Capitalism and the Wages of Virtue

Mr. Donway deals as a free lance student and writer with the social implications of certain philosophical issues.

Among defenders of capitalism, there is virtually no dispute about the proper justification of that system. There is no dispute because there is too much disagreement. What we hear is largely the silence of antagonists who refuse to speak to one another, reminding us again that civil wars are the most ferocious, and the least civil.

One of the more prominent standoffs, at the moment, involves those who would use some form of natural rights defense for capitalism, and those who would prefer to point out its social consequences: the moralists and the pragmatists, as they are sometimes styled. On this split, I would myself join with those who see free enterprise as a necessary part of freedom, and freedom as appropriate to man. I would even maintain that those who defend liberty in terms of its social consequences are not so much taking freedom’s side as taking its side-effects.

But I would point out, too, that this standoff has had an unfortunate aspect. The problem is not that there is something to be said on both sides; it is that there, is everything to be said on one side. Yet, such are the traumas of hostility that it is generally not being said.

Because the moralists see a fatal giveaway in defending capitalism by its social effects, they sometimes sound as though the social effects were of no concern to them. In the attempt to be essential, they have often pruned their theory to a nubbin; they have even cut off the branches, lest anyone should mistake them for roots. The consequences of capitalism, which should be the boast of its defenders, are denied and spurned. Surely, this is wrong-headed.

Competition’s Effects on Innovation, Quality, and Price

To see why, the example of competition is helpful. It might be held, and it would be true, that economic competition is a rightful use of man’s freedom, and that for political purposes nothing more needs to be said in its behalf. But that does not mean that there is nothing more to be said about competition. It hardly follows that capitalists must so fear falling into collectivist presuppositions that they cannot point with pride to competition’s effects on innovation, quality, and price.

In the matter of competition, this is generally recognized. Less well recognized is the wider application of the principle. I particularly have in mind a debate, which Irving Kristol sponsored in Public Interest a few years ago, on the relation between "merit" and material acquisition in a free society. This is perhaps the prime example of a question to which capitalists respond by affirming utter indifference, on the grounds that any concern could only be based on collectivist assumptions. I do not want to enter the debate directly or thoroughly, but I do think it would be helpful to point out how such an issue might be legitimately approached.

Three principal barriers are usually alleged by capitalists for the avoidance of such a question: (1) the collectivist terms of the argument; (2) the alleged amorality of profit-seeking; and (3) the impediment to prediction created by free will. I think that each of these can be dispelled, however, if one recurs to the truth that in discussing economics we are discussing human action.

Wrong Assumptions

The first and foremost problem, then, concerns the terms of the argument. They are quite unacceptable. These money/merit questions generally assume, in one form or another, that capitalist society is a kind of feudalistic hierarchy, or social great chain of being, in which position is signaled by wealth. Apparently it is further supposed that within this hierarchy God makes men high and low, and audits their estates. For it is asked whether relative rankings of wealth under capitalism are adjusted in proportion to the net virtue possessed by the individuals — and in proportion, it should be noted, to whatever the author cares to call virtue. No such challenge can be of any concern.

So put, the question ultimately rests on what has been called "the puppy-bowl theory of values." This is the idea that all wealth belongs, at basis, to society as a whole, and is disbursed by that whole to the various members of the society. Under such an outlook, all gain is deprivation; what one person gets is at the expense of others, and the distribution must therefore be justified by some merit in the gainers. But the scheme is simply false. We are not dealing with scores and prizes, or with points and rewards. We are dealing with individual acting men who are trying to accomplish something.

There is no need to justify social disbursements and deprivations in a free society, because there are none. Distribution is precluded by attribution, sometimes called ownership. Where wealth is created and freely conveyed, what one person possesses as a result of this process can be of no moral concern to others. To try to make it of concern is simply to pander to envy.

Unfortunately, some have attempted to defend capitalism by accepting the puppy-bowl theory of values. They have asserted that, under capitalism, if all are given an equal opportunity, (equal puppies beginning an equal distance from the bowl), the resulting distribution will be roughly proportional to striving. This gives rise to the image of a society-wide competition, a metaphor that can be utterly discredited, as Garry Wills proved in Nixon Agonistes.

The problem at issue, though, is really with other defenders of capitalism, with those who have taken the position that once capitalism is properly defended as an adjunct of freedom, no more ought to be said about the relation between merit and acquisition. This stance, I think, is susceptible to Irving Kristol’s charge of retreat. It is giving up on one of the earlier boasts of capitalism.

Can Virtue Succeed?

Though comparative wealth is of no legitimate concern in a free society, it surely is proper for a person to wonder whether the means of economic success in that world are virtuous, or whether he must sin for his dinner. This does not mean he can expect all virtues to find a correlate in financial reward. Nor does it mean that none but good men will gain in income. It does mean that actions which tend toward success can be found among the virtues; and one might even argue that only among the virtues are to be found means that one can count on to bring success. Conversely, one might argue that corresponding vices tend toward economic failure, and even that no vice can be counted on for economic gain.

That, I take it, is the moral of those inspirational novels in which virtuous young men rise and dissolute heirs fail. (I mention them since both Wills and Kristol use success stories as a focus of argument.) The point is not that merit must always end up wealthier than evil, nor that there is any injustice if it does not. The point, rather, is that certain virtues give one the facility for achieving and maintaining success; and certain vices deprive one of those facilities. In this view, the existence of unworthy rich is more democratizing than otherwise. It reminds us that there is a deeper awkwardness than lack of breeding, and that the parvenu who drops his silverware is still more fittingly accomplished than the heir who lets money slip through his fingers.

When the problem is cast in such terms, I do not see why those who defend freedom as befitting to man need shrink from making some such answer. On the contrary, precisely those who hold free-enterprise to be appropriate to human nature should be anxious to show that virtues appropriate to human nature have a special rapport with that economic system.

Is Business Amoral?

That is the first, and main, barrier to connecting merit and money. The second concerns the alleged amorality of enterprise. It is widely held that business operates according to a morally neutral process called "meeting demand." By this image, a businessman looks up demand in his field, much as he might look up a telephone number, and finds that the maximum profit can be made from producing so much of a certain good or service. As a businessman, so the story goes, he must produce that good whether he considers it valuable or worthless; he must provide the service whether he thinks it virtuous or vicious.

But this is a mechanical parody. It is, again, a failure to see economics as human action. The entrepreneur, like all men, is acting into an incompletely known future. Not for him, nor for anyone else, is there an automatic guide to appropriate economic activity.

One of the entrepreneur’s basic unknowns, as it happens, is how people’s wishes will change from what they are. Moreover, he must know better than his fellows how those wishes will change, for the entrepreneur makes a profit only from future and widely unexpected demand. He must guess the likely future desires of his customers, and he must guess them more accurately than others who are trying to guess them.

And what means does he have to do this? I suggest he has no better means than to bring his own values to bear.

A businessman does not, of course, consider himself the sole and single mold of all his customers. But he does use his idea of what is helpful, attractive, exciting, and so on, to predict what others, in their context, will find so. The alternative is absurd: an entrepreneur has quite enough unknowns without wondering of what possible value his product could be. Since he cannot base his actions on what people do want, and cannot act on what it is generally thought they will want, why would he take a risk on what he believed they could have no good reason for wanting?

Capitalists have too long accepted, and indeed insisted upon, the image of amoralists, and it is just not accurate. A businessman makes offerings to his customers that are generally compatible with his own values. The notion of his placidly pandering to what he knows is vice is largely a myth, and for the simple reason that he could not expect to succeed if he did pander to it.

A Presumption of Reasonableness

Thirdly and finally, then, we turn to the block raised by free will. It is said that one cannot predict the results of political-economic freedom — whether virtue or vice will prove economically gainful — because one cannot know for certain what people are going to do. And that is correct.

What needs to be mentioned, obviously, is that though free will is a barrier to strict prediction, we can often cite strong and worthy motives for a certain kind of behavior. Then, to the extent that reasonableness prevails, we can expect such behavior to occur. This is the moral of the better mousetrap. In the case at hand, we can cite overwhelming motives for people in a free society to prefer the work of diligence to that of idleness, the products of inventiveness to those of imitation, the style of independence to that of sycophancy. To the extent that reasonableness prevails, we can thus expect those virtues to be a means of gain in a free society.

This is clearly not an answer to the question of how capitalism comports with virtue. But I have not been attempting an answer. I have only tried to remove three hindrances frequently thought to preclude any reply at all.

For a reply there should be: not because the case for freedom requires more testimony, but because freedom should have more testimonials. Capitalism is not under a cloud, but it is all too often under a bushel.  

Further Reading