All Commentary
Friday, October 1, 1993

A Reviewer’s Notebook: The Freeman Classics Series

The consumer is sovereign under capitalism.

FEE, under the new dispensation of Hans Sennholz, has decided to refine the gold it has scattered about in its publications, particularly The Freeman magazine. By the beginning of 1993 it had published three collections: one, called The Morality of Capitalism; another, Private Property and Political Control; and the third, Prices and Price Controls. In addition, it has published a collection of many of the Freeman essays written by Henry Hazlitt, who died in July at age 98.

The authors of the books are well aware that capitalism is not perfect. They are also aware of the fact that capitalism is, to quote editor Mark Hendrickson, “morally as well as economically superior to every known alternative, such as socialism or the welfare state.” Hans Sennholz does an informative introduction to The Morality of Capitalism. He notes that the critics of private property never tire of berating the profit motive. The critics “rail at successful merchants and shopkeepers, at wealthy bankers, stockbrokers, and capitalists.” The critics “rave at advertising, marketing, and other business practices designed to inform and influence people in making economic decisions.” But capitalism has its defenders: Orval Watts, Leonard Read, Ludwig von Mises, F. A. Hayek, Garet Garrett, Israel Kirzner. Their essays on the moral issues of our times have been taken from Paul Poirot’s special editing of The Freeman over a thirty-year period. Poirot sets the tone of the books with an essay entitled “He Gains Most Who Serves Best.” A businessman’s profits measure his efficiency in the use of scarce and valuable resources to satisfy the most urgent wants of consumers. Ludwig von Mises notes that the consumer calls the turn. But under freedom there must be access to physical property. If the government owns all the printing presses, the possibility of printing opposing arguments becomes practically non-existent.

In his essay, “Think Twice Before You Disparage Capitalism,” Perry Gresham says, “Capitalism is the one system of political economy which works, has worked, and will continue to work.” The alternative system is socialism which tends toward tyranny and serfdom. Gresham has three pages of lyrical acclamation of capitalism. “It is no relic of Colonial America. It has the genius to change with the times and to meet the challenges of big industries, big unions, and big government if it can free itself from interest-group intervention, which eventuates in needless government spending.” Capitalism, an economic system which believes with Locke and Jefferson in life, liberty, and property, and the inalienable rights of man, denies the “banal dichotomy between property values and human values. Property values are human values” (italics are Gresham’s).

A reason for beginning with the selections in The Morality of Capitalism becomes apparent if you turn the whole business around. Immoral capitalism is theft. It is an easy way to get capital, but it can’t last. The Golden Rule and The Ten Commandments must be obeyed, lest people kill each other off.

Capitalism, so Gresham says, is belief in man. It recognizes the potential tyranny of any government. To quote, “The government is made for man, not man for the government. Therefore, government should be limited in size and function, lest free individuals lose their identity and become wards of the State. Frederic Bastiat has called the state a ‘great fiction wherein everybody tries to live at the expense of everybody else.’”

Capitalism denies faith in the state to control wages and prices (see the third book in the FEE series, Prices and Price Controls). A fair price “is the amount agreed upon by the buyer and seller. Competition in a free market is far more trustworthy than any government administrator.”

Capitalism gives a poor person the chance to become rich. It does not lock people into the condition of poverty. Capitalism offers full employment to those who wish to work. A worker is free to accept a job at any wage he can get. He can join with his fellow-workers in voluntary association to improve his salary and working conditions. He can start his own business. “Capitalism,” says Gresham, “is a belief that nobody is wise enough and knows enough to control the lives of other people . . . . Capitalism respects the market as the only effective and fair means of allocating scarce goods. A free market responds to shortages and spurs production by rising prices . . . . Capitalism is a natural ally of religion. The Judeo-Christian doctrines of stewardship are reflected in a free market economy . . . . Capitalism depends on the family for much of its social and moral strength. When the family disintegrates, the capitalist order falls into confusion . . . . Dividends paid to those who invest capital in an enterprise are as worthy as interest paid to a depositor in a savings bank. The idea abroad that risk capital is unproductive is patently false.”

“The consumer,” says Gresham, “is sovereign under capitalism. No bureaucrat, marketing expert, advertiser, politician, or self-appointed protector can tell him what to buy, sell, or make.”

Property is necessary to capitalism. Individual rights are extensions of property rights. All rights depend upon property, according to the second book, Private Property and Political Control, which clarifies the inadequacies of the socialist concept of rights.

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.