does."

How should a principled advocate for capitalism respond to the professor's remarks? Mr Pearlstein's line of reasoning is based on collectivist premises - which while familiar, obvious, and comforting to a modern progressive are deeply flawed to a free marketer. An understanding of the morality of capitalism reveals that Mr Pearlstein's critique is untenable.

Start with the popular notion that there is "an economic pie." This defective catch phrase is a powerful rhetorical trick that helps big government fans get their way. Income inequality is measured by how much of the "nation's income" various people possess. And the trick is that the expression "nation's income" suggests that the nation itself has an income, is the legitimate owner of it, and that individuals are secondary - like bees in a hive.

This error is an attempt to sweep away the concept of private property, and it deliberately aims to breed universal resentment and hostility. It is a short step to view anyone with more than an equal share of the "nation's income" with suspicion. Furthermore, if the metric is the proportion of the "nation's income" someone has, economics becomes a zero-sum game. No matter how large the pie is, one person's gain subtracts from what is available to everyone else.

If you have the appropriate capitalist mindset equality or inequality of wealth is not an ethical issue. The government should not fixate its attention to how much more or less money you have compared to your neighbors. Instead the morally salient question is on how wealth is obtained. The job of the government is to assure that individual rights are not violated.

Mr Pearlstein's approval of redistribution reflects his contempt for private property rights. Some people have more wealth than he and his cohorts think they should, while others do not have enough. To his frustration, in a pure market system there is no way he can "fix the problem." So the government has to step in - with taxes, regulations, incentives, and special programs - to make things right.

The professor references "the traditional liberal defense of redistribution" and explains that it is fair because a lot of people achieve economic success "from good fortune - the good fortune to be born with the right genes, ...to grow up in the right community, ...the right schools, ...to be at the right place at the right time. A market system should reward virtue, they argue, not dumb luck."

This is reminiscent of A Theory of Justice by John Rawls (a favorite philosopher of progressives and an exemplar of fallacious reasoning to principled advocates of capitalism) that insinuates that no one is responsible for his own success. Even ambition and industriousness are caused by external forces and internal dispositions not chosen by any individual. So to a Rawlsian there is no personal virtue; it is not valid to think you deserve your status; and therefore (gigantic leap in the wrong direction) it is proper for society (the bosses in charge) to take whatever it needs (wants) from you.

The author acknowledges that many people are uncomfortable with the government redistributing wealth, but he dismisses their concern by asserting there is "one glaring problem with the moral case against redistribution. For implicit in the imperative to let the productive keep what they earn is an assumption that the markets distribute income in a way that accurately reflects everyone's relative economic contribution - and therefore is fair. But is that true?"

Of course, Mr Pearlstein and his accomplices will volunteer to set up a Wealth Panel and judge who truly deserves the money they have and who does not. They believe that their preferences regarding how much income each person should be allowed to keep trump the capricious, unsupervised outcomes that are achieved through voluntary exchange.

Note that Mr Pearlstein's phrase "let the productive keep what they earn" reveals a statist, confiscatory mindset that is immoral. It insinuates that the government should have the authority to decide what you get to keep. Rational egoism, which is the foundation of capitalism, requires that the government limit its powers to assuring that individual rights are protected.

Also observe that a principled advocate of capitalism does not assume that everyone’s wealth is a perfect reflection of how much that person contributed to the economy. Instead, the rational egoist knows that if you come by your wealth legitimately, without using force or fraud, you are entitled to it. Conversely, if you achieve wealth by nefarious means - such as theft or forced redistribution - you deserve nothing.

Steven Pearlstein is correct that free markets are inconsistent with his progressive values. The best way to solve the problem is to throw out his collectivist-altruist premises. If you appreciate the doctrine of rational egoism it is apparent that capitalism is moral.

Discuss this Article (4 messages)