Dr. Barry Asmus is an economist and national speaker living in Phoenix, Arizona. Dr. Don Billings is Professor of Economics at Boise State University.
This article is taken from their book, Crossroads: The Great American Experiment, published in 1984 by University Press of America. Reprinted by permission of the publisher.
A powerful and factual case has been made for the remarkable and unprecedented economic progress which inevitably follows the adoption of competitive capitalism and its central institutions of private property and voluntary social arrangements. Even Karl Marx, in the Communist Manifesto, pronounced capitalism a great “engine of growth.” Undeniably, however, the market system of capitalism continues to be viewed as materialistic, ethically unjust, and consequently immoral by great numbers of people all over the world. This view is especially strong among the majority of so-called intellectuals.
Never mind the historical fact that systems other than capitalism trample freedoms, spawn totalitarian political regimes, reduce opportunity, and make a mockery of economic efficiency. Despite the evidence that central planning and economic equality lead to government intervention in private actions, and often ruthless dictatorship, the committed socialist of the left or right nevertheless believes that a small dose of socialism will one day glorify the human situation.
Interestingly, an increasing number of America’s intellectual elite, known for their belief in “the mixed economy,” “the middle way” or “economic democracy,” are emerging from the socialist closet. They either admit to being socialists or, at the very least, are expressing prefer ences for an institutional mix other than free markets. Motives aside, their contention is that capitalism is inherently unfair. Without a moral basis, say the critics, the private property, free-market system could never be compassionate.
In the past, defenders of competitive capitalism have been just as guilty as anyone for perpetuating this wrong-headed view. They have literally spent thousands of hours extolling the virtues of the efficiency of capitalism, free markets, and of the socially useful information gen erated by prices, wages, interest rates, profits, and losses. Pontificating on the efficiency aspects of capitalism, its supporters have failed to devote enough time and attention to the morality of the system. If the case for the morality of capitalism is not made, either through comparisons to its real world alternatives or on the basis of principle, then the probability of the great American experiment surviving is slim indeed.
The Moral Case for Capitalism
In fact, it should be clear that the most important part of the case for economic freedom is not its vaunted economic efficiency nor its dramatic success in promoting economic wealth and well- being, but rather that capitalism is consistent with certain fundamental moral principles of life itself. These are principles that respect the dignity and individuality of each person and that don’t try to manipulate people as objects but recognize a person’s rights and values. They seek to use persuasion and voluntary exchange rather than coercion and force. Competitive capitalism thrives on the non-aggression principle of human freedom.
The requirement that transactions in the private property market order must be voluntary guarantees that the moral and physical autonomy of persons is protected from violent attack by others. Force is inadmissable in human relationships under a regime of capitalism. Personal free dom, and therefore economic and political freedom, is not “ethically indifferent,” but a necessary condition of morality. Violence or the use of force against other individuals, which necessarily denies the most fundamental character of human freedom, the safety of persons and their property, is inconsistent with a moral order. The moral life requires that individuals act and make choices free of external intimidation and coercion. Friedrich Hayek reminds us of certain fundamental conditions of the moral life: “It is only where the individual has choice, and its inherent responsibility, that he has occasion to affirm existing values, to contribute to their further growth, and to earn moral merit.” Moral choice presumes the necessary freedom to exercise our responsibilities.
The free market system, in which only voluntary and mutually beneficial exchange is permitted, is consistent with freedom-of- choice, and, therefore, offers the greatest potentiality for a moral order in which the integrity of the individual conscience is respected. Hayek, in a warning to us about the undesirable con sequences of a planned, socialist order, wrote in his book The Road to Serfdom that only:
. . . where we ourselves are responsible for our own interest . . . has our decision moral value. Freedom to order our own conduct in the sphere where material circumstances force a choice upon us, and responsibility for the arrangement of our own life according to our own conscience, is the air in which alone moral sense grows and in which moral values are daily recreated in the free decision of the individual. Responsibility to bear the consequences of one’s own decisions are the very essence of any morals which deserve the name.
It is frequently asserted that the materialistic character of capitalism is at the very least amoral. However, it is surely an error to blame a social system for being too concerned with material things simply because the individuals in that system remain free to decide for themselves those goals which are to be pursued.
The practice of blaming capitalism for being materialistic is to miss the point. Most would agree that capitalism does have a record of organizing resources efficiently. It is also important to note that very few people go hungry under this system. In comparison, socialism fails on both counts. Yet, material abundance is admittedly but one of the positive attributes of living. In most societies of which we are familiar, it is only a minority who are not concerned with economic growth and material gain. As much or even more than market economies, socialist nations of both the left and right place most of their emphasis on economic growth, industrial production, and personal sacrifice in the pursuit of material ends.
Unfortunately, the people in planned societies who are not materially oriented, those, for example, who might want to pursue the life of a recluse, take a vow of poverty, or seek some spiritual end, are persecuted. Freedom, it seems, is more important to the minority of those who do not have material objectives than it is to those who do. Only in a decentralized, pluralistic, private property order can inalienable rights of these persons who are different be secure. But whatever the goals of in dividuals, whether virtuous, materialistic, or whatever, the market still seems to be the most humane way mankind has found for dealing with the economic problems of scarcity and the efficient allocation of resources.
The Humane Effects of Freedom
One of the great advantages of a social system characterized by social cooperation through mutually beneficial exchange is the opportunity and scope for sympathy, beneficence, and human friendships. Indeed, the libertarian scholar Murray Roth-bard reminds us that “. . . it is far more likely that feelings of friendship and communion are the effects of a regime of contractual social cooperation rather than the cause.” Each individual has a uniqueness. In that sense, it is difficult for anyone else to say what will or will not lead to another’s fulfillment.
Naturally, when we disagree with a person’s actions, there exists the tendency to save that person from himself. Fortunately, capitalism tends to favor those who respect the sanctity of the other person’s autonomy because of the respect for and enforcement of private property rights. The deterioration in many socially useful conventions, and the decay of morality which people have felt in recent years, are partially the result of our shift in thinking from personal to social responsibility. As persons are told their behavior and circumstances are not their fault, behavior is modified, society is indicted, and government is viewed as the only institution capable of solv ing the problem.
The work ethic, encouraged by the institution of private property, represents an important source of moral responsibility as well as a continuous reminder that our actions always entail costs. The essential ingredients of a free market order define a set of social institutions which encourage mutual respect for each and every individual. In contrast with all other economic sys tems, competitive capitalism operates on a set of rules which encourages mutual respect for persons with whom we interact.
The processes by which we satisfy material wants through social cooperation do not exhaust the goals which individuals might hope to achieve. The search for personal happiness and inner peace, for example, must be found within the individual alone. Nevertheless, mankind’s social relationships are generally far more peaceful under a
system of private property and free trade. The period between the Napoleonic Wars and World War I, the heyday of competitive capitalism, represented a century relatively free of the brutality of war. Furthermore, competitive capitalism was the first social system in human history to direct an individual’s desire to become rich by peacefully supplying greater quantities of goods and services for other human beings.
The market process has been especially productive in providing greater abundance for the working class and the poor. Unfortunately, the alternative to serving other people’s wants through voluntary exchange is to try to control their lives through the use of force. Wherever socialism has prevailed, it has invariably meant lower living standards for most people, and the subjugation of the many by the privileged few. A socialist country of the left or right, with few if any exceptions, means a totalitarian political regime in which other civil and human freedoms disappear and a form of slavery ensues.
Capitalism and Religion
The case for morality and justice of the system of capitalism rests on the intimate and complementary connection between private property and voluntary arrangements, and the sovereignty of the individual over his own life. We tend to take the concept of individuality for granted, but in reality, this concern and interest for the individual came into its own only with the rise of capitalism. In fact, the market system, far from dehumanizing man, finally allowed him to assume his full individuality. The individual conscience and its potential for discerning right and wrong, which was recognized during the early Christian period, came to full fruition under the system of competitive capitalism.
The “dawn of conscience,” that point in history in which individuals were first argued to be morally free and, therefore, responsible for their actions, first appeared in Egypt and was later borrowed and developed by the Jews. Later Jesus and the Apostle Paul outlined a view which recognized the unique personality of each human being. Essentially, this account represented an individualistic view of mankind which maintained that the individual’s soul is the most important thing about him. Christianity provided an environment in which individuals, in order to gain salvation, made choices from a position of free will.
Not only did the church discover that individual souls were worth saving, but Christianity also implanted the concept of the “rule of law.” This attention to the notion of legality also proved to be important in the development of the idea of freehold property and the land deed in the Western world. Admittedly, these contributions were largely to protect the church and its institutions and property from the power of the secular State. But over time, the principles of the “rule of law,” and the private ownership of property were progressively expanded to the relationships between individuals. There is a distinct and important connection between the Judeo-Christian morality and a free-mar-ket economy. This relationship rests on the established view of the central importance of the individual in the analysis of social relationships.
The system of free and open markets is most conducive to the perfection, or at least improvement, of man’s free will, which tends to generate and make moral behavior possible. One can learn correct behavior only if one is allowed to make mistakes and, hopefully, to learn from them. After all, one possible consequence of making a mistake is wisdom. Unfortunately, the larger the influence of government in peoples’ lives, the less opportunity there exists for an unhindered and free exercise of a person’s moral faculties.
Society itself cannot be moral or immoral; only individuals are moral agents. Following the argument developed by Arthur Shenfield, it would appear that in an economic system, “. . . if its essential characteristics on balance positively nurture or reinforce moral or immoral individual behavior, [then] . . . it is a moral or immoral system in its effects.” Competitive capitalism, under the rule of law, positively nurtures moral behavior and, therefore, can be moral in its effects. Where justly acquired property rights are defended, and where contracts are enforced, and where the rule of law applies, then “the voluntary nature of capitalist transactions propels us into respect for others.”
Morality and Personal Taste
It is, of course, impossible to argue that a system of competitive capitalism will always produce values and behavior of which we would individually approve. However, it is important that we tolerate the “un-defendable,” undesirable or annoying behavior of others as long as it is peaceful. An individual should not violate what the nineteenth-century sociologist Herbert Spencer called his “law of equal freedom,” which states that “. . . every man has freedom to do all that he wills, provided he infringes not the equal freedom of any other man.” Consequently, peaceful, non-violent human action is not a crime. Those who really believe in freedom must oppose coercive acts which would deny the possibility of a moral life by preventing that freedom of choice which morality requires. Given the uniqueness of individuals and the varied goals they pursue, we must allow actions which, while permissable in a free society, are offensive to personal tastes.
Lysander Spooner, a great and passionate defender of individual liberty during the nineteenth century, recognized an important distinction: the criminal and/or violent invasion of one’s person or property is different in kind from behavior, “. . . whilst perhaps immoral in some broader sense, must be allowed to flourish, and even be given the full protection of the law.” Morality is impossible unless one has the freedom to choose between alternative courses of action without external coercion. It was the great humanitarian, Albert Schweitzer, who said that civilization can only revive when there shall come into being a number of individuals who would develop a new tone of mind, independent of and in opposition to, the prevalent one among the crowd—a point of view which gradually wins influence over the collective mind and in that manner determines its character.
Only a movement grounded in a revised ethical perspective can rescue us from this relentless slide into collectivism. Necessarily, the revised moral point of view will come into existence only by individual choice. Once again, we encounter the proposition that it is the free market economic system of private property and voluntary exchange which maximizes the potential for leading a moral life.
The effects and results of the competitive process under capitalism are generally consistent with a moral order, but even when they are not it is still terribly important to oppose coercive restrictions of human behavior unless they violate the law of equal freedom. Diverse lifestyles and unique opinions represent one of the main arguments for human liberty. It is under a system of private property and free markets where sometimes annoying or even obnoxious activities are protected by the laws of a free society.
Morality and Its Alternatives
In summary, the system of institutional arrangements called “capitalism,” a disparaging reference for many people, is unquestionably more consistent with morality and justice in our social arrangements than any alternative set of social institutions presently conceivable to us. The obviously immoral character of the socialist dictatorships in Poland, Cuba, East Germany, the People’s Republic of China, the Soviet Union, the Ayatollah’s Iran, and the right-wing fascist dictatorships in countries like Argentina and Chile, where the most elementary human freedoms are suppressed, and where millions of human beings have been murdered in the name of a new social order, documents the case for the free, open, and decentralized market system.
Poverty and brutality are repulsive. From any point of view, starving children must be viewed with anguish. We ask then, under what economic systems are the greatest number of people leading lives with sufficient food, self-chosen occupations, and the greatest degree of inward and outward independence? In which countries do individuals have the opportunity to be free, really free? Have the socialist countries delivered this choice, mobility, and independence? Or, in fact, is it best nurtured in an open market, private property, and limited government social order?
Within the Limits of Right
These questions have already been answered. The Soviet Union talks about “freedom” and “democracy,” but they don’t seem to have much of an immigration problem. Communist East Germany, on the other hand, must build massive steel and concrete walls and guard them continuously to prevent an exodus of their people. Even in the so-called “social democracies,” the construction of peaceful and egalitarian systems is failing. In recent years the declining French economy, under a more intense Mitterrand brand of socialism, has been on international display. The myth of the Swedish utopia has been fully revealed for what it really is in The New Totali tarians by Roland Huntford.
The great French economist and social critic, Frederic Bastiat, writing in the nineteenth century, captured what would be the desirable characteristics of a truly just and moral order. He asked an important question:
. . . which countries contain the most peaceful, the most moral, and the happiest people? Those people are found in the countries where the law least interferes with private affairs; where the government is least felt; where the individual has the greatest scope, and free opinion the greatest influence; where the administrative powers are fewest and simplest; where taxes are lightest and most nearly equal; . . . where individuals and groups most actively assume their responsibilities, and, consequently, where morals of . . . human beings are constantly improving; where trade, assemblies, and associations are the least restricted; . . . where mankind most nearly follows its own natural inclinations; . . . in short, the happiest, most moral, and most peaceful people are those who most nearly follow this principle: Although mankind is not perfect, still, all hope rests upon the free and voluntary actions of persons within the limits of right; law or force is to be used for nothing except the administration of universal justice.
Understanding that the case we have made for the moral basis of capitalism requires further refinement, we defer to the wisdom of St. Augustine. He argued that material well-being does not necessarily bring better choices, a finer morality, or even more happiness. Referring to earth and the human predicament, he writes: “The things which the earthly city desires cannot justly be said to be evil, for it is itself, in its own kind, better than all other human goods. For it desires earthly peace for the sake of enjoying earthly goods. It is all right for men to seek these things, for they are good things, and without doubt, the gifts of God. But there is something better and that is the heavenly city which is secured by eternal victory and peace never ending.” That kind of morality is between each person and his God. Salvation is quite another matter.
The Exciting Study of Freedom
Despite the arguments of Bastiat, Hayek, Shenfield, and others, a very interesting and important question remains to be asked. Why has a system of social organization which has produced historically unprecedented increases in living standards in those countries where the principles were practiced, and which simultaneously did so much to reduce man’s inhumanity to man during its ascendancy, come to have such a low standing in the minds of so many millions of people? Hayek is surely right when he insists that we must once again make the study of free dom an exciting intellectual issue. Not just for economic, philosophical, or historical reasons, but for the billions of people who, whether they know it or not, must faintly perceive that ideas do have consequences, and that their lives are bound to be affected dramatically by the scribblings of philosophers. “Liberty,” said Alexis de Tocqueville, “cannot be established without morality, nor morality without faith.”
If America is to survive, its indisputably modern elements must be conjoined with what Russell Kirk calls the “permanent things,” and George Nash calls “. . . the spiritual things and the institutions that sustain them.”
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Nash, George. The Conservative Intellectual Movement in America. New York: Basic Books, Inc., 1976.
Rothbard, Murray. Man, Economy and State. Los Angeles: Nash Publishing, 1962. Shenfield, Arthur. “Capitalism Under the Tests of Ethics,” Imprimus. December, 1981.
Spencer, Herbert. Social Statics. New York: Robert Schalkenbach Foundation, 1970. Spooner, Lysander. Natural Law, Weston, Mass.: M & S Press, 1971.
Tocqueville, Alexis de. Democracy in America. New York: Alfred A. Knopf, 1946.
Crossroads is an important and comprehensive presentation of the rise, decline, and restoration of freedom and the market economy. The authors do an outstanding job of introducing readers to the history and nature of the American free market experiment. Copies can be ordered from the American Studies Institute, 3420 East Shea, Suite 266A, Phoenix, Arizona 85028: Paper $14.25, Cloth $26.75. Please add $1.50 for shipping and handling.