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Understanding Capitalism as a Moral System

By: Adriana Peralta - @AdriPeraltaM - Jan 2, 2014, 1:04 pm

EspañolCapitalism is not often associated with morality. To bring the two concepts together, The Morality Of Capitalism: What Your Professors Won’t Tell You explains why it is the quintessential system for creating wealth, overcoming the natural state of poverty, and freeing mankind. Most important, the book’s essays differentiate free market capitalism from the “crony capitalism” responsible for economic crises, such as the one in 2008.
In order for capitalism to function properly, it must go hand in hand with economic liberty. The combination of these two has brought progress for humanity, more than any other system in existence. Further, it allows men to choose their vocation and to enjoy the fruits of their labor.

moralidad del capitalismoThe capitalist system is responsible for allowing mankind to advance with huge strides, and in little more than 200 years. Life expectancy has almost doubled; and easy access to medicines, education, technology, food, and instant communications are just a few of its successes. In spite of all this, though, many people in this era still believe capitalism is the culprit for most of humanity’s problems.

In terms of structure, The Morality of Capitalism is a set of essays, and its authors include Nobel Prize winners Mario Vargas Llosa and Vernon Smith. It also has an interview with Whole Foods Market cofounder John Mackey, by the editor, Tom Palmer. Split into four parts, the book has extensive analyses of: the virtues of entrepreneurial capitalism, voluntary interaction and self-interest, production and distribution of wealth, and globalization.

In the interview, Mackey explains his idea of “conscious capitalism,” telling us that “capitalism and businesses are the greatest forces for good in the world” — that capitalism and commerce are nothing more than people cooperating with each other to create value for other people and themselves. Mackey identifies himself as an entrepreneur, and therefore an optimist; and he insists we need to change the conversation about capitalism, to show that it creates common value and doesn’t just benefit a small group.

Competition and cooperation also go hand in hand, David Boaz of the Cato Institute explains. He stresses that these activities establish a market — a group of people competing to cooperate. According to Boaz, cooperation is so important that human beings have created institutions that allow it, such as property rights, limited state intervention, and the rule of law.

The book also addresses the debate over equality as a goal and a value in and of itself. Russian philosopher Leonid V. Nikonov explains that inequality is a precondition for exchange, so without it this activity would not make any sense. It would be illogical to expect equal results in exchange because if that were the case, the main reason for the activity would be lost, which is to improve the situation of the parts that are involved in it.

In opposition to those who put down capitalism and call for a redistribution of available resources and “socially fair” results, German economist Ludwig Lachmann explains how property, wealth, and resources — combined with the talents of entrepreneurs — modify market processes and create more wealth. To add value to the market, Lachmann argues, is not a game of luck, but of skill.

These analyses zero in on the connection between government intervention and economic welfare. According to South African economist Temba A. Nolutshungu, the degree of economic freedom that a government allows its citizens has a direct influence on economic outcomes. He contends that “political freedom and economic welfare are not the same thing, although it is possible that a link exists between the two . . . Economic welfare is a consequence of freedom.”

The books closes with an essay by Mario Vargas Llosa on the culture of freedom. The Nobel Prize winner explains the effects of globalization on the so-called “cultural identity” of people. “Cultures need to live free,” claims Vargas Llosa, as he rebuffs the idea of such an identity being static and criticizes those who aim to preserve it as such.

Vargas Llosa warns about the danger of an arbitrary preservation of cultural identity, given the experiences of countries that have lived under nation-state regimes. The advantage of globalization is that it slowly allows for each individual to build a cultural identity of his own, through preferences, rather than government dictates.

Tom Palmer invites us to step back and think for ourselves about the ideas exposed in the book. In particular these ideas make for fitting reading for individuals who think of capitalism as one of the worst evils to be found — in addition to liberty advocates who do not understand the ethical angle.

Numbers and charts aside, the book demystifies the selfishness associated with capitalism. In the words of Vernon Smith, referring to exchange within the market, “you have to give to receive.”

The book has been published in English by the Atlas Network and Students for Liberty. There is also a Spanish version available, given support from Fundación para el Progreso, along with the Cato Institute, the Atlas Network, and Estudiantes por la Libertad.

Translated by Melisa Slep.

Adriana Peralta Adriana Peralta

Adriana Peralta is a freedom advocate from El Salvador and a @CREO_org board member. She is a PanAm Post reporter and blogger, a 2005 Ruta Quetzal scholar, a trained engineer, and an SMC University masters student in political economy. She is also a Pink Floyd fan. Follow @AdriPeraltaM.