Book Review: The Morality of Capitalism



"Free market capitalism is creativity in service to humanity."


JT Bogden - Many people do not think about capitalism's real contribution and value. Although, most hear more from capitalism's opponents who are quick to point to perceived flaws and problems in order to espouse their competitive system. The sound bytes echo over the airwaves as news media drive the spin home; corruption, greed, and deals that are out-of-this-world. In this post, the morality of capitalism is explored. Originally, this post was scripted for inclusion into a book being written by me several years ago. The Morality of Capitalism is not a single person's view but instead a set of essays from economists, marketers, political scientists, etc... from whom a broad perspective is offered.


The Morality of Capitalism


Morality is a dialectic conversation within the mind of an individual as they search out the distinctiveness between right or wrong, good or evil, and redeeming or demeaning. Morality results in an internal character condition within the individual that reflects in their decision-making. An individual's moral condition is impressed upon a system, institution, or process by management or the seat the individual may hold. Moreover, a system, process, or institution may reflect a moral posture by design as well as by management. For example, institutional theft, taxes, is the confiscation or restriction of wealth instituted by those invested in political power, not invested in the production of wealth, and is considered to be the worse kind of theft. Institutional theft often operates behind the mask of process obfuscation. Thus, when organizing a new process, system, or institution care must be taken to ensure there is redeeming value. Leaders must engage in dialectic conversation and examine the dialectic posture and any paradoxes carefully.


There is a moral paradox between selfishness and selflessness. When people are selfish disputes arise over exchanges deemed unfair and resentment towards those who become rich. Similar disputes arise when both parties are selfless. In a hypothetical example, the buyer may not make a purchase if the price is too low for fear of taking advantage of the seller. However, the seller may not raise prices out of fear he may be gouging the buyer. The problem is a conflict of interest in either scenario and not a dilemma of rich vs poor cast often as a privilege; the haves and have nots. The solution to the problem is equal rights for everyone. In this way, everyone has the opportunity to pursue wealth (Yushi, 2011). Success is another issue.


Regarding success, in free markets, some people become more wealthy than others and some lose their shirts. Markets do not generate equal outcomes nor do they require equal capitalization. Thus, a seeming paradox is set up between inequality and equality. Equality is necessary in order to trade, innovate, choose and reap rewards earned but the expectation of results generated is a risk. People possess equal rights to participate in the free market but equal results would be an economic absurdity even though that is upheld as a moral value by those who support socialism. The scandal inequality thought is the gap between the wealth of people in economically free societies and the wealth in unfree societies. Freeing people economically will create enormous wealth and close the gap. Moreover, it would do so as a positive consequence of justice by eliminating the unequal treatment of people in countries misruled by cronyism, statism, militarism, socialism, communism, corruption, and brute force. Economic freedom means an equal standard of justice, equal respect for the rights of all to innovate, produce, and trade (Nokonov, 2011). Capitalism is not just an alternative to these other systems. Free-market capitalism is the natural economy when all human contrived systems and controls are removed.


There needs to be a distinction between the forms of capitalism that are often equivocated as one by social intellectuals. ' Crony ' capitalism is a system found in many nations and governments. In many nations, the aristocracy came about their wealth by birth or by alignment with the state and not through the means of production of wealth. Thus, these people, friends, relatives, and/or supporters inherently wield political power and are the ' Cronies '. Being in such a privileged position they take it on themselves to reward some companies and harm others often using taxpayer money in the process for activities like bailouts, stimulus, pork-barrel spending, and other activities. This is a corrupt system and should not be confused with Free-market capitalism that refers to a system of production and exchange that has these qualities:

  • Based on the Rule of Law and guiding discipline of profits and losses

  • Equality of Rights for all

  • Freedom to choose

  • Freedom to trade

  • Freedom to innovate

  • The Right to enjoy the fruits of one's labor, savings, and investments

  • Freedom from Institutional Theft; confiscation or restriction of wealth by those invested in political power rather than the production of wealth.

Free-market capitalism is often resented by the elite due to an inherent loss of status, power, and control. Free-market capitalism gives levity to the middle class and produces advances to humankind that do not have the magnitude of impact under other systems.


Looking Deeper Into Free-Market Capitalism


So far, as we examined capitalism we considered the ' essence ' of Capitalism as a system that promotes equality, freedom, and opportunity. We also considered the ' being ' of capitalism as a market where production and exchange occur. Now we are going to look deeper at the ' virtue ' of capitalism or what good does capitalism bring to humanity. We saw on a personal level that everyone was equal and those unjust systems have an alternative. But what good does capitalism do for humanity?


Freedom is connected to capital economies which are deemed to be natural and precede other economic forms (see notes) such as the collectivist views of socialism and the extreme form of communism. Capitalism is an economic system that combines cultural, spiritual, and ethical values in a mixture that puts human creativity to the service of humanity such that value is created as opposed to menially making stuff, things, or jobs (Palmer, 2011, pp. 1-3). Stuff, things, and jobs may be the outcome of creating value but making things serve no redeeming value in itself; every task is followed by another task as there is no foreseeable end or real purpose. Politicians who do not understand capitalism create jobs rather than incentivize innovation. This is a very important distinction between creating value vice simply making things or creating jobs. Capitalists create value and new markets emerge causing the age-old axiom, "Necessity is the mother of invention/innovation" to be an incorrect understanding. Nothing of value was ever necessitated as for example no one was sitting around complaining there needs to be a telephone. The telephone was invented that caused the need that people saw value in having formed a new market. The accurate depiction is "Invention/innovation is the mother of necessity" (Schwartz, 2004, p 13). No one needed the smartphone until Apple / Steven Jobs created the value then lines were out the door for the smartphone. The innovation disrupted the cellular market fundamentally changing the cell phone. Thus, the distinctive aspect of Capitalism is creativity in service of humanity which results in new markets and technologies that give levity to life in some way. In the case of smartphones despite people playing games and texting, the device concentrated technologies of portable computing and telecommunications providing GPS maps, contact list consolidation, weather graphics, etc... Of course, jobs were also created to manufacture, distribute, and sell the new phones. Creativity in the service of humanity is a principle redeeming value of capitalism.


Creative Destruction is a systemic action within capitalism that replaces the old with the new (McCloskey, 2011). The kerosene lantern was replaced by the light bulb and the light bulb is being replaced with the Light Emitting Diode (LED). Kerosene is a fossil fuel and these lanterns when knocked over cause fires. This was the cause of the Great Chicago Fire on October 8, 1871. The incandescent light bulb is safer but burns large amounts of electricity. The LED bulb lasts longer and burns substantially less energy. Thus, the service to humanity is a safer more energy-efficient light source. Of course, there were jobs created along the way too but the advantage of capitalism is the value created in service to humanity and in this case was achieved through creative destruction.


Free markets are considered natural and precede all other forms of economic systems. When free-market capitalism was instituted and protected by the United States Government for the first time in human history, the middle class had dignity and liberty as well as an innovation explosion took place. There were all kinds of new devices, products, ideas, and society overcame many social ills. The poor had the opportunity to move up, women could assert their worth in the workplace, and races have equal opportunity. The redeeming value to humanity is an uplifting of dignity and liberty. Overall, Free-market capitalism has had the single most impact on humanity than any rhetoric, idea, political system, or any other economic system (McCloskey, 2011).


Notes: Free market capitalism is considered natural because when freed of all political, social, and human-induced constraints, the market character persists. The antithesis of free-market capitalism is social justice and the command economy.


References:


Kelley, D. (2011). The morality of capitalism; ayn rand and capitalism: the moral revolution. Jameson Books, Inc: IL. pp. 71-72. McCloskey, D. (2011). The morality of capitalism; liberty and dignity explain the modern world. Jameson Books, Inc: IL. pp. 27-30. Nikonov, L. (2011). The morality of capitalism; the moral logic of equality and inequality in market society. Jameson Books, Inc: IL. pp. 55-62

Palmer, T. (2011). The morality of capitalism; introduction: the morality of capitalism. Jameson Books, Inc: IL. pp. 1-3.


Schwartz, E. (2004). Juice: the creative Fuel that drives world-class inventors. Harvard Business Review Press: USA. Yushi, M. (2011). The morality of capitalism; the paradox of morality. Jameson Books, Inc: IL. pp. 1-3.