The Morality of Capitalism
Well, sometimes the self-generated posting just doesn’t come easily, which describes my state over the last few days. So, that’s when we bloggers revert to the excerpt-other-people’s-writing-and-compile-and-synthesize tactic. (Well, it’s better than nothing).
I recently read this piece from Richard Karlgaard on Forbe’s web site in which he wrote:
Money (profit) is a tool. It is capital. Without capital there is no capitalism. Innovation starves. Prosperity weakens. Societies stagnate. God-given gifts wither. This is especially true for humanity’s wonderfully zany outliers: artists, inventors, entrepreneurs. They need capitalism more than anyone.
Money is good, therefore, because capitalism is good. It delivers the goods, literally, and better–broadly and individually–than does any other system…
Bill Ziff, a successful magazine capitalist who died last year, spoke for most of us: “[Capitalism] is not in itself sufficient to create values. It depends on what human and religious values we, ourselves, bring to our affairs. Insofar as those values fail, we would all descend toward a lawless, inhumane, cutthroat society that will no longer harbor our civilization.”
…Conservatives and liberals agree on little these days. But most agree on this: Capitalism works, but it is insufficiently moral. Conservatives–allow me to paint them with a broad brush–believe capitalism works best when it is spun with golden moral threads, when it weaves in those old values learned in church, charities, service clubs and the like.
Liberals are more skeptical. They know capitalism will produce losers as well as winners. They feel the winners must be forced into helping the losers. Forced help hurts everyone, say conservatives. Redistribution discourages winners from producing and losers from trying…
…[Adam Smith] seemed to say two contradictory things. In The Wealth of Nations (1776) he wrote these famous words about self-interest: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” This sounds like selfishness: Greed is good.
But Smith never believed that. In his earlier book, The Theory of Moral Sentiments (1759), Smith defined self-interest not as selfishness or greed but as a psychological need to win favor within one’s society. Smith revised The Theory of Moral Sentiments after he wrote The Wealth of Nations. He did not change his belief that moral sentiments and self-interest are the same thing.
To this, Samuel Gregg elaborates:
Adam Smith’s reference to the “invisible hand” perplexes some, but is simply a metaphor for the idea that through allowing people to pursue their self-interest, unintended but beneficial social consequences for others will follow.
As individuals pursue profit, they unintentionally add to the sum total of the wealth in society, unintentionally allow people from different nations to come to know each other, unintentionally promote civility and peace, unintentionally allow others to benefit from more and better jobs, and unintentionally contribute to technological development. None of this means that commercial society does not afford opportunities for people to act altruistically. Rather, it is precisely because increasingly large numbers of people in commercial society are able to accumulate sums of capital that exceed their immediate needs and acquired responsibilities, they begin to develop opportunities to be generous to others.
Finally, a post dealing with “self-interest, rightly understood” (especially by me) can’t go anywhere without that estimable Frenchman, de Tocqueville!
In the United States hardly anybody talks of the beauty of virtue, but they maintain that virtue is useful and prove it every day. The American moralists do not profess that men ought to sacrifice themselves for their fellow creatures because it is noble to make such sacrifices, but they boldly aver that such sacrifices are as necessary to him who imposes them upon himself as to him for whose sake they are made….They…do not deny that every man may follow his own interest, but they endeavor to prove that it is the interest of every man to be virtuous…
The doctrine of interest rightly understood…is as often asserted by the poor man as by the rich…The Americans…are fond of explaining almost all the actions of their lives by the principle of self-interest rightly understood; they show with complacency how an enlightened regard for themselves constantly prompts them to assist one another and inclines them willingly to sacrifice a portion of their time and property to the welfare of the state. In this respect I think they frequently fail to do themselves justice, for in the United States as well as elsewhere people are sometimes seen to give way to those disinterested and spontaneous impulses that are natural to man; but the Americans seldom admit that they yield to emotions of this kind; they are more anxious to do honor to their philosophy than to themselves…
The principle of self-interest rightly understood produces no great acts of self-sacrifice, but it suggests daily small acts of self-denial. By itself it cannot suffice to make a man virtuous; but it disciplines a number of persons in habits of regularity, temperance, moderation, foresight, self- command; and if it does not lead men straight to virtue by the will, it gradually draws them in that direction by their habits. If the principle of interest rightly understood were to sway the whole moral world, extraordinary virtues would doubtless be more rare; but I think that gross depravity would then also be less common. The principle of interest rightly understood perhaps prevents men from rising far above the level of mankind, but a great number of other men, who were falling far below it, are caught and restrained by it. Observe some few individuals, they are lowered by it; survey mankind, they are raised.