Capitalism, Markets and Morality

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THE ideas of Adam Smith succeeded in generating wealth, liberty and happiness around the globe because they were founded in an understanding of the realities of human nature. Unlike Marx and the totalitarians, he did not set out to transform human nature. It was not capitalism that gave us Auschwitz and the Gulag for the untransformable.

Capitalism, very simply, depends on satisfying human wants; other economic systems depend on some form of coercion. Ask any hostile critic of capitalism what should be put in its place and the answer will be either economic coercion or, from the sort of people who believe Osama bin Laden just needs a big hug, an appeal to New Age or occultist theories of spontaneous self-sacrificing co-operation.

Capitalism hardly claims to be moral, but nevertheless is interdependent with a society where moral values are respected. Capitalism functions less well in the presence of trade-barriers such as tariffs and by artificial barriers to market entry which also happen to be forms of theft. It appears badly handicapped in modern Russia by the power of more direct forms of organized crime.

It is false and dangerous to project from the fact that capitalism-a system of production-is largely of itself unconcerned with morality, any notion that a capitalist society can be amoral.

I do not know of any serious commentator who has actually put forward a totally amoral laissez-faire society as a going proposition, however much some socialists and Leftists believe that is what people like us all want.

It is integral to Western Civilization that provision must be made for the welfare of those unable to take part in the market economy. It is obvious, common sense that governments need to be involved in health and safety issues and some other matters in the workplace. One gets extremely tired of being told that capitalists, economic rationalists, 'Drys' or whatever, 'worship the market' or take no account of market externalities, or the need for public goods or infrastructure investment. These claims are sometimes accompanied by suggestions that those who point out economic irrationalities and inefficiencies, such as tariffs, bounties, subsidies etc., are lusting to thrust children back down the coalmines.

Should this be thought hyperbole on my part, I quote from a review of John Hyde's book Dry published in a long-established, quasi-conservative, anti-free-trade, Catholic-oriented Australian journal:

Every tariff, every import quota, every trade union-indeed every marriage where the wife dares to raise children herself, instead of farming them out to totalitarian creches while she furthers her own paper-shuffling career-disgusts Hyde because it defies pure economic determinism.

This misrepresentation of Hyde's book and arguments is hardly worse than one encounters from economic irrationalists almost every day. (A letter of my own to the same journal was published under the heading 'The Free Trade Panacea,' obviously in order to ridicule it.) William Coleman, author of Exasperating Calculators, has documented many more instances of such misrepresentation. In fact, however, I have never met anyone-I do not think even in print-who 'worships the market' or thinks the market is the complete answer to the human condition. At most, such notions tend to be put forward by extreme polemicists such as Ayn Rand or a few libertarians who tend to use the idea of laissez-faire as a starting point for debate rather than a practical agenda. Such notions are simply not part of the real politico-economic world.

One of the silliest accusations I have heard made against capitalism is that it is atheistic. Capitalism is not a religion but a means of production, and it makes as much or as little sense to call Capitalism atheistic as it does to call a steam-engine atheistic. This, incidentally, is one reason why talking of a 'Third Way' between capitalism and Communism (which latter does make religious claims) is about as sensible as talking of a third way between Tuesday week and plywood. …