Capitalism and Morality

March 9, 2020 by Dan Mitchell @ International Liberty 

Since libertarians are motivated by the non-aggression principle, it’s easy to understand why they support the capitalist system of voluntary exchange rather than alternative systems based on government coercion.

But there are some who think markets are immoral, and that’s the topic of this book and this related video.

Virgil Henry Storr and Ginny Seung Choi are the authors of Do Markets Corrupt Our Morals, and the Mercatus Center explains the book’s core message.

…people in market societies are wealthier, healthier, happier and better connected than those in societies where markets are more restricted. More provocatively, they explain that successful markets require and produce virtuous participants. Markets serve as moral spaces that both rely on and reward their participants for being virtuous. Rather than harming individuals morally, the market is an arena where individuals are encouraged to be their best moral selves.

And Professor Michael Munger from Duke University explores the implications in his review.

The useful thing about this book…is that it considers a more dynamic problem than the classical literature on the morality of markets. …doesn’t “commodification” and the pursuit of gain for its own sake distort, and ultimately corrupt, the human impulses of altruism and mutual aid on which society depends? …Their answer is “perhaps, but not necessarily.” And, compared to other actual systems that might be used to organize large scale human activity, they argue that markets are actually more likely to nurture moral spaces in which people can find ways to cooperate and help each other.

He identifies the main arguments about the putative shortcomings of markets.

…there are three central charges commonly leveled against the morality of markets. One is the claim that markets exploit workers and turn them into brutes; the second is that the commodification of things and the use of prices to direct allocation decisions corrupts the moral sense humans naturally possess and would otherwise use to motivate cooperation; and the third is that a common consequence of markets, extreme inequality, is corrosive to collective institutions of community and democracy.

And here’s Munger’s summary of the answers to those three questions.

Markets, in the Storr and Choi view, actually improve the lives of workers, rather than making them brutes. …it quickly becomes cheaper to “pay” workers with better and more comfortable conditions, safer working spaces, and more interesting activities…higher pay and the improvements in access to desirable consumer products that come with a market economy mean that workers have leisure time and the resources to enjoy it.

…commodification and division of labor foster a dramatic increase in scope and variety of new communities for humans to join and be part of. Further, the relation among workers in a firm, or the relation between a seller and a repeat customer, create new and important “moral spaces” in which the importance of character and personal familiarity produce both legitimately warm comradery and an increase in the efficiency of contracts and cooperation because of improvements in trust and personal commitment.

…market systems can in fact be associated with high levels of inequality, but it appears that increased inequality may often be the price a society pays for reducing poverty, a trade-off that very poor citizens are likely to embrace. Further, Storr and Choi show that (a) market societies generally have lower inequality than non-market societies, and (b) market societies show a great deal more social mobility, or a capacity for the very poor to become much more wealthy than their parents, than non-market systems.

In other words, markets generate higher income, better lives, and upward mobility.
Not a bad result.

My two cents on this debate is to expand on Munger’s point about capitalism when “compared to other actual systems.” In my humble option, this is what really matters.

Yes, markets can be cold and impersonal. And, yes, “creative destruction” is no fun when you’re part of the “destruction” (even if it results in your children and grandchildren living better lives).
But if our goal is prosperity, there’s no alternative that comes close.

Especially since every alternative empowers politicians and their cronies. Indeed, my readings on this topic reminded me of this passage in Atlas Shrugged when one of the anti-market interventionists said it was time to replace the “aristocracy of money” and one of the book’s good guys noted that this meant an “aristocracy of pull.”

And when an economy is based on political influence and power, P.J. O’Rourke warns that there’s an inevitable consequence.

P.S. Here’s David Burton’s bullet-point comparison of the morality of capitalism and socialism.

P.P.S. And Walter Williams has a great video on the morality of markets.