All Commentary
Saturday, December 1, 2001

Peace on Earth, Good Will Toward Men Through Capitalism and Freedom!

Open Markets and Competition Bring Peace and Prosperity

“A great multitude of religious sects . . . might in time [become] free of every mixture of absurdity, imposture, of fanaticism.” —Adam Smith1

In this time of thanksgiving and holiday cheer, we here at the Foundation for Economic Education wish everyone peace, prosperity, and happiness. Leonard Read, our founder, wrote that freedom of choice is one of the essential agents of peace and harmony.

According to Read, true freedom means practicing the Golden Rule and preserving the God-given rights of the individual as declared in the Declaration of Independence. “Everyone is completely free to act creatively as his abilities and ambitions permit; no restraint in this respect—none whatsoever.”2

The latest edition of the Index of Economic Freedom, published by the Heritage Foundation and the Wall Street Journal, shows that many parts of the world are “mostly unfree” or “repressed,” as judged by the level of corruption, taxation, protectionism, inflation, black markets, and government interventionism. Of the 155 nations surveyed, over half (81) receive a negative grade. Most telling, the area of the world with the highest concentration of “repressed” freedom is the Middle East, particularly Iran, Iraq, and Libya (Afghanistan was not ranked).3 Judging from recent events, the Middle East confirms Read’s thesis. Most of the Arab world continues to suffer from economic dislocation, political turmoil, and military conflict. “When the wicked rule, the people mourn” (Proverbs 29:2). Henry Hazlitt summed it up well: “It is socialist governments, notwithstanding their denunciations of imperialist capitalism, that have been the greatest source of modern wars.”4

Commerce and Trade Breaks Down Barriers—and Intolerance

The Middle East is also known for dictatorships and religious intolerance. It seems that economic repression goes hand in hand with political and religious repression, just as economic freedom leads to political and religious freedom.5 Montesquieu, Adam Smith, and other classical-liberal thinkers made the case that liberalized trade and the spirit of capitalism break down cultural and social mono-theism and destroy fanaticism and intolerance. Montesquieu saw many virtues in doux commerce, stating that the pursuit of profit-making serves as a countervailing bridle against the violent passions of war and abusive political power. “Commerce cures destructive prejudices,” Montesquieu declared. “It polishes and softens barbarous mores. . . . The natural effect of commerce is to lead to peace.”6 Adam Smith seconded Montesquieu and taught that the commercial society moderates the passions and prevents a descent into a Hobbesian jungle.

Business encourages people to become educated, industrious, and self-disciplined. As economist Albert Hirschman observes, “The spirit of commerce brings with it the spirit of frugality, of economy, of moderation, of work, of wisdom, of tranquility, of order, and of regularity.”7 Business people are the ultimate in practicality—they are by nature compromisers and tolerant of other viewpoints. They will wheel and deal to sell and produce a product. As John Maynard Keynes once said, “It is better that a man should tyrannise over his bank balance than over his fellow-citizen.”8

The Case for Religious Competition

The Middle East is also famous for its lack of religious freedom and diversity. A few Protestant Christians live and worship there, but proselyting is prohibited, even in Israel. Egyptians are divided into only two Muslim sects; there are virtually no Jews in the country, and no missionaries. Islamic fundamentalists hate the West’s idea (as expressed originally by John Locke) of a free religious society where churches compete for members. According to Andrew Sullivan, America has achieved “one of the most vibrantly religious civil societies on earth,” and America “is living, tangible rebuke to everything they [Taliban and bin Laden] believe in.”9

Adam Smith contends that a state religion breeds fanaticism, intolerance, and persecution. There are numerous examples of holy wars waged by state-supported Christianity, Islam, and other religions that demonstrate Smith’s thesis. But Smith goes further.

He argues that creating a free, competitive environment in religions would be beneficial. Natural liberty, he said, favors “a great multitude of religious sects” which would generate interest in religion and encourage higher attendance at church. “In little religious sects, the morals of common people have been almost remarkably regular and orderly: generally much more so than in the established church.”10 According to Smith, religious competition would reduce zeal and fanaticism and promote tolerance, moderation, and rational religion.

In short, a good dose of open markets and competition in all walks of life could go a long way toward bringing peace, prosperity, and good will in this dangerous part of the world. Until that happens, many will shout “peace, peace, when there is no peace” (Jeremiah 8:11).


  1. Adam Smith, The Wealth of Nations (New York: Modern Library, 1965 [1776]), p. 745.
  2. Leonard Read, Anything That’s Peaceful, 2nd ed. (New York: Foundation for Economic Education, 1998), p. 30.
  3. Gerald P. O’Driscoll, Jr., Kim R. Holmes, and Melanie Kirkpatrick, 2001 Index of Economic Freedom (Washington, D.C.: Heritage Foundation and the Wall Street Journal, 2001), pp. 2, 4.
  4. Henry Hazlitt, The Foundations of Morality, 3rd ed. (New York: Foundation for Economic Education, 1998 [1964]), p. 339.
  5. See Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), chapter 1.
  6. Charles Montesquieu, The Spirit of the Laws (Cambridge: Cambridge University Press, 1989 [1748]), p. 338.
  7. Albert O. Hirschman, The Passion and the Interests, 2nd ed. (Princeton: Princeton University Press, 1997), p. 72. I highly recommend this brilliant book. For more discussion of the peaceable nature of capitalism, see Mark Skousen, The Making of Modern Economics (New York: M. E. Sharpe, 2001), chapter 1.
  8. John Maynard Keynes, The General Theory of Interest, Money and Employment (London: Macmillan, 1936), p. 374. Today we might say, “Better that a person tyrannize over his favorite sports team or his favorite stock than over his fellow citizen.”
  9. Andrew Sullivan, “This Is a Religious War,” New York Times Magazine, October 7, 2001, p. 53. I highly recommend this article.
  10. Smith, op. cit., pp. 747–48.

  • Mark Skousen is a Presidential Fellow at Chapman University, editor of Forecasts & Strategies, and author of over 25 books. He is the former president of FEE and now produces FreedomFest, billed as the world's largest gathering of free minds. Based on his work “The Structure of Production” (NYU Press, 1990), the federal government now publishes a broader, more accurate measure of the economy, Gross Output (GO), every quarter along with GDP.