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The Moral and the Practical

Capitalism is Practical for the Same Reasons That Make It Moral:

Respect for the Mind and Values of the Individual

by Robert W. Tracinski

Chairman

The Center for the Moral Defense of Capitalism

The worldwide discrediting of socialism has left our intellectual leaders in an odd dilemma. The system that they hailed for decades as a moral and philosophical ideal has been shown to be disastrous in practice, leading to stagnation at best and starvation at worst. Meanwhile, capitalism has led to the creation of unprecedented wealth, advanced technology, and widespread prosperity. Yet capitalism is denounced by these same intellectuals as a system of greed, materialism, and ruthless “dog-eat-dog” competition.

So it would seem that the system that enforces virtue leads to poverty—while the system that encourages vice leads to prosperity.

There must be a trade-off, in this view, between being moral and being practical. Given this alternative, the cynical "realists" choose the practical. They conclude that some degree of vice must be tolerated in order to achieve the higher "social good" of prosperity, so they seek a “third way” compromise between the moral ideal of socialism and the practical necessity of capitalism. But the "idealists" will have none of this, so they conclude that if capitalism leads to prosperity, then prosperity itself must be evil. They declare that affluence is a disease and join the environmentalists.

But there is another answer to this dilemma; there is a solution to this apparent contradiction between the moral and the practical. That solution is to re-examine the premise that capitalism is immoral. If we do this, we can see that every characteristic that makes capitalism practical is also a principle that makes capitalism moral.

Capitalism is practical, many economists have argued, because it allows individuals to act on their own thinking rather than being forced to obey the decrees of bureaucrats. Under capitalism, every problem of economic production is tackled by thousands, even millions, of minds. The people whose thinking is successful will thrive. They succeed because they find opportunities that others don't see, because they develop new products that no one else has thought of, or because they discover more efficient production methods that have never been tried before.

In a free market, where everyone is free to start a business, raise capital, and place his product on the market—each individual thinker has the opportunity to put his ideas into practice, and to succeed or fail based on the merits of his idea. Those who succeed bring us new and improved products at an ever lower cost, creating economic progress and prosperity.

In the regulatory state, by contrast, the edicts of politicians and bureaucrats override the thinking of individuals. The result is that political expediency, rather than the truth or falsity of an idea, determines who gets to put his ideas into practice. Thus, for example, a popular health scare about silicone implants or electric power lines is backed by judicial action, in defiance of provable scientific facts; the congressional districts in which ethanol is produced are regarded as more important than the fuel’s economic value; a union leader's ability to deliver votes trumps the employer's judgment concerning what he can afford to pay; and so on.

Stated in more fundamental terms, it is the rational thinking of individuals that causes the production of wealth. But government regulation acts to stymie individual thought, subordinating the knowledge and creativity of millions of individuals to the edicts of public officials.

Thus, the practical value of capitalism flows from the need to protect the creativity and freedom of thought of the individual. But isn’t this also a profound moral principle? Most of today's intellectuals still recognize that we need to protect the thinking of the artist or the scientist—but the same principle applies equally to the worker, the executive, and the industrialist. Only capitalism fully recognizes the moral right of the individual to think and to act on his thinking—not just in his personal life or intellectual life, but also in his economic life.

Economic production is not just a matter of thinking; it is also a matter of motivation. Thus, according to economists, the practicality of capitalism also stems from the fact that it allows individuals to set their own plans and pursue their own goals. Individuals are allowed to decide what career they would enjoy most; what products would give them the best value for their money; what opportunities would give them the best return on their investment; and so on. And capitalism does not merely offer the individual the freedom to pursue his own goals; it also rewards him for doing so. It offers him, as an incentive and reward for achieving his ambitions, the prospect of making money. As a result, people in a free market will work harder, longer, and smarter; they will take more risks and endure more hardships—so long as the work is theirs to choose and theirs to profit from.

In a state-run economy, by contrast, the central planning of government officials wipes out the plans of individuals. Since they don't own the business, can't control the course of their own careers, and don't stand to gain or lose from their actions, the workers' predominant attitude is apathy. And why should they care? If they succeed in increasing production, the extra wealth will be used to support those who haven't succeeded. "From each according to his ability, to each according to his need" is the motto of the welfare state. But in such a system, who would want to be the man of ability, conscripted into a life of unrewarded drudgery so that others can consume the product of his labor? It is no surprise that every society that has approached this socialist ideal has found few volunteers to be the men of ability who keep the economy running.

Stated in more fundamental terms, capitalism is practical because it relies on the inexhaustible motive-power of self-interest. Under capitalism, people are driven by loyalty to their own goals and by the ambition to improve their lives. They are driven by the idea that one's own life is an irreplaceable value not to be sacrificed or wasted.

But this is also a crucial moral principle: the principle that each man is an end in himself, not a mere cog in the collective machine to be exploited for the ends of others. Most of today's intellectuals reflexively condemn self-interest; yet this is the same quality enshrined by our nation's founders when they proclaimed the individual's right to "the pursuit of happiness." It is only capitalism that recognizes this right.

The fundamental characteristics that make capitalism practical—its respect for the freedom of the mind and for the sanctity of the individual—are also profound moral ideals. This is the answer to the dilemma of the moral vs. the practical. The answer is that capitalism is a system of virtue—the virtues of rational thought, productive work, and pride in the value of one's own person. The reward for these virtues—and for the political system that protects and encourages them—is an ever-increasing wealth and prosperity.

Continue to Know Thy Enemy