The Intrinsic Morality of Capitalism

By Brian Anderson, Contributing Editor
Capitalism is intrinsically a moral economic and political system because it accommodates the complexities of the nature of man. For the purpose of this article capitalism is defined as an economic and political system in which interactions among individuals are premised on the notions of liberty, private property, and freedom of contract and association. In a capitalist system property and capital are owned by private individuals rather than a central government (i.e. socialism). Given that economics is inextricably bound to politics, capitalism is equally an economic system as it is a system of governance since, in a capitalist system, the government must limit its infringement upon the interactions of private citizens. The proper role of government in a capitalist system is to enforcement laws that preserve the Lockean and Jeffersonian notion that man has natural rights to life, liberty, property and the pursuit of happiness.

As a theoretical construct, capitalism accommodates the complexities of human nature in three ways: 1) it recognizes the dignity of the individual, 2) it encourages man to achieve true satisfaction, and 3) it is a system based on service that creates jobs and fosters innovation which improves the quality of life in all socioeconomic classes.

Capitalism treats all members of society as individuals who inherently have the same rights as every other member of society. Individuals seek to derive happiness from the pursuits of their own ambitions. Some people seek to accumulate wealth, others vow a life dedicated to a religious vocation, others pursue leisure, others pursue knowledge, and so on. Most individuals pursue several goals throughout their lives, often simultaneously. The point is that individuals pursue various personal ambitions that cannot be orchestrated by other individuals or a central government. Capitalism allows individuals to pursue activities that are consistent with their personal value systems and aspirations. Further, in the pursuit of their desires, individuals must treat other individuals with respect and acknowledge the dignity of their individuality as they expect others to acknowledge the same in themselves. The acknowledgement of the dignity of the humanness of another person also compels man to help those in need. Charity, therefore, is a fundamental moral component of capitalism as man empathizes with others and seeks justice. Now onto how capitalism encourages man to achieve true satisfaction.

Man is a rational being that achieves true satisfaction via reason and accomplishment. Capitalism creates an environment that encourages rational behavior as individuals must calculate the degree of risk related to each decision and determine the potential consequences of their actions. This is not to argue that man acts rationally all the time. The argument here is that people generally make rational decisions throughout their lives to achieve their goals. The collective rational nature of capitalism ensures that the economic and political system will remain stable so long as external forces do not alter it. A stable economic and political system affords men the luxury of planning how to achieve their goals. True satisfaction in life occurs when man achieves his goals. Reflect on the moments in your life when you were truly satisfied. Chances are that you worked hard to accomplish a goal that initially seemed unattainable or you overcame an obstacle that you did not think you had the courage or strength to conquer. The phrase, “I worked hard for it” often accompanies true satisfaction.

Finally, capitalism is a system based on service to others that fosters innovation which improves the quality of life in all socioeconomic classes. This is perhaps where capitalism is incorrectly vilified the most due to wealth disparities between the rich and the poor. There is nothing intrinsically wrong with wealth disparities. If you are able to improve your quality of life as a result of another person’s accumulation of wealth, that is a good thing. Consider that Bill Gates’ accumulation of wealth has created thousands of jobs. Further, capitalism is a free system in which individuals can move between jobs as their ambitions change. Capitalism encourages individuals who want to earn greater wealth to pursue that goal. Conversely, capitalism also encourages people who want to work in relatively low paying jobs in the nonprofit sector to live a satisfying life working such jobs. Both pursuits, it is important to note, are based on service to others. Man typically accumulates wealth and satisfaction by providing services or products that are valuable to other members of society. Since multiple individuals and companies can enter service or product markets, capitalism also facilitates competition, which is the primary impetus for innovation. As products modernize, technology trickles down to the lowest socioeconomic classes thereby improving their quality of life. Overall, competition and innovation improve the quality of life for all socioeconomic classes.

Throughout this argument you may have dismissed some of the merits of capitalism and asked, “What about the current economic downturn? Wasn’t it the result of catastrophic failures in the capitalist system?” The answer is partially yes but primarily no. The breakdown in the economy occurred in the financial sector which is the most heavily regulated sector. The federal government coerced financial institutions to lend money to nonqualified individuals via the Community Reinvestment Act. The federal government’s intrusion into the private sector eroded the rational nature of the capitalist system as financial institutions lent funds to nonqualified borrowers and sold mortgages to quasi government institutions like Fannie Mae. A true capitalist system would have prevented or limited the economic downturn.