It continues to exert a powerful attraction to many people. Why?
Put simply, capitalism is seen as fostering selfishness, while socialism appeals to seemingly higher values than mere material satisfaction. As the late economist Joseph Schumpeter, who was no friend of socialism, put it, “Socialism aims at higher goals than full bellies. ” Of course, for much of human history, and indeed in parts of the world today, many people long for a full belly. But, as one ethical teacher once reminded, man does not live by bread alone. Can capitalism speak to those higher values? Yes, say a number of free-market thinkers.
It is no accident, say its supporters, that capitalism came to maturity at the same time as classical liberalism in the 18th and 19th centuries. Liberalism, in its original meaning, aimed at the very lofty goals of erecting governments that respected human freedom and human rights.
“A free market is the only economic system consistent with individual rights,” said David Kelley, executive director of the Institute for Objectivist Studies, a think tank developing the ideas of novelist-philosopher Ayn Rand. Kelley argues that socialism regards individuals as means to ends determined by “society,” or by those who purport to speak for it. Relations between people in socialist societies are organized by force, which is necessary to direct people to these ends, and any freedom a person enjoys is only at the discretion of “society”.
“Force is certainly more physical than spiritual. It’s about threats, not knowledge,” said Kelley. In capitalist societies though, says Kelley, individuals are free to pursue their own ends. In a free society, he argues, people must deal with each other only on a voluntary basis. “The only social constraint that capitalism imposes is the requirement that those who wish the services of others must offer a freely accepted value in return,” said Kelley. When individuals in a capitalist society complete a transaction, the two may reach a mutually satisfactory result.
If either is dissatisfied, the transaction does not occur. Unlike the aristocrat or the socialist commissar, the businessperson does not order, he persuades. He persuades customers to buy his goods, banks to lend him money, potential partners to join him, and even laborers to work for him. “The way a salesperson in an American store greets customers makes the point: ‘How can I help you?’
The phrase startles foreigners,” writes Donald McCloskey, an economist at the University of Iowa. Compare this treatment, he says, to the Bulgaria of old, where police were stationed in department stores, not to prevent theft but to keep people from attacking the arrogant and incompetent staff selling goods that at once fell apart. This high share of persuasion in a market economy provides a basis for virtue, argues McCloskey. “One must establish a relationship of trust with someone in order to persuade him.
The (personal) character that a speaker claims is the master argument,” he writes. Father Robert Sirico, president of the Acton Institute for the Study of Religion and Liberty, says that without freedom virtue is impossible. “An act that is coerced isn’t virtuous, only a freely chosen act is a virtuous one,” he said. However, critics of capitalism charge that the profit motive rewards self-interested behavior and encourages the accumulation of material goods.
They add the market provides no incentive for charitable works or for cultivating more spiritual interests.
SCROOGE OR EWING?
From the beginning business people have been caricatured as selfish, greedy and unconcerned with others.
From Ebeneezer Scrooge to J. R. Ewing, the portrait is much the same. “I don’t believe that capitalism guarantees virtue, but I think it does a better job than other systems,” says Sirico. Accounts of life in the old Soviet bloc make it clear that socialism didn’t succeed in eliminating materialism and selfishness.
In his 1990 book, Meltdown: Inside the Soviet Economy, economist Paul Craig Roberts described the lifestyle of members of the ruling Politburo as one of chauffeured limousines, spacious country houses equipped with swimming pools, personal maids and cooks, and access to the finest foods and wines.
Meanwhile, for the common Soviet citizen, basic items such as bread, sugar, cabbage and milk could be obtained only by waiting hours in long lines and things such as soap, detergent, shampoo, washing powders and toothpaste were even harder to find. Unlike the rich in capitalist countries, the elite of the Soviet Union did not acquire their wealth by providing goods and services that people wanted but by manipulating the political machinery. Moreover, no one has argued more forcefully against a narrow materialistic approach to living one’s life than many of the defenders of capitalism. Take novelist-philosopher Ayn Rand, for example.
The basis of her ethics was what she described as rational self-interest.
She even entitled one of her nonfiction books The Virtue of Selfishness. But it is clear from her writings that by selfishness she meant something other than what is usually described by the word. Her novel “The Fountainhead” describes one man’s struggle to succeed in his chosen profession of architecture.
Before his eventual triumph, this man, Howard Roark, spends much of the book working at manual labor or designing small projects. Success could have been his early on if he had designed buildings the way that critics and other architects and even some of his potential customers had wanted, but he refused to compromise his artistic vision.
He valued his integrity more than wealth. Put another way, Roark refused to sell a product he didn’t believe in, even though he could have gotten rich had he done so. Further, says Kelley, it is a mistake to believe that an individualist cannot find relationships with others valuable on other than financial terms. “In fact, we derive tremendous value – material and emotional – from others,” says Kelley.
While he, following Rand, rejects the idea that there is a moral duty to charity, Kelley argues that nonetheless there is a selfish basis for some charitable activity. “In light of the many benefits we receive from dealing with others, it is natural to regard our fellows in a spirit of general benevolence, to sympathize with their misfortunes, and to give aid when it does not require a sacrifice of our own interests,” said Kelley.
Indeed, tremendous ambition has often existed side-by-s
ide in the same individual with a tremendous charitable impulse. Many of the great capitalists of the 19th and early 20th century, men such as Andrew Carnegie and John D. Rockefeller, gave vast fortunes to charity. Some economists have pointed out that during the 1980s, popularly categorized as a decade of greed, charitable giving grew faster than in the previous decades. This fact doesn’t surprise those who study charitable activities. “Typically, as people grow wealthier and they don’t have to worry about day-to-day survival, their idealism starts to grow,” said economist James L. Payne, who is currently working on a book on voluntary organizations.
Capitalist countries typically have numerous organizations through which people can donate time or money to help complete strangers. The situation was quite different in the old Soviet Union. “On the personal level there was a lot of charitable giving and doing for others among people’s family and friends,” said Richard Ebeling, an economist at Hillsdale College.
“But officially, private charity was against the law, so there were no institutions for the sort of impersonal giving that Americans often engage in,” he added. In addition to charity, capitalism fosters other virtues, say its defenders. One of these virtues is thrift. “The institution of private property gives people an incentive to save out of current consumption and invest those funds because they know that they can reap whatever awards come from that investment,” said Father Sirico. “If property isn’t secure, people have an incentive to consume their resources immediately, lest they be taken away,” he added.
FINDING THE NEW
Since at least the days of Charles Dickens, business people have been attacked and caricatured as persons of mere routine. However, those who defend free markets say that this conception is all wrong. Business is not about following old patterns but finding the new. Business people, the good ones anyway, are engaged in an endless effort to find new ways to serve consumers, to find new products, new markets, and new technologies of manufacture, say students of capitalism. “Business is a creative activity, just like writing a novel or sculpting a statue,” said Kelley.
“And it requires the same traits as other creative activities: imagination, self-discipline and, often, courage,” he added. Because it involves man’s mind – thought, creativity and rationality – production is as much a spiritual activity as a material one, says Kelley.
Thie article originally appeared in Investor’s Business Daily