Magazine article The Public Interest

Capitalism and Morality

Magazine article The Public Interest

Capitalism and Morality

Article excerpt

Twenty-five years ago, the two founding editors of this magazine published important essays on the cultural and moral status of capitalism.(*) Irving Kristol worried that the most intelligent contemporary defenders of capitalism were now mostly libertarians who praised the market because it produced material benefits and enhanced human freedom but who denied that markets had anything to do with morality. Friedrich Hayek, for example, had written that in a free society it is neither desirable nor practicable that material rewards should be made generally to correspond to what men recognize as merit." It is not practicable because no one can supply a non-arbitrary definition of merit (or justice); it is not desirable because any attempt to impose such a definition would create a despotism. Kristol worried that people would not support any economic order in which the will to success and privilege was severed from its moral moorings." Capitalism could not survive if, quoting George Fitzhugh, "none but the selfish virtues are in repute" because in such a society "virtue loses all her loveliness" and social order becomes impossible.

In the same issue, Daniel Bell published his famous essay on "The Cultural Contradictions of Capitalism" in which he suggested that the bourgeois culture-rational, pragmatic, and moral - that had created capitalism was now being destroyed by the success of capitalism. As capitalism replaced feudal stagnation with material success, it replaced tradition with materialism, as privation was supplanted by abundance, prudence was displaced by prodigality. Capitalism created both a parvenu class of rich plutocrats and corporate climbers and a counterculture of critical intellectuals and disaffected youth. The latter began to have a field day exposing what they took to be the greed, hypocrisy, and Philistinism of the former.

Capitalism's great test

Both Kristol and Bell were amplifying on a theme first developed by Joseph Schumpeter: Contrary to what Marx had taught, capitalism would be destroyed not by its failures but by its successes. Their views did not go unchallenged; a decade later George Gilder, in Wealth and Poverty, launched a frontal attack on the Schumpeterian theory (and its development by Kristol and Bell) by arguing that capitalism was, in fact, a highly moral enterprise because it "begins with giving" and requires "faith."

However one judges that debate, it is striking that in 1970 - at a time when socialism still had many defenders, when certain American economists (and the CIA!) were suggesting that the Soviet economy was growing faster than the American, when books were being written explaining how Fidel Castro could achieve by the use of moral incentives" what other nations achieved by employing material ones-kristol and Bell saw that the great test of capitalism would not be economic but moral. Time has proved them right. Except for a handful of American professors, everyone here and abroad now recognizes that capitalism produces greater material abundance for more people than any other economic system ever invented. The evidence is not in dispute. A series of natural experiments were conducted on a scale that every social scientist must envy. Several nations-china, Germany, Korea, and Vietnam - were sawed in two, and capitalism was installed in one part and "socialism" in the other. In every case, the capitalist part out-produced, by a vast margin, the non-capitalist one.

Moreover, it has become clear during the last half century that democratic regimes only flourish in capitalist societies. Not every nation with something approximating capitalism is democratic, but every nation that is democratic is, to some significant degree, capitalist. (By "capitalist," I mean that production is chiefly organized on the basis of privately owned enterprises, and exchange takes place primarily through voluntary markets.)

If capitalism is an economic success and the necessary (but not sufficient) precondition for democracy, it only remains vulnerable on cultural and moral grounds. …

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