Opinion: The Morality of Capitalism

November 10, 2014

Inside Insight

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capitalism‘CAPITALISM’ IS A DIRTY WORD.
BUT IT SHOULDN’T BE. HERE’S WHY.

Imagine this incredible scenario: You walk into a pizza joint hungry. A few minutes later you’re handed a delicious slice of pizza. You pay the cashier, you both say thank you, and you sit down and enjoy your meal.

Why is this story so incredible? For starters, the pizza place was just waiting for you. Nobody told that person to start a pizza restaurant. No government planning office calculated how many hungry people would walk down that street each day looking for lunch. No city official decided the appropriate pizza-to-sandwich-shop ratio. No mayor issued a plea for people to hire cooks and serve food to citizens. No law required the pizza owner to offer X number of toppings.

None of this was planned. Instead, millions of entrepreneurs each day examine the market and try to fulfill a need. This happens spontaneously. From health care to food production, capitalists are society’s problem solvers. As Ludwig von Mises once said, “Capitalism delivers the goods.”

The second reason why this story is incredible is the double thank you. This is much more than a pleasantry. Instead, it is evidence that wealth was created. You value the slice of pizza more than the cash in your wallet, and the restaurateur values your cash more than the slice of pizza. After the transaction, both parties are better off, and POOF!, wealth is created right there at the cash register. (Economist have a fancy term for this. It’s called a “mutually beneficial transaction.”) What’s better is that now you can go about your day and hopefully create wealth again instead of searching for ingredients to make pizza.

Wealth is created every day though billions of peaceful and profitable transactions. The moment a single transaction does not create wealth, alternatives are sought out and the system repairs itself – spontaneously. It makes the world better for everyone and lifts thousands out of desperate poverty each and every day. This is why capitalism has led to the greatest advancements in human history, and it’s why someone living at today’s poverty line lives better (and longer) than royalty did a century ago. This is the miracle of capitalism. And despite what some politicians think, it cannot be planned or even managed.

So why isn’t this story told more? Why are capitalists and capitalism demonized? The answer is simple: Capitalism is accused of crimes it did not commit.

The cold hard truth is that we have never seen pure capitalism on a national scale. Capitalism, at its purest form, relies on the government to protect property rights and enforce contracts. That’s it. The rest is left the individuals to figure out. But we all know governments meddle more than this. The pressure for legislators to “protect” consumers and “help” workers is immense. This, combined with the lure for entrepreneurs to sell products and services through government (instead of competing for customers in the marketplace), or to lobby legislators for special favors (instead of improving a product), turns pure capitalism into cronyism. From professional licensing requirements for interior designers to international trade barriers for aerospace giants, capitalists kill their own golden egg. They are their own worst enemy. Their constant “rent-seeking” from the government feels good for them in the short-term, but harms them – and us – in the long run.

I say business people are their own worst enemy because their actions give all of us reason to hate them, to blame them when things go wrong, and to demonize business as a whole. When we see a multi-billion dollar company pay $0 in taxes because they persuaded politicians to rig the tax code in their favor, we feel angry. When we see our tax dollars bailing out failing banks and automakers, we feel cheated. This is not capitalism – it’s coercion, cronyism, or outright corruption. And the longer this occurs, the more society begins to blame all business for all problems. And in the end, capitalism – not the government – goes on trial.

How do we restore the idea that business is moral? How do we and restore our faith in the free markets? As long as billions of dollars are doled out each year to companies and industries that lobby the best, we cannot stop cronyism. The pigs will always go to the trough.

My answer is simple. Honest business people must defend themselves and do their part in restoring the public’s trust. Don’t wait for politicians or academics to do this work for you. Avoid the temptation of seeking government handouts and protection. Educate yourself on the morality of capitalism. Explain to others why the profit incentive causes ordinary people to create extraordinary things – and how we all suffer when we allow bureaucrats to meddle in the economy. Lastly, take the time to talk to your friends, employees, and business partners about these ideas. Have a serious non-political discussion about how your company or your industry helps the world. Maybe even include this in your company’s mission statement and employee handbook.

Mises also said, “Capitalism needs neither propaganda nor apostles. Its achievements speak for themselves.” I disagree. The achievements of capitalism are hijacked by politicians and eclipsed by false accusations every day. Capitalism needs all the propaganda and apostles it can get. For the sake of society and what we can accomplish together, capitalists must reclaim the moral high-ground before it’s taken away from them completely.

Brad DeVos is the President and CEO of the Bastiat Society, a 501c3 organization that brings the ideas of free markets and free societies to business communities around the world.