Freeman

ARTICLE

Business and Morality in a Free Society

Capitalism Is the Most Productive, Efficient, and Moral Economic System

NOVEMBER 01, 1997 by EDWARD YOUNKINS

Dr. Younkins is professor of accountancy and business administration at Wheeling Jesuit University, Wheeling, West Virginia.

Few would deny that capitalism is the most productive and efficient economic system, especially after the collapse of Soviet Communism. But some critics still contend that capitalism is not a moral system.

Yet morality is impossible unless one is free to choose between alternatives without outside coercion. Since capitalism is based on freedom of choice, it provides the best environment for morality and character development. In addition, business success not only requires but also rewards virtuous behavior by participants in the market.

Morality Requires Freedom

All human beings have natural rights either endowed by their Creator or inherent in their nature, and have a moral obligation to respect the rights of others. Natural rights impose the negative obligation not to interfere with someone else’s liberty. Thus, it is morally illegitimate to use coercion against someone who does not first undertake the use of force. The role of government, as recognized by America’s founders, is to protect man’s natural rights.

This kind of freedom involves far more than simple democracy. It demands a protected private sphere within which an individual can pursue his freely chosen norms, actions, and ends without the arbitrary intervention of others. And this freedom is necessary for individual morality.

There can be no morality without responsibility and no responsibility without self-determination. Responsible self-determination implies rationality, honesty, self-control, productiveness, and perseverance. In order to provide the maximum self-determination for each individual, the state should be limited to maintaining justice and defending against internal or external coercion, thus protecting life, liberty, and property.

A social system such as capitalism is a system of relationships and cannot be moral or immoral in the sense that a person can be—only individuals can be moral agents. However, a social system can be moral in its effects if it promotes the possibility and likelihood of moral behavior by individuals who act within it. It follows, then, that there is a moral imperative to create a political and economic system that permits the greatest possibility for self-determination and moral agency. Capitalism is that system.

Capitalism is itself only a means and requires its individual participants to decide on the ends to be pursued. No economic system can make people good. The best that an economic system can do is to allow people to be good. But morality and virtue require that individuals be free to be immoral and of bad character. Only when an individual has choice and bears responsibility for his actions can he be moral. Capitalism, more than other economic systems, allows the exercise of individual free will. Thus, though capitalism cannot guarantee a moral society, it is necessary for one.

Human development usually requires more than material wealth. However, prosperity enables individuals to cultivate their talents, abilities, and virtues. Thus, capitalism, the best system for wealth creation, permits individuals to spend less time on physical concerns, leaving them more time to engage in higher pursuits.

The Moral Responsibility of Businessmen

At the same time, the achievement of prosperity tends to reward moral behavior. Businesses—more particularly, their owners, managers, and other employees—have moral obligations. They must respect the natural rights of other individuals, which includes honoring contracts, not engaging in fraud, not using coercion against others, and honoring representations made to the local community. Moreover, businessmen should not support government economic interventions, such as price supports, tariffs, and subsidies, even though doing so might result in higher profits. To do so would involve the use of coercion, one step removed.

Living up to these virtues will aid businessmen in the pursuit of profit. The free market rewards polite, cooperative, tolerant, open, honest, realistic, trustworthy, discerning, creative, fair businessmen. Lying to and cheating other businesses, misleading consumers, and mistreating workers all have serious adverse consequences. In the long run, profitable businesses tend to be operated in accordance with the basic ethical principles most people hold dear.

Under capitalism a business transaction takes place by mutual agreement for perceived mutual advantage. Through voluntary exchange buyers and sellers can promote their own interests only by serving the interests of others. By protecting individual choice, capitalism not only generates enormous wealth, but also creates an environment in which virtue can flourish. In the end, capitalism is not only the most productive and efficient economic system. It is also the most moral economic system.

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November 1997

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