In Defense of Capitalism by Dr. Ronald Nash
Capitalism is not economic anarchy. When properly defined, it recognizes several necessary conditions for the kinds of voluntary relationships it supports. One of these is the existence of inherent human rights, such as the right to make decisions, the right to be free, the right to hold property, and the right to exchange peacefully what one owns for something else.
Capitalism also presupposes a system of morality. Under capitalism, there are definite limits, moral and otherwise, to the ways in which people can exchange. Capitalism should be viewed as a system of voluntary relationships within a framework of laws that protect people’s rights against force, fraud, theft, and violations of contracts. “Thou shalt not steal” and “Thou shalt not lie” are part of the underlying moral constraints of the system. After all, economic exchanges can hardly be voluntary if one participant is coerced, deceived, defrauded, or robbed.
Deviations from the market ideal usually occur because of defects in human nature. Human beings naturally crave security and guaranteed success, values not found readily in a free market. Genuine competition always carries with it the possibility of failure and loss. Consequently, the human desire for security leads people to avoid competition whenever possible, encourages them to operate outside the market, and induces them to subvert the market process through behavior that is often questionable and dishonest. This quest for guaranteed success often leads people to seek special favors from powerful members of government through such means as regulations and restrictions on free exchange.
One of the more effective ways of mitigating the effects of human sin in society is dispersing and decentralizing power. The combination of a free market economy and limited constitutional government is the most effective means yet devised to impede the concentration of economic and political power in the hands of a small number of people. The Religious Left should be aware that their opposition to amassing wealth and power is far more likely to bear fruit with a conservative understanding of economics and government than with the big-government approach of political liberalism.
Every person’s ultimate protection against coercion requires control over some private spheres of life where he or she can be free. Private ownership of property is an important buffer against the exorbitant consolidation of power by government.
Liberal critics also contend that capitalism encourages the development of monopolies. The real source of monopolies, however, is not the free market but governmental intervention with the market. The only monopolies that have ever attained lasting immunity from competition did so by governmental fiat, regulation, or support of some other kind. Governments create monopolies by granting one organization the exclusive privilege of doing business or by establishing de facto monopolies through regulatory agencies whose alleged purpose is the enforcement of competition but whose real effect is the limitation of competition.
Economic interventionism and socialism are the real sources of monopolies. This is illustrated, for example, in the success of the American robber barons of the nineteenth century. Without government aid such as subsidies, the robber barons would never have succeeded.
Liberals blame capitalism for every evil in contemporary society, including its greed, materialism, selfishness, the prevalence of fraudulent behavior, the debasement of society’s tastes, the pollution of the environment, the alienation and despair within society, and vast disparities of wealth. Even racism and sexism are treated as effects of capitalism.
Many of the objections to a market system result from a simple but fallacious two-step operation. First, some undesirable feature is noted in a society that is allegedly capitalistic; then it is simply asserted that capitalism is the cause of this problem. Logic texts call this the Fallacy of False Cause. Mere coincidence does not prove causal connection. Moreover, this belief ignores the fact that these same features exist in interventionist and socialist societies.
The Issue of Greed
Liberal critics of capitalism often attack it for encouraging greed. The truth, however, is that the mechanism of the market actually neutralizes greed as it forces people to find ways of serving the needs of those with whom they wish to exchange. As long as our rights are protected (a basic precondition of market exchanges), the greed of others cannot harm us. As long as greedy people are prohibited from introducing force, fraud, and theft into the exchange process and as long as these persons cannot secure special privileges from the state under interventionist or socialist arrangements, their greed must be channeled into the discovery of products or services for which people are willing to trade. Every person in a market economy has to be other-directed. The market is one area of life where concern for the other person is required. The market, therefore, does not pander to greed. Rather, it is a mechanism that allows natural human desires to be satisfied in nonviolent ways.
Does Capitalism Exploit People?
Capitalism is also attacked on the ground that it leads to situations in which some people (the “exploiters”) win at the expense of other people (the “losers”). A fancier way to put this is to say that market exchanges are examples of what is called a zero-sum game, namely, an exchange where only one participant can win. If one person (or group) wins, then the other must lose. Baseball and basketball are two examples of zero-sum games. If A wins, then B must lose.
The error here consists in thinking that market exchanges are a zero-sum game. On the contrary, market exchanges illustrate what is called a positive-sum game, that is, one in which both players may win. We must reject the myth that economic exchanges necessarily benefit only one party at the expense of the other. In voluntary economic exchanges, both parties may leave the exchange in better economic shape than would otherwise have been the case. To repeat the message of the peaceful means of exchange, “If you do something good for me, then I will do something good for you.” If both parties did not believe they gained through the trade, if each did not see the exchange as beneficial, they would not continue to take part in it.
Most religious critics of capitalism focus their attacks on what they take to be its moral shortcomings. In truth, the moral objections to capitalism turn out to be a sorry collection of claims that reflect, more than anything else, serious confusions about the real nature of a market system. When capitalism is put to the moral test, it beats its competition easily. Among all of our economic options, Arthur Shenfield writes,
only capitalism operates on the basis of respect for free, independent, responsible persons. All other systems in varying degrees treat men as less than this. Socialist systems above all treat men as pawns to be moved about by the authorities, or as children to be given what the rulers decide is good for them, or as serfs or slaves. The rulers begin by boasting about their compassion, which in any case is fraudulent, but after a time they drop this pretense which they find unnecessary for the maintenance of power. In all things they act on the presumption that they know best. Therefore they and their systems are morally stunted. Only the free system, the much assailed capitalism, is morally mature.
The alternative to free exchange is coercion and violence. Capitalism is a mechanism that allows natural human desires to be satisfied in a nonviolent way. Little can be done to prevent people from wanting to be rich, Shenfield says. That’s the way things often are in a fallen world. But what capitalism does is channel that desire into peaceful means that benefit many besides those who wish to improve their own situation in life. “The alternative to serving other men’s wants,” Shenfield concludes, “is seizing power of them, as it always has been. Hence it is not surprising that wherever the enemies of capitalism have prevailed, the result has been not only the debasement of consumption standards for the masses but also their reduction to serfdom by the new privileged class of Socialist rulers.”
Once people realize that few things in life are free, that most things carry a price tag, and that therefore we have to work for most of the things we want, we are in a position to learn a vital truth about life. Capitalism helps teach this truth. But under socialism, Arthur Shefield warns, “Everything still has a cost, but everyone is tempted, even urged to behave as if there is no cost or as if the cost will be borne by somebody else. This is one of the most corrosive effects of collectivism upon the moral character of people.”
And so, we see, capitalism is not merely the more effective economic system; it is also morally superior. When capitalism, the system of free economic exchange, is described fairly, it comes closer to matching the demands of the biblical ethic than does either socialism or interventionism.
These are the real reasons why Ron Sider and his friends in the Religious Left should have abandoned the statist economic policies they promoted in the past. These are also the reasons why they should now end their advocacy of economic interventionism, which only encourages the consolidation of wealth and power in the hands of the few. Christians who are sincere about wanting to help the poor should support the market system described in this chapter.
This article is an excerpt from a chapter of Dr. Nash’s book, Why the Left Is Not Right. Please note that this book has been added to “The Schwarz Report Bookshelf” on the back page.