All is Fair in Love and Markets

"Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion - the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals - the technique of the market place."

– Milton Friedman, Capitalism and Freedom

Often the quality of our beliefs is determined by the quality of the questions we ask. This is true when we ask questions about political and economic philosophy. I think it's especially true when we consider the morality of economic systems like capitalism.

Before we get to those questions, I want to define capitalism. Capitalism - at least the only conception of capitalism that I'm interested in defending - is an economic system that is rooted in the principles of private property and freedom of exchange. Just as the First Amendment to the U.S. Constitution protects the free exchange of ideas, religious or otherwise, so a society's commitment to capitalism protects the free exchange of goods and services. Whatever particular economic system might develop within that framework, I support it as being morally acceptable just as I support the First Amendment even though it allows for things that I don't approve of.

The question that critics often ask about the marketplace is, "is it fair?" I think that is the wrong question. That question places an unreasonable standard on markets. After all, life isn't fair. People aren't fair. The market, being voluntary in nature, is a reflection of human activity sans the power of a coercive third party (e.g. the mafia, drug lords, or if you prefer, the state). It can't possibly be fair.

A more reasonable question would be, "is the marketplace any less fair than other aspects of human activity that we find acceptable?" Is the marketplace less fair than, let's say, the world of sex and romance? Is it fair that as people get older they become less attractive and their prospects for romance diminish? Is it fair that women are less attracted to men who are short or that very few people prefer to date someone who is significantly deformed physically? Of course not. But it doesn't follow that this unfairness would justify the elimination of personal choice in choosing romantic partners. Such a policy would amount to state-sanctioned rape.

That leads us to the 2nd question: is the marketplace less fair than the alternative? The alternative would be an authoritarian state-controlled economy. Given the fact that we've tried these economies countless times in places like Nazi Germany, The Soviet Union, North Korea, and Venezuela, I think the answer is "no."

If the marketplace is no more unfair than other forms of morally acceptable human interaction, then we are applying an unreasonable double standard when we indite capitalism.

Similarly, if the marketplace is more conducive to human well-being than its alternative then our inditement of it amounts to a juvenile sort of black and white thinking in which we condemn everything that falls short of our utopian ideal. If we applied that same standard to ourselves, we would be worthy of the same death that many wish upon the capitalist economy.

Objections and Clarifications

Now I can anticipate an objection: "Nazi Germany, North Korea? Aren't those extreme comparisons? Surely, those aren't the only alternatives. We could have state control of the economy that wouldn't need to be that drastic."

And my response to that is, yes, that's true. But as long as that society is more free than it is controlled, it is essentially a capitalist society. What you would be arguing for in that case would be a different form of capitalism. You might define "free exchange" differently than I would because you might see being trapped in a dead-end job as a type of coercion, for instance. But in making that argument you are defending the legitimacy of capitalist principles. The discussion on what type of capitalism is best is a legitimate discussion to have but it's not the one we're having right now. What we're discussing now is whether or not capitalism is moral as an idea.

That said, I think a lot of our cynicism about capitalism comes down to the misuse of language. I'm old enough to remember a time when most people on the right and the left in the United States had no qualms about being avowed capitalists. That did not mean people didn't criticize aspects of our economy. It just meant that we didn't use "capitalism" as a catch-all term for the problems we saw. We would criticize things like "consumerism," or "corporate greed," as specific problems to be addressed. This is an important distinction because it follows that if you don't approve of something like "consumerism," for instance, you want to replace it with something.

Just the same, it follows that if you disapprove of capitalism you would want to replace it with something. Well, what are the alternatives?

We have…

Feudalism

Marxism

Fascism

Mercantilism

Agrarianism

Anarchy

hunter-gatherer societies

None of those sound like good alternatives to me. And for all of you "democratic socialists" who want to turn America into Scandinavia, it should be noted that all of those countries have economies that are firmly rooted in the principles of private property and freedom of exchange. That is, they have capitalist economies and even the former Prime Minister of Denmark, Lars Løkke Rasmussen recently said so in a talk he gave at the Kennedy School of Government Institute of Politics.

Final Thoughts

Any system that allows for human freedom must, by definition, allow for humans to be, well...human. This is the double-edged sword of liberty. It allows humans to make mistakes, even moral mistakes. For how can you have compassion if you don't have the liberty to choose the opposite? How can you love someone if you are forced to do it? Liberty is the foundation on which all other values depend for their proper expression. And liberty is the foundation of capitalism.

I argue, therefore, that for the marketplace to pass the test of moral acceptability it only needs to be regulated to prevent coercion and theft. Just as in love and sex, disparate outcomes are an unfortunate fact of life that we must live with. But rape is unacceptable. In other words, interactions must be voluntary but they need not be fair. That's not to say that interactions shouldn't be made fairer if it's possible to do that. It is only to say that fairness is not a prerequisite for moral acceptability when considering the system as a whole.

That is why I am confidently and enthusiastically, a capitalist.